SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

For the month of June, 2011

Shaw Communications Inc.

(Translation of registrant’s name into English)

Suite 900, 630 — 3^rd Avenue S.W., Calgary, Alberta T2P 4L4 (403) 750-4500

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F o Form 40-F þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No þ

If “ Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

 

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Shaw Communications Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:		June 29, 2011
		Shaw Communications Inc.

By:		/s/ Steve Wilson   Steve Wilson
		Sr. V.P., Chief Financial Officer
		Shaw Communications Inc.

NEWS RELEASE

Shaw announces third quarter financial and operating results

Calgary, Alberta (June 29, 2011) — Shaw Communications Inc. announced results for the third quarter ended May 31, 2011. Consolidated revenue for the quarter and year-to-date of $1.28 billion and $3.56 billion, respectively, was up 36% and 28% over the comparable periods last year. Total operating income before amortization¹ of $580 million and $1.55 billion, respectively, improved 33% and 16% over the same periods last year.

Free cash flow¹ for the three and nine month periods was $242 million and $554 million, respectively, compared to $151 million and $446 million for the comparable periods last year. The current quarter increased over the comparable period primarily due to the addition of Shaw Media and higher free cash flow from the Cable division. The current nine month period included free cash flow from Shaw Media, for the period October 27 to May 31, partially reduced by the one-time CRTC Part II fee recovery last year.

Chief Executive Officer Brad Shaw said, “Our third quarter financial results reflect a marked improvement over the second quarter and include a partial quarter of cost savings that resulted from the actions we undertook to streamline our organizational structure. Shaw continues to be one of North America’s most successful cable operators and we are committed to delivering value to our shareholders.”

Mr. Shaw continued “We remain focused on continuous innovation and product leadership to enhance the customer experience. During the quarter we increased internet speeds, upgrading all of our Extreme customers from 15 Mbps to 25 Mbps, and after consultations with our customers, announced new packaging and pricing of our Internet products providing customers with industry leading performance, choice, and greater value. We also launched the new Shaw Gateway television product, providing the next generation in television viewing with advanced features and home networking capability, bringing together the power of broadband and high-definition technology that will be the centre of a connected home.”

The new Internet packages will be available in two phases with the second phase tied to a major upgrade of the network scheduled over the next 16 months. Phase 1 of the new offerings, available currently, allow for download speeds of up to 100Mbps and increased data limits including unlimited options. The second phase will allow higher download and upload speeds of 250Mbps and 15Mbps respectively.

During the quarter the Shaw Plan Personalizer (“SPP”) was also launched, enabling customers to customize their core entertainment service needs by building their own Television, Internet and optional Personal Home Phone package at value pricing.

Net income of $203 million or $0.45 per share for the quarter ended May 31, 2011 compared to $158 million or $0.37 per share for the same period last year. Net income for the first nine months of the year was $390 million or $0.86 per share compared to $411 million or $0.95 per share last year. All periods included non-operating items which are more fully detailed in Management’s Discussions and Analysis (MD&A).² The current year-to-date period included a charge of $139 million for the discounted value of the $180 million CRTC benefit obligation related to the acquisition of Shaw Media, as well as business acquisition, integration and restructuring expenses of $90 million. The prior nine month period included debt retirement costs and amounts related to financial instruments of $82 million and $46 million, respectively. Excluding the non-operating items, net income for the three and nine month periods ended May 31, 2011 would have been $223 million and $541 million respectively, compared to $162 million and $481 million in the same periods last year.

Revenue in the Cable division was up 5% and 6% for the three and nine month periods, respectively, to $785 million and $2.31 billion. The improvement was primarily driven by rate increases and growth. Operating income before amortization for the quarter of $388 million was up 7% over the comparable quarter. Excluding the one-time CRTC Part II fee recovery last year, operating income before amortization for the year-to-date period increased 5%.

Revenue in the Satellite division was $210 million and $620 million for the quarter and year-to-date periods, respectively, up 3% over each of the comparable periods. Operating income before amortization for the current three month period of $76 million improved 4% over the same period last year. Excluding the one-time Part II fee recovery, operating income before amortization for the year-to-date period of $216 million improved 2% over the same period last year.

Quarterly revenue and operating income before amortization in the Media division was $312 million and $117 million, respectively. Revenue and operating income before amortization for the period from October 27, 2010 to May 31, 2011 was $681 million and $240 million, respectively. For informational purposes, on a comparative basis to last year, Media revenues for each of the three and full nine month periods were up approximately 8%, and operating income before amortization, excluding the impact of the one-time Part II fee recovery last year, improved 17% and 19%, respectively.

On May 31, 2011 Shaw completed an offering of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares resulting in gross proceeds of $300 million. The net proceeds will be used for working capital and general corporate purposes.

During the quarter approximately 550 employee positions were eliminated, including 150 at the management level. The restructuring costs were $29 million and the annual savings, including other expense reductions, are in excess of $50 million.

“Pricing consistent with product value and timely initiatives undertaken during the quarter to drive efficiencies through focused cost containment and reductions have us on track to achieve our financial guidance, including consolidated fiscal 2011 free cash flow of approximately $600 million.” said Mr. Shaw.

In closing Mr. Shaw emphasized, “Shaw’s strong management team and staff across the Company continue to execute on our strategy to maximize shareholder value through leveraging our network infrastructure, and offering our customers leading edge products and services that provide value to both Shaw and the customer. Our strategy has served our stakeholders well over the years and continues to drive us forward as a successful operator in this evolving and highly competitive landscape. “

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 3.4 million customers, through a reliable and extensive fibre network. Shaw Media operates one of the largest conventional television networks in Canada, Global Television, and 18 specialty networks including HGTV Canada, Food Network Canada, History Television and Showcase. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (Symbol: 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.

For more information, please contact:

Shaw Investor Relations
Investor.relations@sjrb.ca

Shaw Communications Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS
MAY 31, 2011

June 29, 2011

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 should also be read in conjunction with Management’s Discussion and Analysis included in the Company’s August 31, 2010 Annual Report including the Consolidated Financial Statements and the Notes thereto and the unaudited interim Consolidated Financial Statements and the Notes thereto of the current quarter.

CONSOLIDATED RESULTS OF OPERATIONS
THIRD QUARTER ENDING MAY 31, 2011

Selected Financial Highlights

		Three months ended May 31,												Nine months ended May 31,
										Change												Change
($000’s Cdn except per share amounts)		2011				2010				%				2011				2010				%
Operations:
Revenue			1,284,688				943,632				36.1				3,560,204				2,778,708				28.1
Operating income before amortization (1)			579,575				435,822				33.0				1,547,453				1,335,599				15.9
Operating margin (1) (2) (3)			45.1	%			46.2	%			(1.1	)			43.5	%			45.4	%			(1.9	)
Funds flow from operations (4)			430,305				350,810				22.7				1,077,642				1,047,968				2.8
Net income			202,670				158,216				28.1				390,301				411,157				(5.1	)
Per share data:
Earnings per share — basic and diluted		$	0.45			$	0.37							$	0.86			$	0.95
Weighted average participating shares outstanding during period (000’s)			434,816				432,323								434,346				432,595

Subscriber Highlights

						Growth
		Total				Three months ended May 31,								Nine months ended May 31,
		May 31, 2011				2011				2010				2011				2010
Subscriber statistics:
Basic cable customers			2,299,527				(13,577	)			2,322				(34,781	)			(149	)
Digital customers			1,767,740				19,202				87,092				116,821				273,895
Internet customers (including pending installs)			1,859,555				11,165				25,661				40,689				88,638
Digital phone lines (including pending installs)			1,210,064				31,404				66,123				113,758				182,506
DTH customers			908,077				1,644				1,856				2,281				4,024

Shaw Communications Inc.

Additional Highlights

•		Revenue of $1.28 billion and $3.56 billion for the three and nine month periods improved 36.1% and 28.1% over the comparable periods last year.
•		Free cash flow for the quarter and year-to-date periods was $242.0 million and $554.0 million, respectively, compared to $150.9 million and $445.8 million for the same periods last year.
•		In March 2011 Shaw implemented various cost saving initiatives including staff reductions and a review of overhead expenses to drive efficiencies and enhance competitiveness.
•		In May 2011 Shaw commenced to issue from treasury Class B Shares distributed under its Dividend Reinvestment Plan (“DRIP”) and is also offering a 2% discount under the DRIP.
•		On May 31, 2011 Shaw completed an offering of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares resulting in gross proceeds of $300 million.

Consolidated Overview

Consolidated revenue of $1.28 billion and $3.56 billion for the three and nine month periods, respectively, improved 36.1% and 28.1% over the same periods last year. The improvement was primarily due to the acquisition of Shaw Media, as well as rate increases and growth in the Cable and Satellite divisions.

Consolidated operating income before amortization for the three and nine month periods of $579.6 million and $1.55 billion, respectively, increased 33.0% and 15.9% over the same periods last year. Both periods benefitted from the acquisition of Shaw Media as well as core revenue related growth, partially offset by increased sales and marketing, and programming costs. Employee related costs were up modestly over the prior period benefitting from the restructuring initiatives completed midway through the current quarter. The current year-to-date period also included the impact of the retroactive support structure rate increases. The prior year-to-date period benefitted from a one-time CRTC Part II fee recovery of $75.3 million.

Net income was $202.7 million and $390.3 million for the three and nine months ended May 31, 2011, respectively, compared to $158.2 million and $411.2 million for the same periods last year. Non-operating items affected net income in all periods. The current quarter included $29.4 million in restructuring expenses related to the cost savings initiatives undertaken. The current year-to-date period included a charge of $139.1 million for the discounted value of the $180.0 million CRTC benefit obligation, net of incremental revenues, related to the Media acquisition, as well as business acquisition, integration and restructuring expenses of $90.2 million. The prior year-to-date period included debt retirement costs and amounts related to financial instruments of $81.6 million and $47.3 million, respectively. Outlined below are further details on these and other operating and non-operating components of net income for each period.

Shaw Communications Inc.

		Nine months ended				Operating net				Non-				Nine months ended				Operating net				Non-
($000’s Cdn)		May 31, 2011				of interest				operating				May 31, 2010				of interest				operating
Operating income			996,911												852,597
Amortization of financing costs — long-term debt			(3,206	)											(3,015	)
Interest expense — debt			(243,643	)											(185,507	)
Operating income after interest			750,062				750,062				—				664,075				664,075				—
Debt retirement costs			—				—				—				(81,585	)			—				(81,585	)
Gain on repurchase of debt			9,981				—				9,981				—				—				—
CRTC benefit obligation			(139,098	)			—				(139,098	)			—				—				—
Business acquisition, integration and restructuring expenses			(90,243	)			—				(90,243	)			—				—				—
Loss on derivative instruments			(25,780	)			—				(25,780	)			(45,783	)			—				(45,783	)
Accretion of long-term liabilities			(10,862	)			—				(10,862	)			(1,497	)			—				(1,497	)
Foreign exchange gain on unhedged long-term debt			23,376				—				23,376				—				—				—
Other gains			6,878				—				6,878				8,342				—				8,342
Income (loss) before income taxes			524,314				750,062				(225,748	)			543,552				664,075				(120,523	)
Current income tax expense (recovery)			160,278				193,616				(33,338	)			127,332				157,005				(29,673	)
Future income tax expense (recovery)			(12,176	)			15,051				(27,227	)			2,363				26,037				(23,674	)
Income (loss) before following			376,212				541,395				(165,183	)			413,857				481,033				(67,176	)
Equity income (loss) on investees			14,089				—				14,089				(2,700	)			—				(2,700	)
Net income (loss)			390,301				541,395				(151,094	)			411,157				481,033				(69,876	)
		Three months ended				Operating net				Non-				Three months ended				Operating net				Non-
($000’s Cdn)		May 31, 2011				of interest				operating				May 31, 2010				of interest				operating
Operating income			401,006												277,280
Amortization of financing costs — long-term debt			(1,097	)											(962	)
Interest expense — debt			(89,711	)											(61,797	)
Operating income after interest			310,198				310,198				—				214,521				214,521				—
Gain on repayment of debt			—				—				—				—				—				—
Business acquisition, integration and restructuring expenses			(29,361	)			—				(29,361	)			—				—				—
Loss on derivative instruments			(3,016	)			—				(3,016	)			(487	)			—				(487	)
Accretion of long-term liabilities			(5,049	)			—				(5,049	)			(644	)			—				(644	)
Foreign exchange gain on unhedged long-term debt			791				—				791				—				—				—
Other gains (losses)			346				—				346				(1,013	)			—				(1,013	)
Income (loss) before income taxes			273,909				310,198				(36,289	)			212,377				214,521				(2,144	)
Current income tax expense (recovery)			48,428				67,416				(18,988	)			22,051				40,001				(17,950	)
Future income tax expense (recovery)			23,066				19,435				3,631				29,410				13,000				16,410
Income (loss) before following			202,415				223,347				(20,932	)			160,916				161,520				(604	)
Equity income on investees			255				—				255				(2,700	)			—				(2,700	)
Net income (loss)			202,670				223,347				(20,677	)			158,216				161,520				(3,304	)

Shaw Communications Inc.

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

		May 31, 2011 net income compared to:
		Three months ended								Nine months ended
(000’s Cdn)		February 28, 2011				May 31, 2010				May 31, 2010
Increased operating income before amortization			85,051				143,753				211,854
Decreased (increased) amortization			12,654				(20,162	)			(67,731	)
Increased interest expense			(4,474	)			(27,914	)			(58,136	)
Change in net other costs and revenue (1)			(41,583	)			(31,190	)			(88,436	)
Increased income taxes			(16,277	)			(20,033	)			(18,407	)
			35,371				44,454				(20,856	)

Basic earnings per share were $0.45 and $0.86 for the quarter and nine months, respectively compared to $0.37 and $0.95 in the same periods last year. The improvement in the quarter was primarily due to increased operating income before amortization of $143.8 million partially offset by higher net other costs and revenue of $31.2 million and increased interest, amortization and income taxes of $27.9 million, $20.2 million and $20.0 million, respectively. The change in net other costs and revenue was primarily due to restructuring costs in the current period. The year-to-date decrease was primarily due to higher net other costs and revenue of $88.4 million and increased amortization, interest and taxes of $67.7 million, $58.1 million and $18.4 million, respectively, partially offset by improved operating before amortization of $211.9 million. The change in net other costs and revenue was primarily due to amounts related to the CRTC benefit obligation and various acquisition, integration and restructuring costs in the current period partially offset by debt retirement costs and amounts related to financial instruments associated with the early redemption of the three series of US senior notes in the prior year. The prior nine month period operating income before amortization included a one-time CRTC Part II fee recovery of $75.3 million which was offset in the current period by amounts related to Shaw Media and growth in the Cable and Satellite divisions.

Net income in the current quarter increased $35.4 million compared to the second quarter of fiscal 2011 mainly due to improved operating income before amortization of $85.1 million and lower amortization of $12.7 million partially offset by higher other costs and revenue and income taxes of $41.6 million and $16.3 million, respectively. The change in net other costs and revenue was primarily due to restructuring costs in the current period.

Free cash flow for the quarter and year-to-date periods of $242.0 million and $554.0 million, respectively, compared to $150.9 million and $445.8 million in the same periods last year. The improvement in the current quarter was mainly due to increased operating income before amortization related to the acquisition of the Media division as well as growth in the Cable division, partially reduced by higher interest and taxes. The year-to-date improvement was due to the Shaw Media acquisition and growth in the Cable and Satellite divisions, partially reduced by a one time Part II fee recovery last year. The Cable division generated $132.4 million of free cash flow for the quarter compared to $112.8 million in the comparable period. The Satellite division achieved free cash flow of $41.0 million for the three month period compared to $38.1 million last year. The Media division generated $68.6 million of free cash flow for the quarter.

Shaw Communications Inc.

In March 2011 Shaw implemented various cost saving initiatives including staff reductions and a review of overhead expenses to drive efficiencies and enhance competitiveness. Approximately 550 employee positions were eliminated, including 150 at the management level. The restructuring costs incurred in the quarter were $29.4 million and the annual savings is in excess of $50 million. The majority of the staff reductions were in the Cable division, representing approximately 5% of the division’s employee workforce.

In May 2011 Shaw commenced to issue from treasury Class B Shares distributed under its DRIP and also started offering a 2% discount under the DRIP. Effective with the May 2011 dividend payment shareholders holding approximately 30% of the common shares outstanding were registered under the DRIP automatically reinvesting their dividends to increase their investment in the Company.

On May 31, 2011 Shaw completed an offering of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A (“Series A Shares”) resulting in gross proceeds of $300 million. The net proceeds will be used for working capital and general corporate purposes. The Series A Shares are listed on the Toronto Stock Exchange under the ticker symbol SJR.PR.A.

Key Performance Drivers

The Company’s continuous disclosure documents may provide discussion and analysis of non-GAAP financial measures. These financial measures do not have standard definitions prescribed by Canadian GAAP or US GAAP and therefore may not be comparable to similar measures disclosed by other companies. 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. These non-GAAP financial measures have not been presented as an alternative to net income or any other measure of performance required by Canadian or US GAAP.

The following contains a listing of non-GAAP financial measures used by the Company and provides a reconciliation to the nearest GAAP measurement 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 and is presented as a sub-total line item in the Company’s unaudited interim Consolidated Statements of Income and Retained Earnings. 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.

Free cash flow

The Company utilizes this measurement as it measures the Company’s ability to repay debt and return cash to shareholders.

Shaw Communications Inc.

Free cash flow for cable and satellite 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 equipment costs (net) and adjusted to exclude stock-based compensation expense.

Commencing in 2011 with respect to the new Media segment, free cash flow will be determined as detailed above and in addition, Shaw will deduct cash amounts associated with funding the new and assumed CRTC benefit obligation related to the acquisition of Shaw Media as well as exclude the non-controlling interest amounts that are consolidated in the operating income before amortization, capital expenditure and cash tax amounts.

Free cash flow is calculated as follows:

		Three months ended May 31,								Nine months ended May 31,
($000’s Cdn)		2011				2010 (2)				2011				2010 (2)
Cable free cash flow (1)			132,410				112,773				319,163				327,697
Combined satellite free cash flow (1)			41,030				38,097				102,062				118,121
Media free cash flow (1)			68,586				—				132,765				—
Free cash flow			242,026				150,870				553,990				445,818

Shaw Communications Inc.

CABLE
FINANCIAL HIGHLIGHTS

		Three months ended May 31,												Nine months ended May 31,
										Change												Change
($000’s Cdn)		2011				2010 (3)				%				2011				2010 (3)				%
Revenue			784,671				746,322				5.1				2,311,905				2,189,505				5.6
Operating income before amortization (1)			387,751				363,096				6.8				1,099,316				1,097,821				0.1
Capital expenditures and equipment costs (net):
New housing development			19,170				20,172				(5.0	)			65,309				62,613				4.3
Success based			43,060				51,150				(15.8	)			148,741				159,652				(6.8	)
Upgrades and enhancement			61,786				59,034				4.7				185,869				184,018				1.0
Replacement			10,266				15,838				(35.2	)			33,021				42,148				(21.7	)
Buildings/other			17,660				25,305				(30.2	)			53,000				52,911				0.2
Total as per Note 2 to the unaudited interim Consolidated Financial Statements			151,942				171,499				(11.4	)			485,940				501,342				(3.1	)
Free cash flow before the following			235,809				191,597				23.1				613,376				596,479				2.8
Less:
Interest expense			(61,570	)			(51,849	)			18.7				(170,417	)			(161,767	)			5.3
Cash taxes			(45,100	)			(31,001	)			45.5				(134,100	)			(119,005	)			12.7
Other adjustments:
Non-cash stock based compensation			3,271				4,026				(18.8	)			10,304				11,990				(14.1	)
Free cash flow (1)			132,410				112,773				17.4				319,163				327,697				(2.6	)
Operating margin (1) (2)			49.4	%			48.7	%			0.7				47.6	%			47.9	%			(0.3	)

Operating Highlights

•		Digital customers increased 19,202 during the quarter to 1,767,740. Shaw’s Digital penetration of Basic is now 76.9%, up from 70.7% and 56.7% at August 31, 2010 and 2009, respectively.
•		Digital Phone lines increased 31,404 during the three month period to 1,210,064 lines and Internet was up 11,165 to total 1,859,555 as at May 31, 2011. During the quarter Basic cable subscribers decreased 13,577.

Cable revenue for the three and nine month periods of $784.7 million and $2.31 billion improved 5.1% and 5.6%, respectively, over the comparable periods last year. The quarter and year-to-date growth was driven by rate increases and customer growth in Digital Phone and Internet partially offset by higher promotional activity and lower Basic subscribers.

Shaw Communications Inc.

Operating income before amortization of $387.8 million for the quarter improved 6.8% over the same period last year. The year-to-date amount of $1.10 billion increased 4.8% over last year excluding the prior period one-time CRTC Part II fee recovery of $48.7 million. The revenue related growth in the quarter was partially reduced by higher programming costs, and marketing and sales related expenses. Employee related costs were up modestly over the comparable period reflecting the benefit of the restructuring initiatives completed midway through the current quarter. The year-to-date improvement was driven by the revenue related growth partially offset by employee related costs, higher programming, marketing and sales expenses. Both current periods were also impacted by the CRTC decision approving a retroactive rate increase in support structure charges by ILECs with the year-to-date period including the impact of the retroactive increase and the current quarter reflecting the ongoing higher costs.

Revenue increased $15.3 million over the second quarter of fiscal 2011 primarily due to rate increases, lower promotional activity, customer growth in Internet and Digital Phone, partially offset by lower Basic subscribers. Operating income before amortization improved $24.0 million over this same period primarily due to the revenue related growth and lower employee related costs due to the restructuring initiatives undertaken in the quarter partially offset by higher marketing and sales costs.

Total capital investment of $151.9 million and $485.9 million for the quarter and year-to-date decreased $19.6 million and $15.4 million, respectively, over the comparable periods last year. Success based capital declined $8.1 million and $10.9 million over the comparable three and nine month periods mainly due to lower digital set top rental deployment. Year-to-date success based spend also benefitted from reduced purchasing of Digital Phone customer premise equipment mainly due to bulk purchasing done at the end of the prior year.

Investment in Upgrades and enhancement and Replacement categories combined decreased by $2.8 million and $7.3 million for the quarter and year-to-date periods, respectively, compared to the same periods last year. Both the current quarter and year-to-date investment included higher spending on fibre, node segmentation, and internet growth and capacity enhancements which was more than offset by lower spending in the current periods on Digital Phone infrastructure, back office monitoring equipment, and automotive.

Buildings and Other decreased $7.6 million compared to the three month period last year mainly due to reduced investment in various facilities projects as well as lower spend related to back office and customer support systems. The year-to-date spend was comparable to the prior year.

Spending in new housing development increased $2.7 million over the comparable nine month period last year mainly due to higher activity.

As at May 31, 2011 Shaw had 1,859,555 Internet customers which represents an 80.9% penetration of Basic. During the quarter Shaw announced new market leading internet packages in response to the Company’s customer consultation sessions held earlier this year. The new packages provide higher download speeds including 100Mbps packaging, and increase data limits including unlimited options. As part of this new model of Internet services the Company announced a major upgrade to its network over the next 16 months which will allow even higher download and upload speeds of 250Mbps and 15Mbps respectively. The Company also implemented an automatic upgrade for all of its Extreme customers from 15 Mbps to 25Mbps.

Shaw Communications Inc.

During the quarter Shaw continued to grow its Digital customer base and Digital penetration of Basic at May 31, 2011 was 76.9%, up from 70.7% at August 31, 2010. Shaw now has approximately 875,000 HD capable customers who have access to over 120 HD channels and even greater choice through 1,200 HD titles through Shaw VOD.

As part of the new Internet offerings, Shaw is undergoing a major network upgrade in converting the television analog tiers to digital over the next 16 months. The network upgrade will significantly increase the Digital customer footprint and provide increased capacity for HD and On Demand programming. During the quarter the Company also launched the Shaw Gateway, the new standard in connected entertainment that combines the delivery of shared PVR, On Demand entertainment and home networking capability that will allow customers to share pictures and content from their computer onto their television.

Subscriber Statistics

										May 31, 2011
										Three months ended								Nine months ended
														Change								Change
		May 31, 2011				August 31, 2010(1)				Growth				%				Growth				%
CABLE:
Basic service:
Actual			2,299,527				2,334,308				(13,577	)			(0.6	)			(34,781	)			(1.5	)
Penetration as % of homes passed			59.7	%			61.4	%
Digital customers			1,767,740				1,650,919				19,202				1.1				116,821				7.1
INTERNET:
Connected and scheduled			1,859,555				1,818,866				11,165				0.6				40,689				2.2
Penetration as % of basic			80.9	%			77.9	%
Standalone Internet not included in basic cable			221,184				233,426				4,298				2.0				(12,242	)			(5.2	)
DIGITAL PHONE:
Number of lines (2)			1,210,064				1,096,306				31,404				2.7				113,758				10.4

Shaw Communications Inc.

SATELLITE (DTH and Satellite Services)
FINANCIAL HIGHLIGHTS

		Three months ended May 31,												Nine months ended May 31,
										Change												Change
($000’s Cdn)		2011				2010 (5)				%				2011				2010 (5)				%
Revenue
DTH (Shaw Direct)			188,291				181,962				3.5				557,844				541,328				3.1
Satellite Services			21,411				20,595				4.0				61,994				62,208				(0.3	)
			209,702				202,557				3.5				619,838				603,536				2.7
Operating income before amortization (1)
DTH (Shaw Direct)			64,639				62,530				3.4				183,767				205,991				(10.8	)
Satellite Services			11,243				10,286				9.3				31,839				31,877				(0.1	)
			75,882				72,816				4.2				215,606				237,868				(9.4	)
Capital expenditures and equipment costs (net):
Success based (3)			14,573				16,989				(14.2	)			54,747				57,372				(4.6	)
Buildings and other			1,644				2,571				(36.1	)			3,145				5,894				(46.6	)
Total as per Note 2 to the unaudited interim Consolidated Financial Statements			16,217				19,560				(17.1	)			57,892				63,266				(8.5	)
Free cash flow before the following			59,665				53,256				12.0				157,714				174,602				(9.7	)
Less:
Interest expense (2)			(6,563	)			(6,563	)			—				(19,390	)			(19,688	)			(1.5	)
Cash taxes			(12,316	)			(9,000	)			36.8				(37,316	)			(38,000	)			(1.8	)
Other adjustments:
Non-cash stock option expense			244				404				(39.6	)			1,054				1,207				(12.7	)
Free cash flow (1)			41,030				38,097				7.7				102,062				118,121				(13.6	)
Operating Margin (4)			36.2	%			35.9	%			0.3				34.8	%			35.0	%			(0.2	)

Operating Highlights

•		During the quarter Shaw Direct added 1,644 customers and as at May 31, 2011 DTH customers total 908,077.
•		Free cash flow for the quarter of $41.0 million compares to $38.1 million in the same period last year.

Revenue of $209.7 million and $619.8 million for the three and nine month periods, respectively, was up 3.5% and 2.7% over the same periods last year. The improvement was primarily due to rate increases partially reduced by higher promotional activity. Operating income before amortization for the quarter of $75.9 million was up 4.2% over the same quarter last year. The revenue related growth was partially offset by higher programming costs. For the year-to-date period, excluding the one-time Part II fee recovery of $26.6 million, operating income before amortization improved 2.0%.

Shaw Communications Inc.

Compared to the second quarter, operating income before amortization improved $5.7 million primarily due to customer rate increases and growth.

Total capital investment of $16.2 million for the quarter declined modestly compared to $19.6 million in the same period last year. The year-to-date investment of $57.9 million decreased over the prior year spend of $63.3 million. Buildings and other was lower mainly due to expenditures in the prior year related to call centre expansion and network equipment. Success based spend was lower mainly due to reduced supplier pricing on new models of customer premise equipment.

During the quarter, development work was completed on a new entry level HD receiver that will be available in July 2011. With this addition, all new receivers will be HD MPEG-4 capable and with current technology, increased satellite capacity will be available. Also, in the third quarter, work was completed on the development of new outdoor equipment which will be capable of receiving signals from three satellites, including Anik G1 which is expected to be available in November 2012, increasing Shaw Direct’s satellite capacity by 30%. The new outdoor equipment will start to be deployed in customer satellite dishes during the fourth quarter.

Subscriber Statistics

										May 31, 2011
										Three months ended								Nine months ended
														Change								Change
		May 31, 2011				August 31, 2010				Growth				%				Growth				%
DTH customers (1)			908,077				905,796				1,644				0.2				2,281				0.3

Shaw Communications Inc.

MEDIA
FINANCIAL HIGHLIGHTS

		Three months ended				October 27, 2010 to
($000’s Cdn)		May 31, 2011				May 31, 2011 (3)
Revenue			312,131				681,459
Operating income before amortization (1)			117,430				239,677
Capital expenditures:
Broadcast and transmission			4,110				7,271
Buildings/other			2,993				7,235
Total as per Note 2 to the unaudited interim Consolidated Financial Statements			7,103				14,506
Free cash flow before the following			110,327				225,171
Less:
Interest expense (2)			(15,774	)			(37,595	)
Cash taxes			(10,000	)			(22,200	)
Other adjustments:
Non-cash stock based compensation			302				545
CRTC benefit obligation funding			(8,317	)			(15,343	)
Non-controlling interests			(7,952	)			(17,813	)
Free cash flow (1)			68,586				132,765
Operating margin			37.6	%			35.2	%

Operating Highlights

Revenue in the Media division for the third quarter was $312.1 million and operating income before amortization was $117.4 million. Advertising revenue in the quarter was driven by strength in the automotive and entertainment equipment sectors and also benefitted from the federal election. For informational purposes, on a comparative basis to the third quarter last year, Media revenues were up approximately 8% and operating income before amortization improved 19%. This was fuelled by strong advertiser demand as a result of the general improvement in the advertising market and solid audience levels across Global and Media’s Specialty channels.

At the recent US network screenings in LA, Shaw Media secured key elements of the program schedules for fiscal 2012. The Global fall schedule includes established, returning favorites including Survivor and Glee plus several new dramas. The Specialty schedules include over 35 brand new series as well as new seasons of key programming including Top Chef Canada and Real Housewives. During the quarter Shaw Media launched ‘Shaw360’, a new offering which enables advertisers to place advertisements on its top programs across platforms, including linear television, online streaming, mobile applications and Video-On-Demand.

Shaw Communications Inc.

Capital investment in the quarter continued on various projects including the Digital TV transition, which is on track for the analog to digital upgrade in the CRTC mandated markets by August 31, 2011, as well as upgrades of aging production equipment. The integration of various back-office infrastructure has progressed during the quarter and is expected to be fully transitioned over the next 3 months.

WIRELESS
FINANCIAL HIGHLIGHTS

		Three months ended May 31								Nine Months ended May 31,
($000’s Cdn)		2011				2010				2011				2010
Operating expenditures			1,488				90				7,146				90
Interest expense (1)			5,482				3,055				15,269				3,055
Capital expenditures (as per Note 2 to the unaudited interim Consolidated Financial Statements)			15,394				9,178				70,844				9,178
Total expenditures on Wireless infrastructure build			22,364				12,323				93,259				12,323

During the quarter the Company slowed its Wireless infrastructure build to fully review this strategic initiative. Capital investment in the quarter and year-to-date periods includes equipment, site acquisition and physical construction of cell sites.

OTHER INCOME AND EXPENSE ITEMS

Amortization

		Three months ended May 31,												Nine months ended May 31,
										Change												Change
($000’s Cdn)		2011				2010				%				2011				2010				%
Amortization revenue (expense) -
Deferred IRU revenue			3,137				3,137				—				9,410				9,410				—
Deferred equipment revenue			26,340				29,865				(11.8	)			79,373				91,608				(13.4	)
Deferred equipment costs			(50,758	)			(56,497	)			(10.2	)			(152,756	)			(174,146	)			(12.3	)
Deferred charges			(256	)			(256	)			—				(768	)			(768	)			—
Property, plant and equipment			(146,045	)			(128,348	)			13.8				(452,740	)			(384,728	)			17.7
Other intangibles			(10,987	)			(6,443	)			70.5				(33,061	)			(24,378	)			35.6

Amortization of deferred equipment revenue and deferred equipment costs decreased over the comparative periods due to the sales mix of equipment, changes in customer pricing on certain equipment and the impact of equipment rental programs.

Amortization of property, plant and equipment and other intangibles increased over the comparable periods as the amortization of capital expenditures and the effect of Shaw Media in the current year exceeded the impact of assets that became fully depreciated.

Shaw Communications Inc.

Amortization of financing costs and Interest expense

		Three months ended May 31,												Nine months ended May 31,
										Change												Change
($000’s Cdn)		2011				2010				%				2011				2010				%
Amortization of financing costs — long-term debt			1,097				962				14.0				3,206				3,015				6.3
Interest expense			89,711				61,797				45.2				243,643				185,507				31.3

Interest expense increased over the comparative periods as a result of the Canwest broadcasting business acquisition. Approximately $1 billion was required to complete the transaction including repayment of the CW Media term loan and breakage of related currency swaps. In addition, US $338.3 million 13.5% senior unsecured notes were assumed as part of the acquisition.

Debt retirement costs

During the first quarter of the prior year, the Company redeemed all of its outstanding US $440 million 8.25% senior notes due April 11, 2010, US $225 million 7.25% senior notes due April 6, 2011 and US $300 million 7.20% senior notes due December 15, 2011. In connection with the early redemption, the Company incurred costs of $79.5 million and wrote-off the remaining discount and finance costs of $2.1 million. The Company used proceeds from its $1.25 billion 5.65% senior notes issuance in early October 2009 to fund the cash requirements for the redemptions.

Gain on repurchase of debt

As a result of a change of control triggered on the acquisition of the Media business, an offer to purchase all of the US $338.3 million 13.5% senior unsecured notes at a cash price equal to 101% was required. An aggregate US $51.6 million face amount was tendered under the offer and purchased by the Company for cancellation during the second quarter. As a result, the Company recorded a gain of $10 million in respect of the purchase and cancellation. The gain resulted from recognizing the remaining unamortized acquisition date fair value adjustment of $10.5 million in respect of the US $51.6 million net of the 1% repurchase premium of $0.5 million. The Change of Control Offer expired on December 15, 2010 and no further purchases are required.

CRTC benefit obligation

As part of the CRTC decision approving the Media acquisition, the Company is required to contribute approximately $180 million in new benefits to the Canadian broadcasting system over the next seven years. Most of this contribution will be used to create new programming on Shaw Media services, construct digital transmission towers and provide a satellite solution for over-the-air viewers whose local television stations do not convert to digital. The fair value of the obligation on the acquisition date of $139.1 million was determined by discounting future net cash flows using a 5.75% discount rate and has been recorded in the income statement.

Shaw Communications Inc.

Business acquisition, integration and restructuring expenses

The Company incurred costs in respect of the acquisition of the broadcasting businesses of Canwest and organizational restructuring which amounted to $29.4 million and $90.2 million for the three and nine months ended May 31, 2011, respectively. Amounts include acquisition related costs to effect the acquisition, such as professional fees paid to lawyers and consultants. The integration and restructuring costs relate to integrating the new businesses and increasing organizational effectiveness for future growth as well as package costs for the former CEO of Shaw. In March 2011 Shaw implemented various cost saving initiatives including staff reductions and a review of overhead expenses to drive efficiencies and enhance competitiveness. Approximately 550 employee positions were eliminated, including 150 at the management level.

Loss on derivative instruments

For derivative instruments where hedge accounting is not permissible or derivatives are not designated in a hedging relationship, the Company records changes in the fair value of derivative instruments in the income statement. In addition, the Media senior unsecured notes have a variable prepayment option which represents an embedded derivative that is accounted for separately at fair value. The total loss recorded in respect of all such derivative instruments was $3.0 million and $25.8 million for the three and nine months ended May 31, 2011, respectively, compared to $0.5 million and $45.8 million in the same periods last year. The comparative period also included a loss of $50.1 million which was reclassified from accumulated other comprehensive loss in respect of the cross-currency interest rate exchange agreements that no longer qualified as cash flow hedges when the US senior notes were redeemed in October 2009.

Accretion of long-term liabilities

The Company records accretion expense in respect of the discounting of certain long-term liabilities which are accreted to their estimated value over their respective terms. The expense is primarily in respect of CRTC benefit obligations as well as the liability which arose in 2010 when the Company entered into amended agreements with the counterparties to certain cross-currency agreements to fix the settlement of the principal portion of the swaps in December 2011.

Foreign exchange gain on unhedged long-term debt

In conjunction with the acquisition of the broadcasting businesses of Canwest, the Company assumed a US $389.6 million term loan and US $338.3 million senior unsecured notes. Shortly after closing the acquisition, the Company repaid the term loan including breakage of the related cross currency interest rate swaps. During the second quarter, the Company repurchased and cancelled US $51.6 million face amount of the senior secured notes. As a result of fluctuations of the Canadian dollar relative to the US dollar, a foreign exchange gain of $0.8 million and $23.4 million was recorded for the three and nine months ended May 31, 2011, respectively.

Shaw Communications Inc.

Other gains (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 the Company’s share of the operations of Burrard Landing Lot 2 Holdings Partnership (“the Partnership”).

Income taxes

Income taxes increased over the same periods last year due to fluctuations in net income before income taxes and the impact of an income tax recovery of $17.6 million related to reductions in corporate income tax rates recorded in the first quarter of 2010.

Equity income (loss) on investees

During the first quarter, the Company recorded income of $13.4 million in respect of its 49.9% equity interest in CW Media for the period September 1 to October 26, 2010. On October 27, 2010, the Company acquired the remaining equity interest in CW Media as part of its purchase of all the broadcasting assets of Canwest. Results of operations are consolidated effective October 27, 2010. The equity income was comprised of approximately $19.6 million of operating income before amortization partially offset by interest expense of $4.5 million and other net costs of $1.7 million. The remaining equity income on investees is in respect of interests in several specialty channels. The $2.7 million loss in the prior year was in respect of the 49.9% equity interest in CW Media for the period May 3 to May 31, 2010. The loss was comprised of approximately $7.5 million of operating income before amortization offset by interest expense of $2.7 million and other costs of $7.6 million, the majority of which were fair value adjustments on derivative instruments and foreign exchange losses on US denominated long-term debt.

RISKS AND UNCERTAINTIES

The significant risks and uncertainties affecting the Company and its business are discussed in the Company’s August 31, 2010 Annual Report under the Introduction to the Business — Known Events, Trends, Risks and Uncertainties in Management’s Discussion and Analysis.

FINANCIAL POSITION

Total assets at May 31, 2011 were $12.8 billion compared to $10.2 billion at August 31, 2010. Following is a discussion of significant changes in the consolidated balance sheet since August 31, 2010.

Current assets increased by $941.3 million primarily due to increases in cash and cash equivalents of $416.2 million, accounts receivable of $332.1 million, inventories of $25.9 million and prepaids and other of $234.7 million, all of which were partially offset by a decrease in derivative instruments of $66.7 million. Cash and cash equivalents increased as the net funds provided by operating and financing activities, including proceeds from the issuance of $1.3 billion of senior notes and $300.0 million preferred shares, exceeded the cash outlay on capital expenditures and the Canwest broadcasting business acquisition. Accounts receivable and prepaids and other were up primarily as a result of the Media acquisition while inventories were higher due to increased equipment purchases. Derivative instruments decreased due to settlement of the contracts.

Shaw Communications Inc.

The derivative instrument of $6.8 million is in respect of the senior unsecured notes assumed by the Company as part of the Media acquisition. The notes are due in 2015 and have a variable prepayment option at a premium of 106.75 in August 2011 which declines on a straight-line basis to par in 2013.

Investments and other assets decreased by $723.9 million due to the acquisition of remaining equity interest in CW Media which is now consolidated as a 100% owned subsidiary and expensing of acquisition related costs partially offset by investments in several specialty channels purchased in the Media acquisition.

Property, plant and equipment and other intangibles increased by $174.1 million and $93.7 million, respectively as current year capital investment and amounts acquired on the Media acquisition exceeded amortization.

Deferred charges increased by $15.7 million due to higher deferred equipment costs and prepaid maintenance and support contracts.

Broadcast rights and licenses, and goodwill increased $1.4 billion and $641.7 million, respectively, due to the acquisition of the Canwest broadcasting businesses.

Program rights and advances of $71.4 million arose on the acquisition of the Canwest broadcasting businesses.

Current liabilities were up $46.9 million due to increases in accounts payable of $85.5 million and other liability of $160.6 million partially offset by decreases in income taxes payable of $151.7 million and derivative instruments of $54.3 million. Accounts payable and accrued liabilities increased primarily due to the impact of the Media acquisition partially offset by a reduction in trade and other payables mainly in respect of timing of payment of capital expenditures. Income taxes payable decreased due to funding income tax amounts partially offset by current year tax expense and amounts assumed on the Media acquisition. Derivative instruments decreased due to the end of swap notional exchange relating to an outstanding cross-currency interest rate agreement partially offset by new US currency forward purchase contracts entered into during the current year as well as reclassifying amounts from non-current liabilities based on settlement dates. The other liability is the obligation in respect of the principal component of the US $300 million amended cross-currency interest rate agreements which has been reclassified from noncurrent liabilities as it settles in December 2011.

Long-term debt increased $1.6 billion primarily as a result of the Canwest broadcasting business acquisition. Approximately $1 billion was required to complete the acquisition, including repayment of the CW Media term loan and breakage of related currency swaps. The acquisition was initially funded by borrowings under the Company’s revolving credit facility which were subsequently repaid primarily with the net proceeds from the $900 million senior notes offerings in December. As part of the acquisition, the Company assumed CW Media’s US $338.3 million 13.5% senior unsecured notes and subsequently repurchased and cancelled US $51.6 million face amount. In addition, the Company issued $400 million senior notes in February 2011.

Shaw Communications Inc.

Other long-term liabilities increased by $60.1 million mainly due to the non-current portion of CRTC benefit obligations as well as benefit plans as a result of the Media acquisition partially offset by the aforementioned reclassification of the obligation in respect of the principal component of the US $300 million amended cross-currency interest rate agreements.

Derivatives decreased by $6.5 million as amounts have been reclassified to current liabilities based on settlement dates.

Future income taxes increased $244.4 million due to the Media acquisition partially offset by current year tax recovery.

Share capital increased $338.1 million due to the issuance of 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A (“preferred shares”) for net proceeds of $291.1 million as well as issuance of 2,395,035 Class B Non-Voting Shares under the Company’s option plan and Dividend Reinvestment Plan (“DRIP”) for $44.8 million. As of June 15, 2011, share capital is as reported at May 31, 2011 with the exception of the issuance of 111,469 Class B Non-Voting Shares upon exercise of options subsequent to the quarter end. Contributed surplus increased due to stock-based compensation expense recorded in the current year. Accumulated other comprehensive income decreased due settlement of the forward purchase contracts in respect of the closing of the acquisition of the Canwest broadcasting businesses. Non-controlling interests arose in the first quarter due to a number of non-wholly owned specialty channels acquired as part of the Media acquisition.

LIQUIDITY AND CAPITAL RESOURCES

In the current year, the Company generated $554.0 million of free cash flow. Shaw used its free cash flow along with net proceeds of $1.27 billion from its three senior notes issuances, net proceeds of $291.1 million from its preferred share issuance, proceeds on issuance of Class B Non-Voting Shares of $32.4 million and other net items of $38.3 million to pay $981.2 million to complete the Canwest broadcasting business acquisition including repayment of the CW Media term loan and breakage of related currency swaps, fund the net change in working capital requirements of approximately $435.8 million, pay common share dividends of $281.4 million, fund $93.3 million of Wireless expenditures, pay $56.4 million to repurchase and cancel a portion of the Media senior unsecured notes, purchase the Lake Broadcasting cable system for $3.5 million and increase cash and cash equivalents by $333.1 million.

Within thirty days of closing of the Media acquisition, a subsidiary of CW Media was required to make a change of control offer at a cash price equal to 101% of the obligations under the US 13.5% senior unsecured notes due 2015 issued by it in accordance with a related indenture dated as of July 3, 2008. As a result, on November 15, 2010, an offer was made to purchase all of the notes for an effective purchase price of US $1,145.58 for each US $1,000 face amount. An aggregate of US $51.6 million face amount was tendered under the offer and purchased by the Company for cancellation for an aggregate price of approximately $60 million, including accrued interest. The change of control offer expired on December 15, 2010 and no further purchases are required.

Shaw Communications Inc.

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 November 18, 2010. The shelf prospectus allows for the issue of up to an aggregate $4 billion of debt and equity securities over a 25 month period. Pursuant to this shelf prospectus, the Company issued $300.0 million of preferred shares during the third quarter and completed three senior notes offerings in the second quarter totalling $1.3 billion as follows:

•

On May 31, 2011 the Company issued 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A (“Preferred Shares”) at a price of $25.00 per Preferred Share for aggregate gross proceeds of $300.0 million. The net proceeds were used for working capital and general corporate purposes while excess funds are being held in cash and cash equivalents. Holders of the Preferred Shares are entitled to receive, as and when declared by the Company’s board of directors, a cumulative quarterly fixed dividend yielding 4.50% annually for the initial period ending June 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the then current 5-year Government of Canada bond yield plus 2.00%. Holders of Preferred Shares will have the right, at their option, to convert their shares into Cumulative Redeemable Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”), subject to certain conditions, on June 30, 2016 and on June 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled to receive cumulative quarterly dividends, as and when declared by the Company’s board of directors, at a rate set quarterly equal to the then current three-month Government of Canada Treasury Bill yield plus 2.00%.

•

On December 7, 2010 the Company issued $500 million senior notes at a rate of 5.5% due December 7, 2020 and issued an additional $400 million under the reopened 6.75% senior notes due November 9, 2039. The effective rate on the $500 million senior notes and $400 million senior notes is 5.548% and 6.963%, respectively, due to discounts on the issuances. The net proceeds from the notes issuances were used to repay borrowings under the Company’s $1 billion revolving credit facility. In conjunction with the senior notes issuances, the unsecured $500 million revolving credit facility was cancelled. No amounts had been drawn under this facility.

•

On February 17, 2011 the Company issued an additional $400 million under the reopened 6.75% senior notes due November 9, 2039. The effective rate is 6.961% due to the discount on issuance. The net proceeds were used for working capital and general corporate purposes as well as to partially repay borrowings under the revolving credit facility while excess funds are being held in cash and cash equivalents.

The Company’s DRIP allows holders of Class A Shares and Class B Non-Voting Shares who are residents of Canada to automatically reinvest monthly cash dividends to acquire additional Class B Non-Voting Shares. During the current quarter, the Company announced that the Class B Non-Voting Shares distributed under its DRIP would be new shares issued from treasury at a 2% discount from the 5 day weighted average market price immediately preceding the applicable dividend payment date. Previously, the Class B Non-Voting Shares were acquired on the open market at prevailing market prices. The change was effective for the May 30, 2011 dividend payment and resulted in cash savings and incremental Class B Non-Voting Shares of $9.5 million.

Shaw Communications Inc.

On November 25, 2010 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 37,000,000 Class B Non-Voting Shares during the period December 1, 2010 to November 30, 2011. No shares have been repurchased during the current year.

At May 31, 2011, the Company held $633 million in cash and cash equivalents and had access to $1 billion of available credit facilities. Based on available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations during the remainder of the current 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 May 31,												Nine months ended May 31,
										Change												Change
($000’s Cdn)		2011				2010				%				2011				2010				%
Funds flow from operations			430,305				350,810				22.7				1,077,642				1,047,968				2.8
Net increase in non-cash working capital balances related to operations			(63,189	)			(22,266	)			>100.0				(313,849	)			(6,277	)			>100.0
			367,116				328,544				11.7				763,793				1,041,691				(26.7	)

Funds flow from operations increased over the comparative quarter due to the combined impact of higher operating income before amortization adjusted for non-cash program rights expenses partially offset by higher interest expense, current income taxes and the acquisition, integration and restructuring costs in the current year. Funds flow from operations increased over the comparative nine month period due to the aforementioned items partially offset by the realized loss on the mark-to-market payments to terminate the cross-currency interest rate exchange agreements in conjunction with repayment of the CW Media term loan. The net change in non-cash working capital balances over the comparable periods is primarily due to funding of income tax amounts in the current year, the timing of payment of trade and other payables and the seasonal advertising impact of the new Media division on accounts receivable.

Investing Activities

		Three months ended May 31,												Nine months ended May 31,
($000’s Cdn)		2011				2010				Decrease				2011				2010				Decrease
Cash flow used in investing activities			(196,812	)			(922,163	)			725,351				(1,192,350	)			(1,638,068	)			445,718

The cash used in investing activities decreased over the comparable quarter due to the cash outlay of $741.7 million in the prior year in respect of the Company’s initial investment in CW Media. The nine month period was also impacted by the Mountain Cablevision acquisition and investing certain excess funds in a Government of Canada bond in the prior year partially offset by amounts paid to complete the acquisition of the broadcasting businesses of Canwest and higher capital expenditures and inventories in the current year.

Shaw Communications Inc.

Financing Activities

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

		Three months ended May 31,								Nine months ended May 31,
(In $millions Cdn)		2011				2010				2011				2010
Bank loans — net borrowings (repayments)			(75.0	)			5.3				—				5.3
Issuance of Cdn $500 million 5.50% senior notes			—				—				498.2				—
Issuance of Cdn $800 million 6.75% senior notes			—				—				778.9				—
Issuance of Cdn $1.25 billion 5.65% senior notes			—				—				—				1,246.0
Issuance of Cdn $650 million 6.75% senior notes			—				—				—				645.6
Issuance of preferred shares			300.0				—				300.0				—
Senior notes and preferred shares issuance costs			(9.1	)			(0.2	)			(16.6	)			(10.1	)
Repayment of CW Media US $389.6 million term loan			—				—				(394.9	)			—
Repurchase US $51.6 million of CW Media 13.5% senior notes			—				—				(56.4	)			—
Redemption of US $440 million 8.25% senior notes			—				—				—				(465.5	)
Redemption of US $225 million 7.25% senior notes			—				—				—				(238.1	)
Redemption of US $300 million 7.20% senior notes			—				—				—				(312.6	)
Payments on cross-currency agreements			—				—				—				(291.9	)
Debt retirement costs			—				—				—				(79.5	)
Senior notes repurchase premium			—				—				(0.6	)			—
Dividends paid to common shareholders			(90.5	)			(95.1	)			(281.4	)			(276.9	)
Distributions paid to non-controlling interests			(9.8	)			—				(14.4	)			—
Repayment of Partnership debt			(0.1	)			(0.1	)			(0.4	)			(0.4	)
Issue of Class B Non-Voting Shares			8.2				13.8				32.4				39.3
Purchase of Class B Non-Voting Shares for cancellation			—				—				—				(118.1	)
			123.7				(76.3	)			844.8				143.1

SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION

						Operating								Basic and diluted				Funds flow
						income before								earnings per				from
($000’s Cdn except per share amounts)		Revenue				amortization (1)				Net income (3)				share				operations (2)
2011
Third			1,284,688				579,575				202,670				0.45				430,305
Second			1,196,611				494,524				167,299				0.37				382,957
First			1,078,905				473,354				20,332				0.04				264,380
2010
Fourth			938,872				423,152				121,575				0.28				327,435
Third			943,632				435,822				158,216				0.37				350,810
Second			929,142				424,825				138,712				0.32				358,206
First			905,934				474,952				114,229				0.26				338,952
2009
Fourth			872,919				394,900				124,265				0.29				321,319

Shaw Communications Inc.

Generally, revenue and operating income before amortization have grown quarter-over-quarter mainly due to customer growth and rate increases with the exception of the second and fourth quarters of 2010. In the fourth quarter of 2010, revenue and operating income before amortization declined by $4.8 million and $12.7 million, respectively, due to customer growth offset by timing of On-Demand events, increased promotional activity and timing of certain expenses including maintenance and costs related to customer growth. Operating income before amortization decreased by $50.1 million in the second quarter of 2010 due to the impact of the one-time Part II fee recovery of $75.3 million recorded in the previous quarter.

Net income has fluctuated quarter-over-quarter primarily as a result of the growth in operating income before amortization described above and the impact of the net change in non-operating items. The first quarter of the current year was also impacted by the acquisition of the Canwest broadcasting businesses. As a result, net income declined by $101.2 million in the first quarter of 2011 as the higher operating income before amortization of $50.2 million due to the contribution from the new Media division and lower income taxes of $32.1 million were offset by the CRTC benefit obligation of $139.1 million and acquisition, integration and restructuring costs of $58.1 million. Net income increased by $147.0 million in the second quarter of 2011 due to the impact of the Canwest broadcasting business acquisition in the immediately preceding quarter and higher operating income before amortization and foreign exchange gain on unhedged long-term debt, the total of which was partially offset by increases in interest expense, loss on derivative instruments and income tax expense. During the third quarter of 2011, net income increased by $35.4 million due to higher operating income before amortization and a lower loss on derivative instruments partially offset by increased income taxes, a lower of foreign exchange gain on unhedged long-term debt and the impact of the restructuring activities undertaken by the Company. Net income declined by $10.0 million in the first quarter of 2010 mainly due to debt retirement costs of $81.6 million in respect of the US senior note redemptions, the loss on derivative instruments of $44.4 million, the total of which was partially offset by higher operating income before amortization of $80.1 million (which includes the impact of the one-time Part II fee recovery of $75.3 million) and lower income taxes of $28.9 million. The lower income taxes were due to lower net income before taxes and an income tax recovery of $17.6 million related to reductions in corporate income tax rates in the first quarter of 2010. Net income increased by $24.5 million in the second quarter of 2010 due to the aforementioned items recorded in the previous quarter and the impact of customer growth, the Mountain Cablevision acquisition and lower costs including employee related and marketing expenses all of which were partially offset by increased taxes on higher net income before taxes. During the third quarter of 2010, net income increased by $19.5 million mainly due to higher operating income before amortization and lower amortization. Net income declined by $36.6 million in the fourth quarter of 2010 due to lower operating income before amortization of $12.7 million and higher amortization expense of $14.7 million. As a result of the aforementioned changes in net income, basic and diluted earnings per share have trended accordingly.

Shaw Communications Inc.

ACCOUNTING STANDARDS

Update to critical accounting policies and estimates

The Management’s Discussion and Analysis (“MD&A”) included in the Company’s August 31, 2010 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 unaudited 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 as follows.

Adoption of accounting policies for Shaw Media

The following accounting policies have been adopted for the Company’s new television broadcasting operations (Shaw Media).

Revenue

Subscriber revenue is recognized monthly based on subscriber levels. Advertising revenues are recognized in the period in which the advertisements are broadcast and recorded net of agency commissions as these amounts are paid directly to the agency or advertiser. When a sales arrangement includes multiple advertising spots, the proceeds are allocated to individual advertising spots under the arrangement based on relative fair values.

Program Rights and Advances

Program rights represent licensed rights acquired to broadcast television programs on the Company’s conventional and specialty television channels and program advances are in respect of payments for programming prior to the window license start date. For licensed rights, the Company records a liability for program rights and corresponding asset when the license period has commenced and all of the following conditions have been met: (i) the cost of the program is known or reasonably determinable, (ii) the program material has been accepted by the Company in accordance with the license agreement and (iii) the material is available to the Company for telecast. Program rights are expensed on a systematic basis over the estimated exhibition period as the programs are aired and are included in operating, general and administrative expenses. If program rights are not scheduled, they are considered impaired and are written off.

CRTC Benefit Obligations

The fair value of CRTC benefit obligations committed as part of business acquisitions are initially recorded, on a discounted basis, at the present value of amounts to be paid net of any expected incremental cash inflows. The obligation is subsequently adjusted for the incurrence of related expenditures, the passage of time and for revisions to the timing of the cash flows. Changes in the obligation due to the passage of time are recorded as accretion of long-term liabilities in the income statement.

Asset Retirement Obligations

The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, on a discounted basis, with a corresponding increase to the carrying amount of property and equipment. This cost is amortized on the same basis as the related asset. The liability is subsequently increased for the passage of time and the accretion is recorded in the income statement as accretion of long-term liabilities. Revisions due to the estimated timing of cash flows or the amount required to settle the obligation may result in an increase or decrease in the liability. Actual costs incurred upon settlement of the obligation are charged against the liability to the extent recorded.

Shaw Communications Inc.

Embedded Derivative Instruments

Derivatives embedded in other financial instruments or contracts are separated from their host contracts and separately accounted for as derivatives when their economic characteristics and risks are not closely related to the host contract, they meet the definition of a derivative and the combined instrument or contract is not measured at fair value. The Company records embedded derivatives at fair value with changes recognized in the income statement as loss/gain on derivative instruments.

Adoption of recent accounting pronouncements

Business Combinations

Effective September 1, 2010, the Company early adopted CICA Handbook Section 1582 “Business Combinations”, which replaces Section 1581 “Business Combinations”. The differences which arise from the new accounting standard relate to details in applying the acquisition method. The significant changes that result include (i) a change in the measurement date for equity instruments issued by the acquirer from a few days before and after the announcement date to the acquisition date, (ii) contingent consideration is recognized at fair value and subsequently remeasured at each reporting date until settled, (iii) future adjustments to income tax estimates are recorded in income whereas previously, certain changes were recorded in goodwill, (iv) acquisition related costs, other than costs to issue debt or equity instruments, and acquisition related restructuring costs must be expensed, (v) for business combinations completed in stages, identifiable net assets are recognized at fair value when control is obtained and a gain or loss is recognized for the difference in fair value and carrying value of the previously held equity interests, (vi) the fair value of identifiable assets and liabilities attributable to non-controlling interests must be recognized, and (vii) non-controlling interests are recorded at either fair value or their proportionate share of the fair value of identifiable net assets acquired.

Consolidated Financial Statements and Non-controlling Interests

Effective September 1, 2010, the Company early adopted CICA Handbook Section 1601 “Consolidated Financial Statements” and Section 1602 “Non-controlling Interests” which replace Section 1600 “Consolidated Financial Statements”. The new standards provide guidance for the preparation of financial statements and accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. For presentation and disclosure purposes, non-controlling interests are classified as a separate component of shareholders’ equity. In addition, net income and comprehensive income is attributed to the Company’s shareholders and to non-controlling interests rather than reflecting the non-controlling interests as a deduction to arrive at net income and comprehensive income.

Shaw Communications Inc.

Recent accounting pronouncements:

International Financial Reporting Standards (IFRS)

In February 2008, the CICA Accounting Standards Board (AScB) confirmed that Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), for fiscal periods beginning on or after January 1, 2011. These standards require the Company to begin reporting under IFRS in the first quarter of fiscal 2012 with comparative data for the prior year. The table below outlines the phases involved in the changeover to IFRS.

Phase		Description and status
Impact assessment and planning		This phase includes establishment of a project team and high-level review to determine potential significant differences under IFRS as compared to Canadian GAAP. This phase has been completed and as a result, the Company has developed a transition plan and a preliminary timeline to comply with the changeover date while recognizing that project activities and timelines may change as a result of unexpected developments.
Design and development — key elements		This phase includes (i) an in-depth review to identify and assess accounting and reporting differences, (ii) evaluation and selection of accounting policies, (iii) assessment of impact on information systems, internal controls, and business activities, and (iv) training and communication with key stakeholders.
		During 2009, the Company completed its preliminary identification and assessment of accounting and reporting differences. In addition, training was provided to certain key employees involved in or directly impacted by the conversion process.
		During 2010, the assessment of the impact on information systems and design phase of system changes have been completed and the implementation phase has commenced. The Company has completed further in-depth evaluations of those areas initially identified as being potential accounting and reporting differences, as well as the evaluation of IFRS 1 elections/exemptions which are discussed below.
Implementation		This phase includes integration of solutions into processes and financial systems that are required for the conversion to IFRS and parallel reporting during the year prior to transition including proforma financial statements and note disclosures. Process solutions will incorporate required revisions to internal controls during the changeover and on an on-going basis.

Shaw Communications Inc.

In the period leading up to the changeover, the AcSB will continue to issue accounting standards that are converged with IFRS, thus mitigating the impact of the adoption of IFRS at the changeover date. The International Accounting Standards Board (“IASB”) will also continue to issue new accounting standards during the conversion period and, as a result, the final impact of IFRS on the Company’s consolidated financial statements will only be measured once all IFRS applicable at the conversion date are known.

The Company’s adoption of IFRS will require the application of IFRS 1, First-Time Adoption of International Financial Reporting Standards (“IFRS 1”), which provides guidance for an entity’s initial adoption of IFRS. IFRS 1 generally requires that an entity apply all IFRS effective at the end of its first IFRS reporting period retrospectively. However, IFRS 1 does include certain mandatory exceptions and limited optional exemptions in specified areas of certain standards from this general requirement. Management is assessing the exemptions available under IFRS 1 and their impact on the Company’s future financial position. On adoption of IFRS, the significant optional exemptions being considered by the Company are as follows:

Exemption		Application of exemption
Business combinations		The Company expects to apply IFRS 3 prospectively from its transition date and elect not to restate any business combinations that occurred prior to September 1, 2010.
Employee benefits		The Company expects to elect to recognize cumulative actuarial gains and losses arising from all of its defined benefit plans as at September 1, 2010 in opening retained earnings.
Borrowing costs		The Company expects to elect to apply IAS 23 “Borrowing Costs” prospectively from September 1, 2010.

Management is in the process of quantifying the expected material differences between IFRS and the current accounting treatment under Canadian GAAP. Set out below are the key areas where changes in accounting policies are expected that may impact the Company’s consolidated financial statements. The list and comments should not be regarded as a complete list of changes that will result from the transition to IFRS. It is intended to highlight those areas management believes to be most significant. However, the IASB has significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS and their impact on the Company’s consolidated financial statements. Consequently, management’s analysis of changes and policy decisions have been made based on its expectations regarding the accounting standards that we anticipate will be effective at the time of transition. The future impacts of IFRS will also depend on the particular circumstances prevailing in those years. At this stage, management is not able to reliably quantify the impacts expected on the Company’s consolidated financial statements for these differences. Please see the section entitled “Cautionary statement regarding forward-looking statements”.

The following significant differences between Canadian GAAP and IFRS have been identified that are expected to impact the Company’s financial statements. This is not an exhaustive list of all of the changes that could occur during the transition to IFRS. At this time, the comprehensive impact of the changeover on the Company’s future financial position and results of operations is not yet determinable.

The Company continues to monitor and assess the impact of evolving differences between Canadian GAAP and IFRS, since the IASB is expected to continue to issue new accounting standards during the transition period. As a result, the final impact of IFRS on the Company’s consolidated financial statements can only be measured once all the applicable IFRS at the conversion date are known.

Shaw Communications Inc.

Differences with respect to recognition, measurement, presentation and disclosure of financial information are expected to be in the following key accounting areas:

		Differences from Canadian GAAP, with
Key accounting area		potential impact for the Company
Presentation of Financial Statements (IAS 1)		IAS 1 requires additional disclosures in the notes to financial statements.
Share-based Payments (IFRS 2)		IFRS 2 requires cash-settled awards to employees be measured at fair value at the initial grant date and re-measured at fair value at the end of each reporting period.
		IFRS 2 also requires the fair value of stock-based compensation awards to be recognized using a graded vesting method based on the vesting period of the options.
Income Taxes (IAS 12)		IAS 12 recognition and measurement criteria for deferred tax assets and liabilities may differ.
Employee Benefits (IAS 19)		IAS 19 requires past service costs of defined benefit plans to be expensed on an accelerated basis, with vested past service costs immediately expensed and unvested past service costs amortized on a straight line basis until benefits become vested.
		IAS 19 has an accounting policy choice that allows the Company to recognize actuarial gains and losses using one of the following methods:
		•    in net income using the corridor approach amortized over the expected average remaining working lives,
		•    in net income on a systematic basis for faster recognition, including immediate recognition of all actuarial gains and losses, or
		•    to recognize them in other comprehensive income, as they occur.
		The Company is currently reviewing the impact of the accounting policy choice for recognition of actuarial gains and losses.
Interests in Joint Ventures (IAS 31)		Although IAS 31 currently permits the use of proportionate consolidation for joint ventures interests, the recently issued IFRS 11 “Joint Arrangements” requires joint arrangements classified as joint ventures to be accounted for using the equity method.

Shaw Communications Inc.

		Differences from Canadian GAAP, with
Key accounting area		potential impact for the Company
Impairment of Assets (IAS 36)		IAS 36 uses a one-step approach for the identification and measurement of impairment of assets. The carrying value of assets is compared to the greater of its fair value less costs to sell and value in use, which is based on the net present value of future cash flows. Impairment of assets, other than goodwill, is reversed in a subsequent period if circumstances change such that the previously determined impairment is reduced or eliminated.
Provisions, Contingent Liabilities and Contingent Assets (IAS 37)		IAS 37 uses a different threshold for recognition of a contingent liability that could impact the timing of when a provision may be recorded.
Intangible Assets (IAS 38)		IAS 38 prohibits the amortization of indefinite-lived intangibles and reinstatement of previous amortization is required.