Shaw Communications Inc., Part 1 of 2: Shareholders Report: Fourth Quarter Ending August 31, 2002

Business Wire, Oct 17, 2002

Business Editors

CALGARY, Alberta--(BUSINESS WIRE)--Oct. 17, 2002

Shaw Communications (NYSE:SJR)(TSX:SJR.B.TO):

MANAGEMENT'S DISCUSSION AND ANALYSIS

Certain statements in this report may constitute forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such 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 the Management's Discussion and Analysis included in the Company's August 31, 2001 Annual Report and Financial Statements and the Notes thereto.

                CONSOLIDATED RESULTS OF OPERATIONS
               FOURTH QUARTER ENDING AUGUST 31, 2002
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                                 Three months ended      Year ended
                                    August 31,           August 31,
                                  2002      2001       2002      2001
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 ($000's except per share
 amounts)
Operations:
 Total revenue                 494,610   428,075  1,888,560 1,536,953

 Operating income before
  amortization                 185,215   125,023    632,673   460,340

 Cash flow from operations     107,258    47,383    332,109   210,514

 Reported net loss             (70,647) (294,758)  (288,292) (147,421)

Per share data:

 Cash flow per share
  - basic (1)                    $0.42     $0.16      $1.25     $0.77

 Reported loss per share
  - basic and diluted (1)       ($0.35)   ($1.32)    ($1.43)   ($0.85)

 Weighted average participating
  shares outstanding during
  period (000's)               231,848   231,750    231,820   221,079
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1 After deducting entitlements on the equity instruments, net of
  income taxes, amounting to $9,977 or $0.04 per share (2001 - $10,085
  or $0.04 per share) and $42,331 or $0.18 per share (2001 - $40,123
  or $0.18 per share) for the quarter and year ended respectively.

Consolidated Results

Highlights

In the second quarter report to shareholders, your Company aligned its resources to pursue the primary objective of achieving strong growth in a sustainable free cash flow environment. Comparing the February quarter to the August quarter or over a six month period, the cable, Internet and Big Pipe division ("cable"), which represents over 70% of Shaw's revenue, grew operating income before amortization by 24% and reversed negative cash flow of $185 million to achieve breakeven cash flow.

The cable division is now on track to achieve $105 million of free cash flow in fiscal 2003.

Over the same period, the satellite division (including satellite services and DTH) grew operating income by 205% and reduced the cash flow deficit from $62 million to $39 million. We believe the division will achieve a run rate of being cash flow positive in fiscal 2004. For the most part, all of the cash is invested in the acquisition of customers and it is worth noting that in a hypothetical no-growth environment, the division is cash flow positive in fiscal 2003.

In the immediate term, Shaw has access to $1 billion of available credit facilities. Adding to our liquidity is the potential sale of the US cable systems for proceeds of approximately $300 million Canadian. The outlook for the next five years is very positive as we believe we can generate in excess of $1 billion in free cash flow from operations on a consolidated basis. The outlook is based on conservative growth assumptions in the cable division of 5% per year for operating income before amortization for the years 2004 - 2007 and average capital expenditures of $285 million per year for the same period. The satellite division is based on operating income before amortization growing 300% from 2003 - 2007 and subscriber growth of 435,000 (an average of 86,000 per year) over the same period. Based on the above and the existing Shaw bank facility, we believe we do not have to access the debt capital market during the next five years. Although we anticipate that actual results over the next five years will exceed the above assumptions, this clearly illustrates the potential for value creation for all of our stakeholders.

Shaw has a high quality infrastructure, a large and growing customer base and a strong management team totally focused on growing free cash flow. We believe the company has achieved a turning point in pursuing its primary objective of growing free cash flow and the outlook is very positive.

Consolidated Overview

This quarter, Shaw repeated the good news story of the third quarter, with significant sequential quarter over quarter growth. Revenue increased 1% over the May 2002 quarter and operating income before amortization increased by 7.8%. Again, the cable and Internet divisions were the major contributors to the revenue growth, as a result of Internet customer growth and rate increases. All divisions, with the exception of Satellite Services, recorded sequential growth in operating income before amortization. Price increases and cost reduction programs contributed to operating income before amortization surpassing revenue growth.