SHAW COMMUNICATIONS INC. — Interim / Quarterly Report 2021

Apr 14, 2021

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (unaudited)

(millions of Canadian dollars)	February 28, 2021	August 31, 2020
ASSETS
Current
Cash and cash equivalents	388	763
Accounts receivable	330	268
Income taxes recoverable	21	-
Inventories	70	60
Other current assets_[note 4]_	309	277
Current portion of contract assets_[note 12]_	128	132
	1,246	1,500
Investments and other assets_[note 5 & 16]_	70	42
Property, plant and equipment	6,091	6,142
Other long-term assets	159	163
Contract assets_[note 12]_	35	40
Deferred income tax assets	2	1
Intangibles_[note 17]_	8,005	7,997
Goodwill_[note 17]_	280	280
	15,888	16,165
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Short-term borrowings_[note 7]_	200	200
Accounts payable and accrued liabilities	935	999
Provisions_[note 8]_	97	101
Income taxes payable	-	57
Current portion of contract liabilities_[note 12]_	206	211
Current portion of long-term debt_[notes 9 and 16]_	1	1
Current portion of lease liabilities_[note 6]_	108	113
Current portionofderivatives	7	6
	1,554	1,688
Long-term debt_[notes 9 and 16]_	4,548	4,547
Lease liabilities_[note 6]_	1,182	1,157
Other long-term liabilities	44	72
Provisions_[note 8]_	80	80
Deferred credits	398	406
Contract liabilities_[note 12]_	15	14
Deferredincome tax liabilities	2,030	1,968
	9,851	9,932
Shareholders' equity[notes 10 and 14]
Common and preferred shareholders	6,037	6,233
	15,888	16,165

See accompanying notes.

42

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(millions of Canadian dollars)	Threemonths ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Revenue[notes 3 and 12] Operating, general and administrative expenses_[note 13] Restructuring costs[notes 8 and 13]_ Amortization: Deferred equipment revenue Deferred equipment costs Property, plant and equipment, intangibles and other	1,387 1,363 (750) (763) (1) - 3 5 (12) (17) (294) (288)	2,757 2,746 (1,513) (1,558) (13) - 6 9 (25) (35) (589) (577)
Operating income Amortization of financing costs – long-term debt Interest expense Other gains (losses)	333 300 - (1) (67) (68) 26 (19)	623 585 (1) (2) (133) (139) 24 (22)
Income before income taxes Current income tax expense_[note 3]_ Deferred income tax expense	292 212 44 23 31 22	513 422 80 59 53 34
Net income	217 167	380 329
Net income attributable to: Equity shareholders Earnings per share:[note 11] Basic and diluted	217 167 0.43 0.32	380 329 0.74 0.63

See accompanying notes.

43

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(millions of Canadian dollars)	Three months ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Net income Other comprehensive income[note 14] Items that may subsequently be reclassified to income: Change in unrealized fair value of derivatives designated as cash flow hedges Adjustment for hedged items recognized in the period	217 167 (1) - 1 -	380 329 (2) - 2 -
Items that will not subsequently be reclassified to income: Remeasurements on employee benefit plans	- - 28 (10)	- - 23 (5)
	28 (10)	23 (5)
Comprehensive income	245 157	403 324
Comprehensive income attributable to: Equityshareholders	245 157	403 324

See accompanying notes.

44

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Six months ended February 28, 2021

Attributable to equity shareholders

						Equity
				Accumulated		attributable
				other		to non
	Share	Contributed	Retained	comprehensive		controlling	Total
(millions of Canadian dollars)	capital	surplus	earnings	loss	Total	interest	equity
Balance as at September 1, 2020	4,602	27	1,703	(99)	6,233	-	6,233
Net income	-	-	380	-	380	-	380
Other comprehensive income	-	-	-	23	23	-	23
Comprehensive income	-	-	380	23	403	-	403
Dividends	-	-	(300)	-	(300)	-	(300)
Shares issued under stock option plan	1	-	-	-	1	-	1
Shares repurchased_[note 10]_	(116)	-	(184)	-	(300)	-	(300)
Balance as at February 28, 2021	4,487	27	1,599	(76)	6,037	-	6,037

Six months ended February 29, 2020

Attributable to equity shareholders

						Equity
				Accumulated		attributable
				other		to non
	Share	Contributed	Retained	comprehensive		controlling	Total
(millions of Canadian dollars)	capital	surplus	earnings	loss	Total	interest	equity
Balance as at September 1, 2019	4,605	26	1,723	(94)	6,260	3	6,263
Net income	-	-	329	-	329	-	329
Othercomprehensiveincome	-	-	-	(5)	(5)	-	(5)
Comprehensive income	-	-	329	(5)	324	-	324
Dividends	-	-	(272)	-	(272)	-	(272)
Dividend reinvestment plan	37	-	(37)	-	-	-	-
Distributions declared to non-controlling interest	-	-	-	-	-	(3)	(3)
Shares issued under stock option plan	6	(1)	-	-	5	-	5
Shares repurchased	(35)	-	(70)	-	(105)	-	(105)
Share-based compensation	-	1	-	-	1	-	1
Balance as at February29,2020	4,613	26	1,673	(99)	6,213	-	6,213

See accompanying notes.

45

Shaw Communications Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(millions of Canadian dollars)	Three months ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
OPERATING ACTIVITIES Funds flow from operations[note 15] Net change in non-cash balances	539 496 (66) (135)	1,027 946 (254) (246)
	473 361	773 700
INVESTING ACTIVITIES Additions to property, plant and equipment_[note 3] Additions to equipment costs (net)[note 3] Additions to other intangibles[note 3]_ Net additions to investments and other assets Proceeds on disposal of property, plant and equipment	(218) (248) (5) (7) (34) (36) - (4) 3 1	(414) (518) (12) (18) (76) (64) (1) (5) 17 1
	(254) (294)	(486) (604)
FINANCING ACTIVITIES Increase in short-term borrowings_[note 7] Issuance of long-term debt Repayment of long-term debt Debt arrangement costs Payment of lease liabilities[note 6] Issue of Class B Shares[note 10] Purchase of Class B Shares[note 10]_ Dividends paid on Class A Shares and Class B Shares Dividends paid on Preferred Shares Payment of distributions to non-controlling interests	- 135 - 800 - (818) - (9) (27) (27) 1 2 (225) (80) (149) (153) (2) (2) - -	- 215 - 800 - (2,068) - (10) (58) (57) 1 5 (300) (105) (301) (269) (4) (4) - (2)
	(402) (152)	(662) (1,495)
Decrease in cash Cash, beginning of the period	(183) (85) 571 132	(375) (1,399) 763 1,446
Cash, end of theperiod	388 47	388 47

See accompanying notes.

46

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

1. CORPORATE INFORMATION

Shaw Communications Inc. (the “Company”) is a diversified Canadian connectivity company whose core operating business is providing: Cable telecommunications, Satellite video services and data networking to residential customers, businesses and public-sector entities (“Wireline”); and wireless services for voice and data communications (“Wireless”). The Company’s shares are listed on the Toronto Stock Exchange (TSX), TSX Venture Exchange (TSXV) and New York Stock Exchange (NYSE) (Symbol: TSX - SJR.B, SJR.PR.A, SJR.PR.B, NYSE - SJR, and TSXV - SJR.A).

2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Statement of compliance

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

The condensed interim consolidated financial statements of the Company for the three and six months ended February 28, 2021 were authorized for issue by the Board of Directors on April 14, 2021.

Basis of presentation

These condensed interim consolidated financial statements have been prepared primarily under the historical cost convention except as detailed in the significant accounting policies disclosed in the Company’s consolidated financial statements for the year ended August 31, 2020 and are expressed in millions of Canadian dollars unless otherwise indicated. The condensed interim consolidated statements of income are presented using the nature classification for expenses.

The notes presented in these condensed interim consolidated financial statements include only significant events and transactions occurring since the Company’s last fiscal year end and are not fully inclusive of all matters required to be disclosed by IFRS in the Company’s annual consolidated financial statements. As a result, these condensed interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended August 31, 2020.

The condensed interim consolidated financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements.

47

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

3. BUSINESS SEGMENT INFORMATION

The Company’s chief operating decision makers are the Executive Chair & Chief Executive Officer, the President, and the Executive Vice President, Chief Financial & Corporate Development Officer and they review the operating performance of the Company by segments, which are comprised of Wireline and Wireless. The chief operating decision makers utilize adjusted earnings before interest, income taxes, depreciation and amortization (“adjusted EBITDA”) for each segment as a key measure in making operating decisions and assessing performance.

The Wireline segment provides Cable telecommunications services including Video, Internet, WiFi, Phone, Satellite Video and data networking through a national fibre-optic backbone network to Canadian consumers, North American businesses and public-sector entities. The Wireless segment provides wireless services for voice and data communications serving customers in Ontario, British Columbia and Alberta through Freedom Mobile and in British Columbia and Alberta through Shaw Mobile.

Both of the Company’s reportable segments are substantially located in Canada. Information on operations by segment is as follows:

Operating information

Operating information
	Threemonths ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Revenue Wireline Wireless	1,054 1,063 336 302	2,110 2,130 653 620
Intersegment eliminations	1,390 1,365 (3) (2)	2,763 2,750 (6) (4)
	1,387 1,363	2,757 2,746
Adjusted EBITDA(1) Wireline Wireless	540 519 97 81	1,072 1,036 172 152
Restructuring costs Amortization	637 600 (1) - (303) (300)	1,244 1,188 (13) - (608) (603)
Operating income	333 300	623 585
Current taxes Operating Other/non-operating	43 22 1 1	78 54 2 5
	44 23	80 59

(1) Adjusted EBITDA does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers; the Company defines adjusted EBITDA as revenues less operating, general and administrative expenses.

48

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

Capital expenditures

Capital expenditures
	Three months ended Six months ended
	February 28, 2021 February 29, 2020 February 28, 2021 February 29, 2020
Capital expenditures accrual basis Wireline Wireless	174 216 328 410 71 53 144 108
	245 269 472 518
Equipment costs (net of revenue) Wireline	5 7 12 18
Capital expenditures and equipment costs (net) Wireline Wireless	179 223 340 428 71 53 144 108
	250 276 484 536
Reconciliation to Consolidated Statements of Cash Flows Additions to property, plant and equipment Additions to equipment costs (net) Additions to other intangibles	218 248 414 518 5 7 12 18 34 36 76 64
Total of capital expenditures and equipment costs (net) per Consolidated Statements of Cash Flows Decrease in working capital and other liabilities related to capital expenditures Less:Proceeds ondisposalofproperty, plant and equipment	257 291 502 600 (4) (14) (1) (63) (3) (1) (17) (1)
Total capital expenditures and equipment costs (net) reported bysegments	250 276 484 536

4. OTHER CURRENT ASSETS

	February 28, 2021	August 31, 2020
Prepaid expenses	93	89
Deferred commission costs(1)	63	61
Wireless handset receivables(2)	153	127
	309	277

(1) Costs incurred to obtain or fulfill a contract with a customer are capitalized and subsequently amortized as an expense over the average life of a customer.

(2) As described in the revenue and expenses accounting policy detailed in the significant accounting policies disclosed in the Company’s consolidated financial statements for the year ended August 31, 2020, these amounts relate to the current portion of wireless handset receivables.

49

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

5. INVESTMENTS AND OTHER ASSETS

	**February **	**28, **	2021	August	31,	2020
Investments inprivate entities			70			42

The Company has a portfolio of investments in various private entities. In the second quarter of fiscal 2021, the Company recorded a net fair value adjustment of $27 relating to these investments. This gain is included in other gains (losses) on the Consolidated Statements of Income.

6. LEASE LIABILITIES

Below is a summary of the activity related to the Company’s lease liabilities.

August 31, 2020	1,270
Net additions	78
Interest on lease liabilities	22
Interest payments on lease liabilities	(22)
Principal payments of lease liabilities	(58)
Other	-
Balance as at February 28, 2021	1,290
Current	113
Long-term	1,157
Balance as at August 31,2020	1,270
Current	108
Long-term	**1,182 **
Balance as at February 28, 2021	1,290

7. SHORT-TERM BORROWINGS

A summary of our accounts receivable securitization program is as follows:

	Three months ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Accounts receivable securitization program, beginning of period Proceeds received from accounts receivable securitization Repayment of accounts receivable securitization	200 120 - 80 - -	200 40 - 160 - -
Accounts receivable securitizationprogram, end ofperiod	200 200	200 200

	February 28, 2021	August 31, 2020
Trade accounts receivable sold to buyer as security	485	446
Short-term borrowings from buyer	(200)	(200)
Over-collateralization	285	246

50

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

8. PROVISIONS

8. PROVISIONS
	Asset
	retirement		Restructuring
	obligations		(1)(2)	Other		Total
	$		$	$		$
Balance as at August 31, 2020		79	13		89		181
Additions		-	13		9		22
Accretion		1	-		-		1
Reversal		-	-		(3)		(3)
Payments		-	(24)		-		(24)
Balance as at February 28, 2021		80	2		95		177
Current		-	13		88		101
Long-term		79	-		1		80
Balance as at August 31,2020		79	13		89		181
Current		-	2		95		97
Long-term		80	-		-		80
Balance as at February 28, 2021		80	2		95		177

(1) During fiscal 2018 the Company offered a voluntary departure program to a group of eligible employees as part of a total business transformation initiative and in fiscal 2020 restructured certain operations within the Wireline segment and announced a realignment of the senior leadership team. A total of $12 has been paid in fiscal 2021 relating to these initiatives. The remaining costs are expected to be paid out within the next 11 months.

(2) During fiscal 2021, the Company made a number of changes to its organizational structure in an effort to streamline the business, consolidate certain functions, and reduce redundancies between the Wireless and Wireline segments. In connection with the restructuring, the Company recorded $1 in the second quarter and $12 in the first quarter primarily related to severance and employee related costs, of which $12 has been paid as at February 28, 2021. The remaining costs are expected to be paid within the next 11 months.

51

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

9. LONG-TERM DEBT

	February 28, 2021 Effective interest rates Long-term debt at amortized cost(1) Adjustment for finance costs(1) Long-term debt repayable at maturity % $ $ $	August 31, 2020
		Long-term debt at amortized cost(1) Adjustment for finance costs(1) Long-term debt repayable at maturity $ $ $
Corporate Cdn fixed rate senior notes- 3.80% due November 2, 2023 4.35% due January 31, 2024 3.80% due March 1, 2027 4.40% due November 2, 2028 3.30% due December 10, 2029 2.90% due December 9, 2030 6.75% due November 9, 2039 4.25% due December 9, 2049	3.80 498 2 500 4.35 499 1 500 3.84 299 1 300 4.40 496 4 500 3.41 496 4 500 2.92 496 4 500 6.89 1,421 29 1,450 4.33 296 4 300	498 2 500 499 1 500 298 2 300 496 4 500 495 5 500 496 4 500 1,421 29 1,450 296 4 300
Other Burrard Landing Lot 2 Holdings Partnership	4,501 49 4,550 Various 48 - 48	4,499 51 4,550 49 - 49
Total consolidated debt Less current portion(2)	4,549 49 4,598 1 - 1	4,548 51 4,599 1 - 1
	4,548 49 4,597	4,547 51 4,598

(1) Long-term debt is presented net of unamortized discounts and finance costs.

(2) Current portion of long-term debt includes amounts due within one year in respect of the Burrard Landing loans.

10. SHARE CAPITAL

Changes in share capital during the six months ended February 28, 2021 are as follows:

	Class A Shares Number $	Class B Shares Number $	Series A Preferred Shares Number $	Series B Preferred Shares
				Number $
August 31, 2020 Issued upon stock option plan exercises Issued upon restricted share unit exercises Sharesrepurchased	22,372,064 2 - - - - - -	490,632,833 4,307 28,300 1 6,423 - (13,224,772) (116)	10,012,393 245 - - - - - -	1,987,607 48 - - - - - -
February 28, 2021	22,372,064 2	477,442,784 4,192	10,012,393 245	1,987,607 48

Normal Course Issuer Bid

On November 2, 2020, the Company announced that it had received approval from the TSX to establish a normal course issuer bid (NCIB) program. The program commenced on November 5, 2020 and will remain in effect until November 4, 2021. As approved by the TSX, the Company has the ability to purchase for cancellation up to 24,532,404 Class B Non-Voting Participating Shares (“Class B Shares”) representing approximately 5% of all of the issued and outstanding Class B Shares as at October 22, 2020.

52

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

During the six months ended February 28, 2021, the Company purchased 13,224,772 Class B Shares for cancellation for a total cost of approximately $300 under the NCIB program. The average book value of the shares repurchased was $8.77 per share and was charged to share capital. The excess of the market price over the average book value, including transaction costs, was approximately $184 and was charged to retained earnings.

From March 1, 2021 to March 12, 2021, the Company purchased an additional 1,559,202 Class B Shares for cancellation for a total cost of approximately $36 under the NCIB program. In connection with the announcement of the Transaction on March 15, 2021 (as discussed in more detail in Note 18), the Company suspended share buybacks under its NCIB program.

11. EARNINGS PER SHARE

Earnings per share calculations are as follows:

	Three months ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Numerator for basic and diluted earnings per share ($) Net income Deduct: dividends on Preferred Shares	217 167 (2) (2)	380 329 (4) (4)
Netincome attributable to commonshareholders	215 165	376 325
Denominator (millions of shares) Weighted average number of Class A Shares and Class B Shares for basic earnings per share 505 516 Effect of dilutive securities(1) - -		509 517 - -
Weighted average number of Class A Shares and Class B Shares for diluted earnings per share 505 516		509 517
Basic earnings per share ($) Basic and diluted 0.43 0.32		0.74 0.63

(1) The earnings per share calculation does not take into consideration the potential dilutive effect of certain stock options since their impact is anti-dilutive. For the three and six months ended February 28, 2021, 8,199,698 (February 29, 2020 – 5,852,922) and 7,852,637 (February 29, 2020 – 5,719,981) options were excluded from the diluted earnings per share calculation, respectively.

53

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

12. REVENUE

Contract assets and liabilities

The table below provides a reconciliation of the significant changes to the current and long-term portion of contract assets and liabilities balances during the year.

assets and liabilities balances during the year.
	Contract	Contract
	Assets	Liabilities
Balance as at August 31, 2020	172	225
Increase in contract assets from revenue recognized during the year	81	-
Contract assets transferred to trade receivables	(81)	-
Contract terminations transferred to trade receivables	(9)	-
Revenue recognized included in contract liabilities at the beginning of the year	-	(215)
Increaseincontractliabilities during the year	-	211
Balance as at February 28, 2021	163	221

	Contract		Contract
	Assets		Liabilities
Current		132		211
Long-term		40		14
Balance as at August 31,2020		172		225
Current		128		206
Long-term		35		15
Balance as at February 28, 2021		163		221

Deferred commission cost assets

The table below provides a summary of the changes in the deferred commission cost assets recognized from the incremental costs incurred to obtain contracts with customers during the six months ended February 28, 2021. We believe these amounts to be recoverable through the revenue earned from the related contracts. The deferred commission cost assets are presented within other current assets (when they will be amortized into net income within twelve months of the date of the financial statements) or other long-term assets.

August 31, 2020	98
Additions to deferred commission cost assets	39
Amortization recognized on deferred commission cost assets	(41)
Balance as at February 28, 2021	96
Current	61
Long-term	37
Balance as at August 31,2020	98
Current	63
Long-term	33
Balance as at February 28, 2021	96

Commission costs are amortized over a period ranging from 24 to 36 months.

54

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

Disaggregation of revenue

Disaggregation of revenue
	Three months ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Services Wireline - Consumer Wireline - Business Wireless	909 919 145 144 218 201	1,820 1,843 290 287 433 397
	1,272 1,264	2,543 2,527
Equipment and other Wireless	118 101	220 223
	118 101	220 223
Intersegment eliminations	(3) (2)	(6) (4)
Total revenue	1,387 1,363	2,757 2,746

Remaining performance obligations

The following table includes revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as at February 28, 2021.

	Within	Within	Within	Within	Within
	1 year	2 years	3 years	4 years	5 years	Thereafter	Total
Wireline	1,553	672	159	88	28	1	2,501
Wireless	415	137	-	-	-	-	552
Total	1,968	809	159	88	28	1	3,053

When estimating minimum transaction prices allocated to the remaining unfilled, or partially unfulfilled, performance obligations, Shaw applied the practical expedient to not disclose information about remaining performance obligations that have original expected duration of one year or less and for those contracts where we bill the same value as that which is transferred to the customer. The estimated amounts disclosed are based upon contractual terms and maturities. Revenues recognized based on actual minimum transaction price, and the timing thereof, will differ from these estimates due to the frequency with which the actual durations of contracts with customers do not match their contractual maturities.

13. OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES AND RESTRUCTURING COSTS

COSTS
	Three months ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Employee salaries and benefits(1) Purchase of goods and services	154 160 597 603	307 317 1,219 1,241
	751 763	1,526 1,558

(1) For the three and six months ended February 28, 2021, employee salaries and benefits include $1 (2020 - $nil) and $13 (2020 - $nil) in restructuring costs respectively.

55

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

14. OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of other comprehensive income and the related income tax effects for the three months ended February 28, 2021 are as follows:

28, 2021 are as follows:
	Amount		Income taxes	Net
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		(1)	-		(1)
Adjustment for hedged items recognized in the period		1	-		1
		-	-		-
Items that will not be subsequently reclassified to income
Remeasurements on employee benefit plans		38	(10)		28
		38	(10)		28

Components of other comprehensive income and the related income tax effects for the six months ended February 28, 2021 are as follows:

	Amount		Income taxes	Net
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		(2)	-		(2)
Adjustmentfor hedgeditemsrecognizedinthe period		2	-		2
		-	-		-
Items that will not be subsequently reclassified to income
Remeasurements on employee benefit plans		31	(8)		23
		31	(8)		23

Components of other comprehensive income and the related income tax effects for the three months ended February 29, 2020 are as follows:

	Amount		Income taxes	Net
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges		-	-		-
Adjustment for hedged items recognized in the period		-	-		-
		-	-		-
Items that will not be subsequently reclassified to income
Remeasurements on employee benefit plans		(14)	4		(10)
		(14)	4		(10)

Components of other comprehensive income and the related income tax effects for the six months ended February 29, 2020 are as follows:

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

56

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

Accumulated other comprehensive loss is comprised of the following:

	February 28, 2021	August 31, 2020
Items that may subsequently be reclassified to income
Change in unrealized fair value of derivatives designated as cash flow hedges	(5)	(5)
Items that will not be subsequently reclassified to income
Remeasurements onemployee benefit plans	(71)	(94)
	(76)	(99)

15. CONSOLIDATED STATEMENTS OF CASH FLOWS

(i) Funds flow from operations

	Threemonths ended February 28, 2021 February 29, 2020	Six months ended
		February 28, 2021 February 29, 2020
Net income from continuing operations Adjustments to reconcile net income to funds flow from operations: Amortization Deferred income tax expense Share-based compensation Defined benefit pension plans Net change in contract asset balances Fair value adjustments for private investments Other	217 167 303 301 31 22 1 1 3 3 13 (17) (27) - (2) 19	380 329 609 605 53 34 1 1 3 1 8 (45) (27) - - 21
Funds flow from operations	539 496	1,027 946

(ii) Interest and income taxes paid and interest received and classified as operating activities are as follows:

	Three months ended February 28, 2021 February 29, 2020
Interest paid Income taxes paid (net of refunds) Interest received	35 31 64 68 1 1

(iii) Non-cash transactions:

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

	Six months ended
	February 28, 2021 February 29, 2020
Issuance of Class B Non-Voting Shares: Dividend reinvestment plan	- 37

57

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

16. FAIR VALUE

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Financial instruments

The fair value of financial instruments has been determined as follows:

(i) Current assets and current liabilities

The fair value of financial instruments included in current assets and current liabilities approximates their carrying value due to their short-term nature.

(ii) Investments and other assets and other long-term assets

The fair value of publicly traded investments is determined by quoted market prices. Investments in private entities which do not have quoted market prices in an active market and whose fair value cannot be readily measured are carried at approximate fair value. No published market exists for such investments. These equity investments have been made as they are considered to have the potential to provide future benefit to the Company and accordingly, the Company has no current intention to dispose of these investments in the near term. The fair value of long-term receivables approximates their carrying value as they are recorded at the net present values of their future cash flows, using an appropriate discount rate.

(iii) Long-term debt

The carrying value of long-term debt is at amortized cost based on the initial fair value as determined at the time of issuance or at the time of a business acquisition. The fair value of publicly traded notes is based upon current trading values. The fair value of finance lease obligations is determined by discounting future cash flows using a rate for loans with similar terms, conditions and maturity dates. The carrying value of bank credit facilities approximates fair value as the debt bears interest at rates that fluctuate with market values. Other notes and debentures are valued based upon current trading values for similar instruments.

The carrying value and estimated fair value of long-term debt are as follows:

	February 28, 2021 Carrying value Estimated fair value	August 31,2020
		Carrying value Estimated fair value
Liabilities Long-term debt(includingcurrentportion)(1)	4,549 5,378	4,548 5,613

(1) Level 2 fair value – determined by valuation techniques using inputs based on observable market data, either directly or indirectly, other than quoted prices.

(iv) Other long-term liabilities

The fair value of contingent consideration arising from a business acquisition is determined by calculating the present value of the probability weighted assessment of the likelihood that revenue targets will be met and the estimated timing of such payments.

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Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

(v) Derivative financial instruments

The fair value of US currency forward purchase contracts is determined by an estimated credit-adjusted mark-tomarket valuation using observable forward exchange rates at the end of reporting periods and contract forward rates.

17. INTANGIBLES AND GOODWILL

Impairment testing of indefinite-life intangibles and goodwill

The Company conducted its annual impairment test on goodwill and indefinite-life intangibles as at February 1, 2021 and the recoverable amount of the cash generating units exceeded their carrying value.

A hypothetical decline of 10% in the recoverable amount of the broadcast rights and licences for the Cable cash generating unit as at February 1, 2021 would not result in any impairment loss. A hypothetical decline of 10% in the recoverable amount of the broadcast rights and licences for the Satellite cash generating unit as at February 1, 2021 would not result in an impairment loss. A hypothetical decline of 10% in the recoverable amount of the Wireless generating unit as at February 1, 2021 would not result in any impairment loss.

Any changes in economic conditions since the impairment testing conducted as at February 1, 2021 do not represent events or changes in circumstance that would be indicative of impairment at February 28, 2021.

Significant estimates inherent to this analysis include discount rates and the terminal value. At February 1, 2021, the estimates that have been utilized in the impairment tests reflect any changes in market conditions and are as follows:

Post-tax discount rate	Terminal value
	Terminal growth rate Terminal adjusted EBITDA multiple
Cable 5.0% Satellite 6.0% Wireless 6.0%	0.0% 9.7x -8.0% 6.5x 1.0% 6.1x

A sensitivity analysis of significant estimates is conducted as part of every impairment test. With respect to the impairment tests performed in the second quarter, the estimated decline in recoverable amount for the sensitivity of significant estimates is as follows:

		Estimated decline in recoverable amount
	1% increase in discount rate	Terminal value
		1% decrease in terminal growth rate 0.5 times decrease in terminal adjusted EBITDA multiple
Cable Satellite Wireless	16.4% 6.5% 21.9%	13.8% 1.9% 4.2% 3.6% 13.5% 2.1%

59

Shaw Communications Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

February 28, 2021 and February 29, 2020

[all amounts in millions of Canadian dollars, except share and per share amounts]

18. SUBSEQUENT EVENT

On March 15, 2021, the Company announced that it had entered into an arrangement agreement (the “Arrangement Agreement”) with Rogers Communications Inc. (“Rogers”), under which Rogers will acquire all of Shaw’s issued and outstanding Class A Participating Shares (“Class A Shares”) and Class B Shares in a transaction valued at approximately $26 billion, inclusive of approximately $6 billion of Shaw debt (the “Transaction”). Holders of Shaw Class A Shares and Class B Shares (other than the Shaw Family Living Trust, the controlling shareholder of Shaw, and related persons (collectively the “Shaw Family Shareholders”)) will receive $40.50 per share in cash. The Shaw Family Shareholders will receive 60% of the consideration for their shares in the form of Class B Non-Voting Shares of Rogers (the “Rogers Shares”) on the basis of the volume-weighted average trading price for the Rogers Shares for the 10 trading days ending March 12, 2021, and the balance in cash. The Transaction is subject to the approval of shareholders as well as other customary closing conditions including court and stock exchange approval and approvals from Canadian regulators. In connection with the announcement of the Transaction on March 15, 2021, the Company suspended share buybacks under its normal course issuer bid (NCIB) program. Subject to receipt of all required approvals, the Transaction is expected to close in the first half of 2022.

Under the terms of the Arrangement Agreement, Rogers has the right to cause the Company to redeem its outstanding preferred shares on June 30, 2021 in accordance with their terms by providing written notice to Shaw. As of the date of these financial statements, Rogers has not exercised this right.

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