Shaw Announces Fourth Quarter and Full Year Fiscal 2016 Results
Strategic realignment of assets in F16 results in subscriber growth in the fourth quarter
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 11/02/16 -- (TSX: SJR.B)(NYSE: SJR) - Shaw Communications Inc. announces consolidated financial and operating results for the quarter and year ended August 31, 2016. Consolidated revenue from continuing operations for the quarter and year-to-date of $1.3 billion and $4.9 billion increased 15.5% and 8.9% over the comparable periods, respectively. Operating income before restructuring costs and amortization(1) for the quarter and year-to-date of $549 million and $2.1 billion improved 4.6% and 3.8% over the comparable periods, respectively. Excluding the results of Wireless, acquired on March 1, 2016, and the Media division, sold on April 1, 2016, revenue and operating income before restructuring costs and amortization for the quarter from the combined Consumer, Business Network Services and Business Infrastructure Services divisions were up 2.2% and down 1.0% in the quarter over the comparable period, respectively. On a full year basis, the combined three divisions reported revenue and operating income before restructuring costs and amortization, up 2.6% and 0.9% over the comparable period, respectively.
Chief Executive Officer, Brad Shaw said, "Fiscal 2016 marks a very deliberate pivot in the strategic direction for Shaw towards long-term, sustainable growth. This exciting new era builds on our wireline network advantage and extends our position into wireless and an enhanced connectivity company, delivering significant value to both our customers and our shareholders. Strong execution in fiscal 2016 resulted in solid financial results through this period of significant change. Our growth segments, comprised of Wireless, Business Network Services and Business Infrastructure Services, will continue to play a key role as we work towards building a stronger future for Shaw that drives long-term growth for all stakeholders."
"Wireless delivered another strong quarter with revenue of $148 million increasing over 12% compared to the previous quarter. In the fourth quarter we added nearly forty thousand net new wireless subscribers and increased Average Revenue Per Unit ("ARPU") by over 3% compared to the third quarter as customers continue to choose higher value plans. This subscriber and ARPU growth demonstrates the impact of our wireless network investments, which started this year with 3G upgrades in Western Canada, improving customer value and instilling trust and confidence among our subscribers. We are making excellent progress towards our LTE Advanced network, and the Wireless team is executing well against their business plan." said Mr. Shaw.
Selected Financial Highlights
Net income for the quarter was $154 million or $0.31 per share compared to $276 million or $0.57 per share for the prior year quarter. The decrease in net income is primarily attributed to a non-recurring gain on the sale of spectrum licenses recorded in the fourth quarter of 2015. Net income for fiscal 2016 was $1.2 billion or $2.51 per share compared to $880 million or $1.80 per share for fiscal 2015. The improvement was driven mainly by the gain on the sale of the Media division partly offset by various other non-operating costs and the prior year gain on the sale of spectrum licenses.
Consolidated free cash flow(1) for the three and twelve month periods of $9 million and $482 million, respectively, compares to $35 million and $653 million for the comparable periods. The reduction for the quarter and year-to-date was largely due to lower free cash flow from Media which was sold during the third quarter and higher planned capital expenditures from continuing operations.
In the current quarter, total revenue generating units ("RGU"s) grew by approximately 8,000. This significant and positive shift in subscriber trends was driven by Wireless and Consumer Internet. In aggregate, Consumer RGUs in the fourth quarter declined approximately 37,000 RGUs, a significant improvement over the fourth quarter 2015 where the RGU loss was approximately 76,000.
"We are pleased with the Internet results this quarter as WideOpen Internet 150, which launched in mid-July, became available to a wide customer base and delivers the right balance between speed and affordability. Combining WideOpen Internet 150 with our attractive two-year Value Plans has provided price certainty to our customers and is having a positive impact on our business." said Mr. Shaw.
Shaw is also introducing its fiscal 2017 guidance, which includes consolidated operating income before restructuring and amortization to range between $2.125 - $2.175 billion. In regards to consolidated capital, as previously disclosed, investment in fiscal 2017 is expected to be $1.3 billion and free cash flow is expected to exceed $400 million.
Brad Shaw concluded, "We have entered fiscal 2017 with the necessary foundation in place to execute on our strategic initiatives. We will continue to improve our wireline network through the implementation of DOCSIS 3.1 and use this strength to our advantage. We are currently monitoring and reviewing the results of our in-home trials of the X1 set-top box and are still on track for launching a best-in-class next generation video product. As the LTE Advanced upgrade progresses, we will combine our hybrid fibre-coax, WiFi and wireless infrastructure to create a seamless converged network that is more efficient and cost effective. We are focused on consistent and successful execution of our plan and thank our 14,000 employees who have leaned in to our strategic shift and are prepared to deliver an enhanced connectivity experience for our customers."
Shaw Communications Inc. is an enhanced connectivity provider. Our Consumer division serves consumers with broadband Internet, Shaw Go WiFi, video and digital phone. Our Wireless division provides wireless voice and data services through an expanding and improving mobile wireless network infrastructure. The Business Network Services division provides business customers with Internet, data, WiFi, telephony, video and fleet tracking services. The Business Infrastructure Services division, through ViaWest, provides hybrid IT solutions including colocation, cloud computing and security and compliance for North American enterprises.
Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 Index (TSX: SJR.B),(TSX: SJR.PR.A), (TSX: SJR.PR.B), (NYSE: SJR), and (TSX VENTURE: SJR.A). For more information, please visit
The accompanying Management''s Discussion and Analysis ("MD&A") forms part of this news release and the "Caution concerning forward-looking statements" applies to all forward-looking statements made in this news release.
MANAGEMENT''S DISCUSSION AND ANALYSIS
For the three and twelve months ended August 31, 2016
November 2, 2016
Advisories
The following Management''s Discussion and Analysis ("MD&A"), dated November 2, 2016, should be read in conjunction with the unaudited interim Consolidated Financial Statements and Notes thereto for the quarter ended August 31, 2016 and the 2015 Annual Consolidated Financial Statements, the Notes thereto and related MD&A included in the Company''s 2015 Annual Report. The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") for interim financial statements and is expressed in Canadian dollars unless otherwise indicated. References to "Shaw", the "Company", "we", "us" or "our" mean Shaw Communications Inc. and its subsidiaries and consolidated entities, unless the context otherwise requires.
Caution concerning forward-looking statements
Statements included in this MD&A that are not historic constitute "forward-looking statements" within the meaning of applicable securities laws. Such statements include, but are not limited to:
They can generally be identified by words such as "anticipate", "believe", "expect", "plan", "intend", "target", "goal" and similar expressions (although not all forward-looking statements contain such words). All of the forward-looking statements made in this report are qualified by these cautionary statements.
Forward-looking statements are based on assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances as of the current date. The Company''s management believes that its assumptions and analysis in this MD&A are reasonable and that the expectations reflected in the forward looking statements contained herein are also reasonable based on the information available on the date such statements are made and the process used to prepare the information. These assumptions, many of which are confidential, include, but are not limited to:
You should not place undue reliance on any forward-looking statements. Many factors, including those not within the Company''s control, may cause the Company''s actual results to be materially different from the views expressed or implied by such forward-looking statements, including, but not limited to:
The foregoing is not an exhaustive list of all possible factors.
Should one or more of these risks materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein.
The Company provides certain financial guidance for future performance as the Company believes that certain investors, analysts and others utilize this and other forward-looking information in order to assess the Company''s expected operational and financial performance and as an indicator of its ability to service debt and pay dividends to shareholders. The Company''s financial guidance may not be appropriate for this or other purposes.
Any forward-looking statement speaks only as of the date on which it was originally made and, except as required by law, Shaw expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement to reflect any change in related assumptions, events, conditions or circumstances. All forward looking statements contained in this MD&A are expressly qualified by this statement.
Non-IFRS and additional GAAP measures
Certain measures in this MD&A do not have standard meanings prescribed by IFRS and are therefore considered non-IFRS measures. These measures are provided to enhance the reader''s overall understanding of our financial performance or current financial condition. They are included to provide investors and management with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a more consistent basis for comparison between periods. These measures are not in accordance with, or an alternative to, IFRS and do not have standardized meanings. Therefore, they are unlikely to be comparable to similar measures presented by other entities.
Please refer to "Non-IFRS and additional GAAP measures" in this MD&A for a discussion and reconciliation of non-IFRS measures, including operating income before restructuring costs and amortization, free cash flow and accelerated capital fund.
Introduction
In 2016, we made several strategic moves to position Shaw as an enhanced connectivity provider dedicated to serving our customers for the long term. Amidst the transformative changes we were able to close out another year with solid financial results despite the competitive landscape and slowed economic environment in parts of western Canada. Our growth segments, comprised of Wireless, Business Network Services and Business Infrastructure Services, will continue to be key contributors to our success as we work towards building a stronger future for Shaw that drives long-term growth for all our stakeholders.
We enter fiscal 2017 with the necessary foundation in place to execute on our strategic initiatives. We continue to improve our wireline network through the implementation of DOCSIS 3.1 and use this strength to our advantage in the marketplace. The July launch of WideOpen Internet 150 builds upon the investments made over the past several years to enhance the quality and capacity of our broadband network, already one of North America''s largest. WideOpen Internet 150 became available to a wide customer base in the fourth quarter and balances speed with affordability. The improvements give more than 90% of communities in our footprint the ability to immediately access to top-tier speeds. Early in the fiscal year, we enhanced speeds of our Shaw Go WiFi network six-fold for our mid-tier and top tier Internet customers to enjoy at approximately 85,000 hotspots across western Canada.
In the Wireless division, we added nearly 40,000 net new wireless subscribers and increased Average Revenue Per Unit ("ARPU") by over 3% compared to the third quarter as customers continue to choose value plans. Significant progress has been made on our path towards an LTE Advanced network as we continue to integrate our hybrid fibre-coax, WiFi and wireless facilities to create a seamless converged network that is more efficient and cost effective(1). In time, customers can expect to see integrated offerings that provide them with high value for their dollar in terms of the quality of coverage and seamless connectivity experience.
Customers continued to benefit from the combination of our network investments and our commitment to bring to market innovative products and services that are industry solutions led by global partners with scale. Our next generation video product roadmap enabled through Comcast''s world-class X1 platform continues to progress with an increasing number of customers enjoying FreeRange TV. We are currently monitoring and reviewing the results of our in-home trials of the X1 set-top box and still on track for launching a best-in-class next generation video product. Our video and network product roadmap will ensure we have extraordinary experiences available for our customers and by the end of fiscal 2017 we expect to have the X1 set-top box available across western Canada.
Business Network Services continued to strengthen our position as trusted advisors to small and medium sized businesses. Applying a managed services strategy developed in partnership with Broadsoft, Cisco and Meraki, we have made it easy for businesses to harness seamless technology advances such as SmartVoice, SmartWiFi, and SmartSecurity for all of their connectivity needs.
Our Business Infrastructure Services division continues to focus on being a leading global provider of Hybrid IT Solutions. We have expanded capacity once again with the opening of our newest data centre in Plano, Texas. In addition, the recently launched Calgary data centre has positioned us as a top tier provider of private cloud, public cloud, colocation and related data centre services in the Canadian market.
Culture and People
During its realignment to an enhanced connectivity provider, the Company embarked on evolving its culture to enable it to deliver on its corporate and operational strategy. Building off the success of its Focus to Deliver program launched in 2014, the Company continues to maintain its efficiency and growth potential by ensuring business decisions are made in accordance with disciplined customer-centric criteria.
The Company believes its success and strength stems from its people and its commitment to making Shaw the place where the best people choose to work. Inspiring and engaging its employees to align with its strategy is the cornerstone of the Company''s success. Shaw is grateful to have approximately 14,000 employees committed to delivering an exceptional enhanced connectivity experience for its customers and the communities it serves.
Selected financial and operational highlights
Basis of presentation
On April 1, 2016, Shaw sold 100% of its wholly owned subsidiary Shaw Media Inc. ("Shaw Media") to Corus Entertainment Inc. ("Corus"), a related party subject to common voting control for $2.65 billion, comprised of $1.85 billion in cash and 71,364,853 Corus Class B non-voting participating shares.
Accordingly, the operating results and operating cash flows for the previously reported Media division are presented as discontinued operations separate from the Company''s continuing operations. Prior period financial information has been reclassified to present the Media division as a discontinued operation, and has therefore been excluded from both continuing operations and segmented results for all periods presented in this MD&A and the accompanying interim financial statements. This MD&A reflects the results of continuing operations, unless otherwise noted.
Financial Highlights
Subscriber highlights
Shaw''s subscriber highlights include Business Network Services subscriber measures for which the method of counting is at the individual unit level. These measures are suited for traditional offerings such as analog video, and phone, including non-cloud based Internet products, because larger installations result in subscriber additions that correlated with the increase in revenues.
With the introduction of SmartWiFi and SmartSecurity cloud based solutions, subscriber additions are generally recorded at the customer level so that a single customer is reported when an installation may involve several units. The result is that when new customers subscribe for our cloud based services, the subscriber impact is minimal. The effects are greater when existing customers upgrade from traditional business Internet with additional subscriptions to our cloud based solutions because the customer that was formerly counted as multiple units is now counted as a single subscriber. This means that, as the Company succeeds by attracting new and existing customers to its new offerings, the number of Business Network Services subscribers for Internet may fall even as revenues increase.
Overview
Our fiscal 2016 fourth quarter financial results represent improvements in revenue and operating income before restructuring costs and amortization over the fourth quarter of fiscal 2015. Highlights of the fourth quarter financial results are as follows:
Revenue increased 15.5% and 8.9% for the three and twelve month periods, respectively, primarily due to the acquisition of WIND on March 1, 2016 contributing Wireless revenues of $148 million and $280 million for the respective periods. Business Network Services and Business Infrastructure Services divisions also contributed to revenue increases for the three and twelve month periods, primarily driven by customer growth and the December 2015 acquisition of INetU by the Business Infrastructure Services division.
Operating income before restructuring costs and amortization of $549 million and $2.11 billion for the three and twelve month periods improved 4.6% and 3.8% compared to $525 million and $2.04 billion for fiscal 2015. The improvement in the fourth quarter reflects the addition of the Wireless division and growth in the Business Infrastructure Services and Business Network Services divisions attributable to profitable customer growth and the acquisition of INetU. This improvement was partially offset by lower operating income before restructuring costs and amortization in the Consumer division related primarily to higher costs associated with the deployment of FreeRange TV and programming.
Revenue and operating income before restructuring costs and amortization increased $23 million and decreased $6 million, respectively, compared to the third quarter of fiscal 2016. The increase in revenue was primarily due to customer growth in the Business Network Services division and RGU growth in the Wireless division. The decrease in operating income before restructuring costs and amortization was primarily due to higher costs in the Consumer division related to the launch of WideOpen Internet 150 and employee related costs.
The Wireless division finished the quarter with 1,043,288 RGUs, adding 27,031 postpaid and 12,788 prepaid subscribers in the period. Consumer and Business Network Services, excluding named and wholesale customers, had a combined 5,779,380 million RGUs as at August 31, 2016. During the quarter, Consumer RGUs declined by 37,104, an improvement compared to declines of 47,256 RGUs in the third quarter of 2016 and 76,035 RGUs in the fourth quarter of 2015. Consumer RGU decline in the current quarter was comprised of 18,942 phone, 6,332 satellite video and 22,171 cable video, partially offset by Internet gains of 10,341.
Net income was $154 million and $1.24 billion for the three and twelve months ended August 31, 2016, respectively, compared to $276 million and $880 million for the same periods last year. The changes in net income are outlined in the following table.
Fourth quarter net income decreased $550 million compared to the third quarter of fiscal 2016 mainly due to lower income from discontinued operations relating primarily to the gain on the divestiture of the former Media division recorded in the third quarter, decreased operating income before restructuring costs and amortization, and higher income taxes. Partly offsetting the decrease in net income were decreases in net other costs and revenue and restructuring costs. Net other costs and revenue decreased primarily due to non-recurring charges recorded in the third quarter, including a $17 million impairment of goodwill relating to the Tracking business, a $51 million impairment of the Company''s joint venture interest in shomi, a $20 million write-down of a private portfolio investment, $12 million acquisition related costs and a $10 million loss from an equity accounted associate. See "Other income and Expense" for further detail on non-operating items.
Net income for the current quarter decreased $122 million relative to the fourth quarter of fiscal 2015 mainly due to higher net other costs and revenue in the prior period, primarily the result of a $158 million gain on the sale of wireless spectrum. Also contributing to the decrease in net income were increased amortization and decreased income from discontinued operations, net of tax, which was more than fully offset by higher operating income before restructuring costs and amortization and a decrease in income taxes.
Net income for the twelve month period increased $360 million relative to the comparable period primarily due to higher income from discontinued operations, net of tax, higher operating income before restructuring costs and amortization and a decrease in income taxes. Partly offsetting the improvement were increases in net other costs and revenue, higher interest expense and amortization, and reduced income from discontinued operations, net of tax, for the period following the divestiture. Net other costs and revenues improved primarily due to amounts incurred in the third quarter related to the acquisition of WIND, the impairment of goodwill relating to the Tracking business, the equity losses incurred and the impairment of the Company''s joint venture interest in shomi, the write-down of private portfolio investment and a $10 million loss from an equity accounted associate. See "Other income and Expense" for further detail on non-operating items.
Free cash flow of $9 million and $482 million for the three and twelve months ended August 31, 2016, respectively, compared to $35 million and $653 million for the comparable periods. The free cash flow decrease in each of the three and twelve month periods were primarily the result of higher planned capital expenditures and equipment costs and a reduction in free cash flow from discontinued operations following the sale of the Media division, partly offset by the incremental operating income before restructuring costs and amortization from continuing operations and the added Wireless division, lower cash taxes and dividends from equity accounted associates.
Outlook
Shaw is introducing its fiscal 2017 guidance which includes consolidated operating income before restructuring costs and amortization to range between $2.125 - $2.175 billion and free cash flow is expected to exceed $400 million.
For consolidated capital, as previously disclosed, investment in fiscal 2017 is expected to be $1.3 billion.
See "Caution concerning forward-looking statements".
Non-IFRS and additional GAAP measures
The Company''s continuous disclosure documents may provide discussion and analysis of non-IFRS financial measures. These financial measures do not have standard definitions prescribed by IFRS and therefore may not be comparable to similar measures disclosed by other companies. The Company''s continuous disclosure documents may also provide discussion and analysis of additional GAAP measures. Additional GAAP measures include line items, headings, and sub-totals included in the financial statements.
The Company utilizes these measures in making operating decisions and assessing its performance. Certain investors, analysts and others utilize these measures in assessing the Company''s operational and financial performance and as an indicator of its ability to service debt and pay dividends from distributable cash flow to shareholders. The non-IFRS financial measures and additional GAAP measures have not been presented as an alternative to net income or any other measure of performance required by IFRS.
Below is a discussion of the non-IFRS financial measures and additional GAAP measures used by the Company and provides a reconciliation to the nearest IFRS measure or provides a reference to such reconciliation.
Operating income before restructuring costs and amortization
Operating income before restructuring costs and amortization is calculated as revenue less operating, general and administrative expenses. It is intended to indicate the Company''s ongoing ability to service and/or incur debt, and is therefore calculated before one-time items such as restructuring costs, amortization (a non-cash expense) and interest. Operating income before restructuring costs and amortization is also one of the measures used by the investing community to value the business.
Operating margin
Operating margin is calculated by dividing operating income before restructuring costs and amortization by revenue.
Income from discontinued operations before restructuring costs, amortization, taxes and other non-operating items
Income from discontinued operations before restructuring costs, amortization, taxes and other non-operating items is calculated as revenue less operating, general and administrative expenses from discontinued operations. This measure is used in the determination of free cash flow.
Free cash flow
The Company utilizes this measure to assess the Company''s ability to repay debt and pay dividends to shareholders. Free cash flow is calculated as free cash flow from continuing operations and free cash flow from discontinued operations.
Free cash flow from continuing operations is comprised of operating income before restructuring costs and amortization adding dividends from equity accounted associates, changes in receivable related balances with respect to customer equipment financing transactions as a cash item and deducting capital expenditures (on an accrual basis and net of proceeds on capital dispositions adjusted to exclude amounts funded through the accelerated capital fund) and equipment costs (net), interest, cash taxes paid or payable, dividends paid on the Company''s Cumulative Redeemable Rate Reset Preferred Shares, recurring cash funding of pension amounts net of pension expense and adjusted to exclude share-based compensation expense.
Free cash flow from continuing operations has not been reported on a segmented basis. Certain components of free cash flow from continuing operations, including operating income before restructuring costs and amortization continue to be reported on a segmented basis. Capital expenditures and equipment costs (net) are reported on a combined basis for Consumer and Business Network Services due to the common infrastructure and for Business Infrastructure Services is separately reported. Other items, including interest and cash taxes, are not generally directly attributable to a segment, and are reported on a consolidated basis.
Free cash flow from discontinued operations is comprised of income from discontinued operations before restructuring costs, amortization, taxes and other non-operating items after deducting capital expenditures (on an accrual basis and net of proceeds on capital dispositions and adjusted to exclude amounts funded through the accelerated capital fund) and equipment costs (net), cash taxes paid or payable, program rights amortization on assets held for sale, cash amounts associated with funding CRTC benefit obligations related to media acquisitions, recurring cash funding of pension amounts net of pension expense and excludes non-controlling interest amounts that are included in the income from discontinued operations before restructuring costs, amortization, taxes and other non-operating items.
Free cash flow is calculated as follows:
Accelerated capital fund
In fiscal 2013, the Company established a notional fund, the accelerated capital fund, of $500 million with proceeds received from several strategic transactions. The accelerated capital initiatives were funded through this fund and not cash generated from operations. Key investments included the Calgary data centres, further digitization of the network and additional bandwidth upgrades, expansion of Shaw Go WiFi, and additional innovative product offerings related to Shaw Go WiFi and other applications to provide an enhanced customer experience. Approximately $110 million was invested in fiscal 2013, $240 million in fiscal 2014 and $150 million in fiscal 2015. The accelerated capital fund closed in fiscal 2015.
Statistical and financial measures
The following measures are industry metrics that are useful in assessing the operating performance of a wireless entity, but do not have a standardized meaning under IFRS.
Discussion of operations
During the quarter, Consumer RGUs declined by 37,104 with cable video, phone and Satellite decreasing 22,171, 18,942, and 6,332 respectively. These declines were offset by increased Internet RGUs of 10,341. The combined RGU results represent a significant improvement over the same quarter last year and the prior quarter. The improvement over the prior year was due primarily to the launch of WideOpen Internet 150 into the market, together with a reduction in phone unbundling activity and other market factors. The improvement over the third quarter included the introduction of WideOpen Internet 150 and the reinstatement of customers in Fort McMurray following the temporary disconnects that occurred in the third quarter. Despite the significant improvements, the economic slowdown in parts of western Canada, competitive pressures and wireline substitution continue to put downward pressure on Consumer RGUs.
Consumer revenue for the current quarter and twelve month period of $938 million and $3.8 billion respectively were comparable to the prior year periods. Improvements in revenue from annual August rate increases and growth in Internet RGUs were offset by video, phone and satellite RGU declines and lower On Demand revenues.
Operating income before restructuring costs and amortization for the quarter of $418 million was lower by 3.7% relative to the comparable quarter. The quarter results reflect the impact of flat revenues and higher expenses, including implementation and recurring costs attributable to the launch of FreeRange TV, higher programming costs and the timing of certain administrative costs. Operating income before restructuring costs and amortization for the twelve-month period was 1.1% lower than in the comparable period. The year-to-date result was similarly affected by flat revenues and higher expenses including FreeRange TV costs, and programming costs due to annual contracted increases and new content, offset partially by lower employee related costs due in part to the efficiency program enacted in the third quarter. The efficiency program initiated by the Company during the third quarter of fiscal 2016 will deliver fiscal 2017 operating cost and capital efficiencies, in aggregate, of approximately $75 million.
The current quarter revenue showed a moderate improvement over the third quarter of fiscal 2016 while operating income before restructuring costs and amortization decreased 2.1% or by $9 million. The revenue improvements driven by an August 2016 rate increase, lower promotional costs and a full quarter of revenue from reconnected customers in Fort McMurray were more than fully offset by RGU losses, lower On Demand revenues and higher expenses including employee related costs, marketing costs in support of the WideOpen Internet 150 launch and timing of various other administrative costs.
In July, Shaw introduced its new WideOpen Internet 150 offering available in over 90% of its customer footprint. WideOpen Internet 150 is offered at an affordable price and when paired with our improved two-year Value Plans, it provides cost certainty for our customers which we expect will improve customer retention. Shaw also improved its carrier-grade Shaw Go WiFi service in the first half of fiscal 2016 by making it six times faster for our mid-tier and top-tier Internet customers. These upgrades support the continuing growth in the number of devices that Shaw''s customers are connecting to our network. Over 2.5 million devices have authenticated to our carrier-grade Shaw Go WiFi network and there are approximately 85,000 access points covering locations from British Columbia to Ontario.
Business Network Services
Revenue of $140 million and $548 million for the current quarter and twelve month period were up 5.3% and 5.4%, respectively, over the comparable periods, primarily due to customer growth in both small to medium size businesses and in large enterprise markets as well as an August 2016 rate increase for video, Internet and phone products. The business, excluding satellite services, increased revenues 6.6% in the current quarter and 7.0% on a full year basis, reflecting continued customer growth converting to or adding Shaw''s Smart suite of products.
Operating income before restructuring costs and amortization of $70 million and $265 million for the quarter and year-to-date improved 4.5% and 3.5%, respectively, over the comparable periods. Consistent with the growth trend that was achieved throughout fiscal 2016, current quarter improvements were due mainly to customer growth partially offset by the incremental costs associated with pursuing new customer opportunities including additional employee and marketing costs incurred relating to the Smart suite of products, specifically with the launch of SmartSecurity.
In the fourth quarter, revenue increased by $4 million over the third quarter of fiscal 2016, primarily due to customer growth in both small to medium size businesses and large enterprise markets as well as a rate increase in our video, Internet and phone products introduced in August 2016. Also contributing to the fourth quarter improvement was the reduction in service credits offered to business customers affected by the Fort McMurray wildfires in the third quarter. Operating income before restructuring costs and amortization also increased by $4 million over the third quarter due mainly to revenue growth and reduction in service credits.
Further broadening our footprint in the Smart suite of products and building on our portfolio of managed service offerings, in July the Company introduced SmartSecurity, a fully-managed network security platform tailored for small businesses and deployed over Cisco''s Meraki platform. SmartSecurity protects a wired and Wi-Fi network at the edge with access control, the ability to control which applications run on the network, content filtering and connecting branch locations.
Business Infrastructure Services
Revenue of $86 million for the current quarter increased 26.5% over the comparable period primarily due to the December 2015 acquisition of INetU and continued customer growth throughout the year. For the twelve month period, revenue of $334 million increased 35.8% over the prior year also due primarily to the acquisition of INetU and customer growth as well as a favourable foreign exchange rate and a full year of results from AppliedTrust, acquired in the fourth quarter of 2015. Excluding the effect of foreign exchange, revenue for the U.S. based operations increased by 25.6% to US$66 million for the three month period and by 24.3% to US$252 million for the twelve month period. Excluding the effect of INetU, revenue for the U.S. based operations increased by 8.9% to US$58 million for the three month period and by 12.0% to US$227 million for the twelve month period.
Operating income before restructuring costs and amortization improved over the comparable period by 33.3% for the current quarter and by 29.5% for the twelve-month period. Improvements were primarily due to the revenue increases discussed above and reduced expense attributed to share appreciation rights offset slightly by costs associated with the completion of Calgary1 data centre in Calgary, Alberta and Portland, Oregon.
Compared to the third quarter of 2016, revenue and operating income before restructuring costs and amortization were comparable as the impact of a one-time anticipated departure of a customer in a single-tenant data centre and higher costs due mainly to seasonality of utility costs were offset by customer growth in other parts of the business. Excluding the impact of foreign exchange, revenue and operating income before restructuring costs and amortization for U.S. based operations increased 0.6% and decreased 4.5%, respectively, compared to the third quarter of 2016, reflecting the previously mentioned customer departure.
The Company completed construction and testing for its newest data centre in Plano, Texas, which opened in September 2016. In addition, the recently launched Calgary1 data centre has positioned us as a top-tier hybrid IT provider of private cloud, public cloud, colocation and related data centre services in the Canadian market.
Wireless
The Company is reporting its second full quarter of results from the newly created Wireless division.
Revenue for the quarter increased by $16 million over the third quarter due mainly to the nearly 40,000 added RGUs, a 3.0% increase in ARPU to $37.40 and higher handset revenue. Operating income before restructuring costs and amortization was comparable to the prior quarter as the increase in revenue was offset by an increase in expenses, including dealer commissions on higher customer activations, and commercial cost increases.
During 2016, WIND reached a milestone in acquiring its one-millionth combined postpaid and prepaid subscriber. The year ended with 667,028 postpaid subscribers and 376,260 prepaid subscribers.
Capital expenditures and equipment costs
Capital investment was $386 million and $1.2 billion in the current three month and twelve month periods. Capital investment for the comparable periods was $370 million and $1.1 billion and included $59 million and $150 million, respectively, of investment funded through the accelerated capital fund. The accelerated capital fund initiatives, which were completed in the fourth quarter of 2015, included investment on new internal and external Calgary data centres, increasing network capacity, next generation video delivery systems, back office infrastructure upgrades, and expediting the WiFi infrastructure build.
Consumer and Business Network Services
Success based capital for the three and twelve month periods of $74 million and $275 million were moderately lower than the comparable periods last year. The current quarter spend reflected higher customer set-top box installations as customers migrated into our two year Value Plans, offset by lower phone installations and a decrease in advanced Internet WiFi modem purchases driven by timing of delivery. Satellite success based capital spend was comparable with the prior year quarter.
On a year-to-date basis, the decrease in success based capital was due primarily to lower phone installations and decreased advanced Internet WiFi modem spend partially offset by higher Satellite success based capital spend driven by higher customer activations, increased equipment discounts and lower rental returns. Rental returns decreased in the year due mainly to the termination of the Satellite rental program.
For the three and twelve month periods, investment in the combined upgrades and enhancement and replacement categories was $137 million and $444 million respectively. The decrease from the comparable quarter was primarily due to the timing of license purchases and related equipment to support the launch of our Smart suite of products in Business Network Services. The current quarter also included higher spend on network capacity upgrades in support of enhanced broadband capacity partly offset by lower spending on the WiFi network, various other fibre projects and video on demand capacity scaling.
Capital investment in combined upgrades and enhancements, and replacement categories increased $56 million for the twelve months over the comparable period primarily due to: i) investment in the wireline network including significant bandwidth and upgrade programs; ii) next generation video delivery platforms necessary to support the rollout of Comcast''s X1 and TVE products; iii) timing of bulk material and vehicle purchases; iv) initial investment in support of Satellite MPEG2 to MPEG4 upgrade; v) investment in Business Network Services managed WiFi and SmartVoice products; and vi) mainline upgrade activities. Increased investments were partly offset by lower spend on Shaw Go WiFi access points and fibre builds in support of Business Network Services.
Investment in buildings and other of $28 million and $91 million for the three and twelve month periods were down $15 million and $85 million, respectively, over the comparable periods. The decreases in each of the current quarter and year-to-date periods relate to lower spend on the internal data centre, Shaw Court refurbishment expenditures, lower internal network, software and equipment upgrades and lower capitalized interest.
Capital spend on new housing development for the three and twelve month periods was $27 million and $105 million, respectively and were comparable to the $28 million and $106 million from the prior year period.
Business Infrastructure Services
Capital investment of $51 million and $155 million for the three and twelve month periods, respectively, was primarily growth related capital investment in core infrastructure and equipment to expand existing facilities in Denver, Colorado and Portland, Oregon along with development of the newest data center in Plano, Texas. Also included in the twelve-month period is $11 million related to investment in the Calgary1 data centre located in Calgary, Alberta.
Wireless
Capital investment of $69 million and $121 million for the quarter and for the six months since the formation of the Wireless division, respectively, represented investment for the continued improvement in the network infrastructure primarily in the LTE Advanced core and radio network rollout readiness project across the network as well as capital investments made on the upgrade of back office systems.
Discontinued operations - Shaw Media
For the twelve month period, revenue of $564 million and income from discontinued operations, net of tax, of $784 million compared to $1.0 billion and $214 million last year, respectively. The revenue decrease was the result of seven months of results in the current year prior to the divestiture of the former Media division on April 1, 2016. The increase in income from discontinued operations, net of tax, was primarily due to the $672 million gain on the divestiture offset by the impact of lower income from discontinued operations before gain on divestiture, the result of only seven months of results in the current year, and income taxes on the gain.
Supplementary quarterly financial information
Fourth quarter net income decreased $550 million compared to the third quarter of fiscal 2016 mainly due to lower income from discontinued operations relating primarily to the gain on the divestiture of the former Media division recorded in the third quarter, decreased operating income before restructuring costs and amortization, and higher income taxes. Partly offsetting the decrease in net income were decreases in net other costs and revenues and restructuring costs. Net other costs and revenue decreased primarily due to non-recurring charges recorded in the third quarter, including a $17 million impairment of goodwill relating to the Tracking business, a $51 million impairment of the Company''s joint venture investment in shomi, a $20 million write-down of a private portfolio investment, $12 million acquisition related costs and a $10 million loss from an equity accounted associate. See "Other income and Expense" for further detail on non-operating items.
Net income for the third quarter increased $540 million compared to the second quarter of fiscal 2016 mainly due to higher income from discontinued operations relating primarily to the gain on the divestiture of the former Media division, increased operating income before restructuring costs and amortization and lower income taxes. Partly offsetting the net income improvement in the quarter were: i) decreased net other costs and revenue; ii) increased restructuring charges; and iii) increased amortization. Net other costs and revenue decreased primarily due to $17 million impairment of goodwill relating to the Tracking business, a $51 million impairment of the Company''s shomi joint venture investment, a $20 million write-down of a private portfolio investment and a $10 loss from an equity accounted associate.
In the second quarter of 2016, net income decreased $54 million compared to the first quarter of fiscal 2016 mainly due to decreased income from discontinued operations of $32 million, primarily due to the seasonality of the Media business reflected in income from discontinued operations, net of tax, and net other costs and revenues of $13 million. Net other costs and revenues decreased primarily due to $8 million of costs recorded in the quarter related to the acquisition of WIND and INetU.
In the first quarter of 2016, net income decreased $58 million compared to the fourth quarter of 2015 mainly due to a change in net other costs and revenues of $140 million and decrease in operating income before restructuring costs and amortization of $17 million offset by an increase in income from discontinued operations, net of tax, of $51 million and a decrease in income taxes of $50 million. Net other costs and revenues decreased primarily due to a fourth quarter 2015 gain on the sale of wireless spectrum of $158 million less the impact of a $27 million write-down of a private portfolio investment in the same period offset by an increase in the equity loss of a joint venture of $5 million in the first quarter of 2016.
In the fourth quarter of 2015, net income increased $67 million primarily due to improved net other revenue items of $191 million partially offset by lower income from discontinued operations, net of tax, of $44 million and higher income tax expense of $70 million. The improvement in net other costs and revenue items was due to the combined effects of the aforementioned sale of spectrum licenses and write-down of a private portfolio investment during the fourth quarter and the $59 million net charge arising in the third quarter related to an impairment of goodwill, write-down of IPTV assets and proceeds received on the Shaw Court insurance claim.
In the third quarter of 2015, net income increased $41 million due to higher operating income before restructuring costs and amortization of $29 million, an increase in income from discontinued operations, net of tax, of $40 million, lower restructuring costs of $35 million and $11 million of proceeds related to the Shaw Court insurance claim, partially offset by a charge for impairment of goodwill of $15 million and write-down of IPTV assets of $55 million as well as the distributions received from a venture capital fund in the second quarter. The impairment of goodwill was in respect of the Tracking operations in the Business Network Services division and was a result of the Company''s annual impairment test of goodwill and indefinite-life intangibles in the third quarter. The write-down of IPTV assets was a result of the Company''s decision to work with Comcast to begin technical trials of their cloud-based X1 platform.
In the second quarter of 2015, net income decreased $59 million due to lower income from discontinued operations, net of tax, of $46 million and restructuring expenses of $36 million partially offset by higher operating income before restructuring costs and amortization of $10 million, net other costs and revenue items of $24 million due to the aforementioned venture capital fund distributions.
In the first quarter of 2015, net income increased $35 million due to income from discontinued operations, net of tax, of $56 million and a decrease in income taxes of $26 million, partially offset by increases in amortization of $33 million and net other costs of $17 million. The increase in net other costs was primarily due to an equity loss of $13 million in respect of the Company''s joint venture interest in shomi.
Other income and expense items
Amortization of property, plant and equipment, intangibles and other increased 17.7% and 12.2% for the three months and year ended August 31, 2016 over the comparable periods due to amortization related to the new Wireless division, the effect of higher foreign exchange rates on the translation of ViaWest and the amortization of new expenditures exceeding the amortization of assets that became fully amortized during the periods.
Amortization of financing costs and Interest expense
Interest expense for the quarter was comparable to the same period in the prior year, with a decrease in capitalized interest largely offset by slightly lower average debt levels. For the twelve month period ended August 31, 2016, interest expense increased over the comparable period primarily due to increased debt related to the INetU and WIND acquisitions, foreign exchange on U.S. dollar denominated debt and a decrease in capitalized interest.
Business acquisition costs
In fiscal 2016, the Company incurred $20 million of acquisition related costs for professional fees paid to lawyers, consultants, advisors and other related costs in respect of the acquisition of WIND which closed on March 1, 2016, and $1 million related to the acquisition of INetU. During the first quarter of the prior year, $6 million of costs were incurred in respect of the acquisition of ViaWest.
Equity loss of an associate or joint venture
For the three and twelve month periods ended August 31, 2016, the Company recorded equity losses of $nil and $51 million, respectively, compared to $13 million and $56 million for in the comparable periods related to its interest in shomi, a joint venture with Rogers Communications Inc. See "Other losses" for further information regarding the shomi investment.
For the three and twelve month periods ended August 31, 2016, the Company recorded equity losses of $nil and $10 million, respectively, related to its investment in Corus.
Other losses
This category generally includes realized and unrealized foreign exchange gains and losses on U.S. dollar denominated current assets and liabilities, gains and losses on disposal of property, plant and equipment and minor investments, and the Company''s share of the operations of Burrard Landing Lot 2 Holdings Partnership. In the current year, the category also includes a write-down of $54 in respect of the Company''s investment in shomi, a write-down of $20 in respect of a private portfolio investment and asset write-downs of $16. In the prior year, the category included a write-down of $6 in respect of a property held for sale, distributions of $27 from a venture capital fund investment, a write-down of $27 in respect of a private portfolio investment, additional proceeds of $15 related to the fiscal 2012 Shaw Court insurance claim and asset write-downs of $55.
Subsequent to the period end, shomi announced its decision to wind down its operations with service ending November 30, 2016. As a result, the Company expects to incur an investment loss of up to $120 million in its first quarter ending November 30, 2016 relating to estimated provisions for future liabilities in shomi.
Income taxes
Income taxes are lower in the current quarter and year mainly due to a reduction in net income.
Financial position
Total assets were $15.2 billion at August 31, 2016 compared to $14.6 billion at August 31, 2015. Following is a discussion of significant changes in the consolidated statement of financial position since August 31, 2015.
Current assets decreased $133 million due to decreases in accounts receivable of $200 million, partially offset by increases in cash of $7 million and other current assets of $60 million. Accounts receivable decreased primarily due to the sale of the former Media division, partly offset by accounts receivable of WIND acquired during the third quarter. Cash increased as the funds provided by operations exceeded the cash outlay for investing and financing activities. Other current assets increased with the acquisition of WIND.
Investments and other assets increased $756 million primarily due to the Corus Class B shares received as proceeds on the sale of the Media division, partially offset by equity losses of associates and joint ventures and write-downs of an investment in shomi and an investment in a privately held entity.
Property, plant and equipment increased $387 million due to the WIND and INetU business acquisitions and capital investment in excess of amortization, partly offset by property, plant and equipment of the Media division, which was sold during the third quarter. Other long-term assets increased $16 million mainly due to the acquisition of WIND. Intangibles and goodwill decreased $343 million due to goodwill and intangibles related to the Media division which was disposed of during the quarter, partly offset by $1.6 billion of intangibles and $231 million goodwill recorded on the acquisitions of INetU and WIND, net software intangible additions and the ongoing effect of foreign exchange arising on translation of ViaWest.
Current liabilities decreased $119 million during the quarter due to decreases in the current portion of long-term debt of $196 million and current provisions of $19 million, partially offset by increases of $57 million in accounts payable and accruals, $20 million in income taxes payable and $19 million in unearned revenue. The decrease in current portion of long term debt is due to the repayment of $300 million variable rate senior notes on February 1, 2016 and $300 million 6.15% senior notes on May 9, 2016, partly offset by inclusion of $400 million 5.70% senior notes due March 2, 2017. Current provisions decreased primarily due to lower unpaid restructuring amounts. Accounts payable and accruals increased due the inclusion of accounts payable related to WIND which was acquired in the third quarter, partially offset by accounts payable related to the Media division which was sold during the third quarter and the timing of payment and fluctuations in various payables including capital expenditures and interest. Income taxes payable increased as a result of the current period provision partially offset by installments made in the period.
Long-term debt increased $139 million due to the issuance of $300 million in fixed rate senior notes at a rate of 3.15% due February 19, 2021, the debt incurred related to the acquisition of INetU under ViaWest''s and the Company''s credit facility totaling US $170 million and the effect of foreign exchanges rates on ViaWest''s debt and the Company''s US dollar borrowings under its credit facility, partially offset by the reclassification of the 6.15% senior notes to current liabilities.
Other long-term liabilities decreased $51 million mainly due to amounts related to the former Media division which was sold and contributions to employee benefit plans partially offset by actuarial losses recorded on those plans in the current quarter. Provisions increased due to the addition of WIND asset retirement obligations.
Deferred credits decreased $25 million due to a decline in deferred equipment revenue.
Deferred income tax liabilities increased $39 million primarily due to the amounts recorded on the acquisition of WIND and INetU, partly offset by amounts related to the former Media division which was sold during the previous quarter and current year income tax recovery.
Shareholders'' equity increased $649 million primarily due to increases in share capital of $299 million and retained earnings of $622 million partly offset by decreases in accumulated other comprehensive loss of $33 million and equity attributable to non-controlling interests of $236 million. Share capital increased due to the issuance of 9,489,566 Class B non-voting participating shares ("Class B Non-Voting Shares") under the Company''s option plan and Dividend Reinvestment Plan ("DRIP") and the issuance of 2,866,384 Class B Non-Voting Shares in connection with the acquisition of WIND. As at October 14, 2016, share capital is as reported at August 31, 2016 with the exception of the issuance of a total of 694,470 Class B Non-Voting Shares upon exercise of options under the Company''s option plan and the DRIP. Retained earnings increased due to current year earnings of $1.2 billion, partially offset by dividends of $584 million while equity attributable to non-controlling interests decreased due to their share of current year earnings and derecognition in connection to the sale of Shaw Media. Accumulated other comprehensive loss decreased due to the net effect of exchange differences arising on the translation of ViaWest and U.S. dollar denominated debt designated as a hedge of the Company''s net investment in those foreign operations as well as re-measurements recorded on employee benefit plans.
Liquidity and capital resources
In the current year, the Company generated $482 million of free cash flow, including $132 million of free cash flow from discontinued operations. Shaw used its free cash flow along with $1.8 billion net proceeds on the sale of the Media division, $300 million proceeds from a 3.15% senior note issuance, borrowings of $1.4 billion under its credit facilities, borrowings of $192 million under ViaWest''s credit facility, proceeds on issuance of Class B Non-Voting Shares of $37 million and funding through the net working capital change of $114 million to repay at maturity $300 million of variable rate senior notes, repay at maturity $300 million 6.15% senior notes, finance the $223 million acquisition of INetU, finance the $1.6 billion acquisition of WIND, pay common share dividends of $380 million, make $104 million in financial investments, repay $1.4 billion borrowings under its credit facilities, pay $35 million in restructuring costs and pay $7 million in other net items.
The Company issues Class B Non-Voting Shares from treasury under its DRIP which resulted in cash savings and incremental Class B Non-Voting Shares of $188 million during the twelve months ending August 31, 2016.
On December 15, 2015, ViaWest closed the acquisition of 100% of the shares of INetU for approximately US$162 million which was funded through a combination of borrowings under ViaWest''s and the Company''s revolving credit facilities and incremental term loan proceeds under ViaWest''s credit facility. In addition, ViaWest''s revolving credit facility was increased from US$85 million to US$120 million.
On February 11, 2016 the Company amended the terms of its bank credit facility to increase the maximum borrowings from $1.0 billion to $1.5 billion under the bank credit facility.
The Company entered into an agreement with a syndicate of lenders to provide a $1.0 billion non-revolving term loan facility to partially fund the acquisition of WIND. The Company used the proceeds of the term loan along with cash on hand, $300 million borrowings under its existing bank credit facility and proceeds from the issuance of 2,866,384 Class B Non-Voting Shares to finance the acquisition of WIND on March 1, 2016. The $1.0 billion non-revolving term loan facility and $300 million borrowings under the Company''s bank credit facility were repaid on April 1, 2016 with the proceeds from the sale of Shaw Media to Corus.
Shaw''s and ViaWest''s credit facilities are subject to customary covenants which include maintaining minimum or maximum financial ratios.
At August 31, 2016 Shaw is in compliance with these covenants and based on current business plans, the Company is not aware of any condition or event that would give rise to non-compliance with the covenants over the life of the borrowings.
On June 30, 2016, 1,987,607 of the Company''s Cumulative Redeemable Rate Reset Class 2 Preferred Shares, Series A ("Series A Shares") were converted into an equal number of Cumulative Redeemable Floating Rate Class 2 Preferred Shares, Series B ("Series B Shares") in accordance with the notice of conversion right issued on May 31, 2016. As a result of the conversion, the Company has 10,012,393 Series A Shares and 1,987,607 Series B Shares issued and outstanding. The Series A Shares will continue to be listed on the TSX under the symbol SJR.PR.A. The Series B Shares began trading on the TSX on June 30, 2016 under the symbol SJR.PR.B. The annual fixed dividend rate for the Series A Shares, payable quarterly, was reset to 2.791% for the five year period from and including June 30, 2016 to but excluding June 30, 2021. The floating quarterly dividend rate for the Series B Shares was set at an annual dividend rate of 2.539% for the period from and including June 30, 2016 to but excluding September 30, 2016. During the quarter, the floating quarterly dividend rate for the Series B Shares was set at an annual dividend rate of 2.512% for the period from and including September 30, 2016 to but excluding December 31, 2016. The floating quarterly dividend rate will be reset quarterly.
Based on the aforementioned financing activities, available credit facilities and forecasted free cash flow, the Company expects to have sufficient liquidity to fund operations and obligations, including maturing debt, during the upcoming fiscal year. On a longer-term basis, Shaw expects to generate free cash flow and have borrowing capacity sufficient to finance foreseeable future business plans and refinance maturing debt.
Cash Flow from Operations
Operating Activities
For the three month period ended August 31, 2016, funds flow from operations increased over the comparable period primarily due to higher operating income before restructuring costs and amortization and lower income tax expense. On a year-to-date basis, funds flow from operations inc
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