UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 6-K

 

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2020

 

Commission File Number: 001-35400

 

 

 

JUST ENERGY GROUP INC.

(Translation of registrant’s name into English)

 

 

 

100 King Street West, Suite 2630
Toronto, Ontario M5X 1E1

(Address of principal executive office)

 

 

 

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

 

Form 20-F ☐            Form 40-F ☒

 

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

 

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

 

 

 

 

 

 

DOCUMENTS INCLUDED AS PART OF THIS REPORT

 

Exhibit  
   
99.1 Consolidated Interim Financial Statements (Unaudited) for the three months ended September 30, 2020 and 2019.
   
99.2 Management’s Discussion and Analysis for the three months ended September 30, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

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

 

 

    JUST ENERGY GROUP INC.
    (Registrant)
     
Dated: November 11, 2020 By: /s/ Michael Carter  
  Name: Michael Carter  
  Title: Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands of Canadian dollars)

 

      As at   As at 
      Sept. 30, 2020   March 31, 2020 
   Notes  (Unaudited)   (Audited) 
ASSETS             
Current assets             
Cash and cash equivalents  12(c)  $77,965   $26,093 
Restricted cash      245    4,326 
Trade and other receivables, net  5(a)   356,092    403,907 
Gas in storage      21,366    6,177 
Fair value of derivative financial assets  7   38,652    36,353 
Income taxes recoverable      10,099    6,641 
Other current assets  6(a)   154,471    203,270 
       658,890    686,767 
Assets classified as held for sale  16   2,452    7,611 
       661,342    694,378 
Non-current assets             
Investments      32,889    32,889 
Property and equipment, net      21,968    28,794 
Intangible assets, net      90,292    98,266 
Goodwill      268,006    272,692 
Fair value of derivative financial assets  7   22,466    28,792 
Deferred income tax assets      3,415    3,572 
Other non-current assets  6(b)   37,289    56,450 
       476,325    521,455 
TOTAL ASSETS     $1,137,667   $1,215,833 
              
LIABILITIES             
Current liabilities             
Trade and other payables  8  $568,913   $685,665 
Deferred revenue      9,547    852 
Income taxes payable      2,665    5,799 
Fair value of derivative financial liabilities  7   101,478    113,438 
Provisions  17(b)   6,127    1,529 
Current portion of long-term debt  9   3,958    253,485 
       692,688    1,060,768 
Liabilities associated with assets classified as held for sale  16   2,445    4,906 
       695,133    1,065,674 
Non-current liabilities             
Long-term debt  9   496,035    528,518 
Fair value of derivative financial liabilities  7   86,526    76,268 
Deferred income tax liabilities      2,715    2,931 
Other non-current liabilities      28,007    37,730 
       613,283    645,447 
TOTAL LIABILITIES     $1,308,416   $1,711,121 
SHAREHOLDERS’ DEFICIT             
Shareholders’ capital  12  $1,537,110   $1,246,829 
Equity component of convertible debentures      -    13,029 
Contributed deficit      (12,828)   (29,826)
Accumulated deficit      (1,781,683)   (1,809,557)
Accumulated other comprehensive income      87,067    84,651 
Non-controlling interest      (415)   (414)
TOTAL SHAREHOLDERS’ DEFICIT      (170,749)   (495,288)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT     $1,137,667   $1,215,833 

 

Commitments and guarantees (Note 17)

 

See accompanying notes to the interim condensed consolidated financial statements

 

       
/s/ Scott Gahn   /s/ Stephen Schaefer  
Chief Executive Officer and President   Corporate Director  

 

 1

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

      Three months   Three months   Six months   Six months 
      ended   ended   ended   ended 
      Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   Notes  2020   2019   2020   2019 
                    
CONTINUING OPERATIONS                       
Sales  10  $649,602   $768,440   $1,242,736   $1,438,605 
Cost of goods sold      428,891    843,788    752,888    1,301,729 
GROSS MARGIN      220,711    (75,348)   489,848    136,876 
INCOME (EXPENSES)                       
Administrative      (43,957)   (41,466)   (82,099)   (82,269)
Selling and marketing      (47,912)   (54,279)   (94,871)   (115,983)
Other operating expenses  13(a)   (20,765)   (39,842)   (40,676)   (75,607)
Finance costs  9   (29,744)   (28,451)   (51,597)   (51,997)
Restructuring costs  14   (7,118)   -    (7,118)   - 
Gain on Recapitalization transaction, net  12(c)   52,152    -    50,341    - 
Unrealized gain (loss) of derivative instruments and other  7   (84,968)   65,463    (7,619)   (176,536)
Realized gain (loss) of derivative instruments  4   (85,457)   236,500    (219,903)   156,568 
Other income (expenses), net      (2,425)   28,825    (3,057)   28,085 
Profit (loss) from continuing operations before income taxes      (49,483)   91,402    33,249    (180,863)
Provision for (recovery of) income taxes  11   673    2,053    1,307    (241)
PROFIT (LOSS) FROM CONTINUING OPERATIONS     $(50,156)  $89,349   $31,942   $(180,622)
DISCONTINUED OPERATIONS                       
Loss from discontinued operations  16   (1,210)   (9,809)   (4,158)   (14,998)
PROFIT (LOSS) FOR THE PERIOD     $(51,366)  $79,540   $27,784   $(195,620)
Attributable to:                       
Shareholders of Just Energy     $(50,040)  $89,363   $32,055   $(180,588)
Discontinued operations      (1,210)   (9,809)   (4,158)   (14,998)
Non-controlling interest      (116)   (14)   (113)   (34)
PROFIT (LOSS) FOR THE PERIOD     $(51,366)  $79,540   $27,784   $(195,620)
                        
Earnings (loss) per share from continuing operations  15                    
Basic     $(4.37)  $9.05   $2.99   $(18.38)
Diluted     $(4.37)  $8.97   $2.97   $(18.38)
Earnings (loss) per share from discontinued operations  16                    
Basic     $(0.10)  $(0.99)  $(0.39)  $(1.53)
Diluted     $(0.10)  $(0.99)  $(0.39)  $(1.53)
Earnings (loss) per share available to shareholders  15                    
Basic     $(4.47)  $8.06   $2.60   $(19.91)
Diluted     $(4.47)  $7.98   $2.58   $(19.91)

 

See accompanying notes to the interim condensed consolidated financial statements

 

 2

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited in thousands of Canadian dollars)

 

      Three months   Three months   Six months   Six months 
      ended   ended   ended   ended 
      Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   Notes  2020   2019   2020   2019 
PROFIT (LOSS) FOR THE PERIOD     $(51,366)  $79,540   $27,784   $(195,620)
                        
Unrealized gain (loss) on translation of foreign operations, net of tax      (349)   8,801    794    1,782 
Unrealized gain on translation of foreign operations from discontinued operations      363    -    789    4,721 
Gain on translation of foreign operations disposed and reclassified to consolidated statement of income (loss)  16   -    -    833    - 
       14    8,801    2,416    6,503 
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX     $(51,352)  $88,341   $30,200   $(189,117)
                        
Total comprehensive income (loss) attributable to:                       
Shareholders of Just Energy     $(51,236)  $88,355   $30,313   $(189,084)
Non-controlling interest      (116)   (14)   (113)   (34)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD, NET OF TAX     $(51,352)  $88,341   $30,200   $(189,118)

 

See accompanying notes to the interim condensed consolidated financial statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 3

 

JUST ENERGY GROUP INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN SHAREHOLDERS’ EQUITY (DEFICIT)

(unaudited in thousands of Canadian dollars)

 

      Six months   Six months 
      ended   ended 
   Notes  Sept. 30, 2020   Sept. 30, 2019 
ATTRIBUTABLE TO THE SHAREHOLDERS             
Accumulated earnings, beginning of period     $140,446   $450,032 
Profit (loss) for the period as reported, attributable to shareholders      27,897    (195,586)
Accumulated earnings, end of period     $168,343   $254,446 
              
DIVIDENDS AND DISTRIBUTIONS             
Dividends and distributions, beginning of period      (1,950,003)   (1,923,808)
Dividends and distributions declared and paid  12(b)   (23)   (25,359)
Dividends and distributions, end of period     $(1,950,026)  $(1,949,167)
ACCUMULATED DEFICIT     $(1,781,683)  $(1,694,721)
              
ACCUMULATED OTHER COMPREHENSIVE INCOME             
Accumulated other comprehensive income, beginning of period  4  $84,651   $79,093 
Other comprehensive income      2,416    6,503 
Accumulated other comprehensive income, end of period     $87,067   $85,596 
              
SHAREHOLDERS’ CAPITAL  12          
Common shares             
Common shares, beginning of period     $1,099,864   $1,088,538 
Issuance of shares due to Recapitalization  12(c)   438,642    - 
Issuance cost associated with Recapitalization  12(c)   (1,572)   - 
Share-based units exercised      176    10,031 
Common shares, end of period     $1,537,110   $1,098,569 
              
Preferred shares  12          
Preferred shares, beginning of period     $146,965   $146,965 
Settled with common shares  12(c)   (146,965)   - 
Preferred shares, end of period     $-   $146,965 
SHAREHOLDERS’ CAPITAL     $1,537,110   $1,245,534 
              
EQUITY COMPONENT OF CONVERTIBLE DEBENTURES             
Balance, beginning of period     $13,029   $13,029 
Settled with common shares  12(c)   (13,029)   - 
Balance, end of period     $-   $13,029 
              
CONTRIBUTED DEFICIT             
Balance, beginning of period     $(29,826)  $(25,540)
Add: Share-based compensation expense  13(a)   4,122    8,784 
Discontinued operations      -    254 
Transferred from equity component      13,029    - 
Less: Share-based units exercised      (176)   (10,031)
Share-based compensation adjustment      -    (3,450)
Non-cash deferred share grant distributions      23    (1,815)
Balance, end of period     $(12,828)  $(31,798)
              
NON-CONTROLLING INTEREST             
Balance, beginning of period     $(414)  $(399)
Foreign exchange impact on non-controlling interest      112    49 
Loss attributable to non-controlling interest      (113)   (34)
Balance, end of period     $(415)  $(384)
TOTAL SHAREHOLDERS’ DEFICIT     $(170,749)  $(382,744)

 

See accompanying notes to the interim condensed consolidated financial statements

 

 4

 

JUST ENERGY GROUP INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited in thousands of Canadian dollars)

 

      Six months   Six months 
      ended   ended 
      Sept. 30,   Sept. 30, 
Net inflow (outflow) of cash related to the following activities  Notes  2020   2019 
OPERATING             
Profit (loss) from continuing operations before income taxes     $33,249   $(180,863)
Profit (loss) from discontinued operations before income taxes      (4,158)   (15,034)
Profit (loss) before income taxes      29,091    (195,897)
              
Items not affecting cash             
Amortization of intangible assets  13(a)   8,618    14,463 
Depreciation of property, plant and equipment      4,453    6,630 
Share-based compensation expense  13(a)   4,122    8,784 
Financing charges, non-cash portion      16,576    11,130 
Unrealized (gain) loss in fair value of derivative instruments and other  7   7,619    176,536 
Gain from Recapitalization transaction, net  12(c)   (76,972)   - 
Net change in working capital balances      36,123    87,198 
Adjustment for discontinued operations      931    (34,967)
Income taxes paid      (7,763)   (6,100)
Cash inflow from operating activities      22,798    67,777 
              
INVESTING             
Purchase of property and equipment      (44)   (624)
Purchase of intangible assets      (4,629)   (5,577)
Payments for previously acquired business      -    (12,013)
Cash outflow from investing activities      (4,673)   (18,214)
              
FINANCING             
Dividends/distributions paid      -    (25,335)
Repayment of long-term debt  9   (3,252)   (2,203)
Leased asset payments      (2,085)   (2,989)
Debt issuance costs  9   (6,625)   83 
Share swap payout      (21,488)   - 
Credit facility withdrawal (repayment)  9   (30,093)   1,239 
Proceeds from issuance of common stock, net      100,969    - 
Cash inflow (outflow) from financing activities      37,426    (29,205)
              
Effect of foreign currency translation on cash balances      (3,679)   (204)
              
Net cash inflow      51,872    20,154 
Cash and cash equivalents, beginning of period      26,093    9,927 
              
Cash and cash equivalents, end of period     $77,965   $30,081 
              
Supplemental cash flow information:             
Interest paid     $43,880   $41,706 

 

See accompanying notes to the interim condensed consolidated financial statements

 

 5

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

 

1.ORGANIZATION

 

Just Energy Group Inc. (“Just Energy” or the “Company”) is a corporation established under the laws of Canada to hold securities and to distribute the income of its directly or indirectly owned operating subsidiaries and affiliates. The registered office of Just Energy is First Canadian Place, 100 King Street West, Toronto, Ontario, Canada. The unaudited interim condensed consolidated financial statements (“Interim Financial Statements”) consist of Just Energy and its subsidiaries and affiliates. The Interim Financial Statements were approved by the Board of Directors on November 11, 2020.

 

2.OPERATIONS

 

Just Energy is a retail energy provider specializing in electricity and natural gas commodities and bringing energy efficient solutions and renewable energy options to customers. Currently operating in the United States (“U.S.”) and Canada, Just Energy serves both residential and commercial customers, providing homes and businesses with a broad range of energy solutions that deliver comfort, convenience and control. Just Energy is the parent company of Amigo Energy, Filter Group Inc. (“Filter Group”), Hudson Energy, Interactive Energy Group, Tara Energy and TerraPass.

 

Just Energy’s current commodity product offerings include fixed, variable, index and flat rate options. By fixing the price of natural gas or electricity under its fixed-price or price-protected program contracts for a period of up to five years, Just Energy’s customers offset their exposure to changes in the price of these essential commodities. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Flat-bill products allow customers to pay a flat rate each month regardless of usage. Just Energy derives its margin or gross profit from the difference between the price at which it is able to sell the commodities to its customers and the related price at which it purchases the associated volumes from its suppliers.

 

Through the Filter Group business, Just Energy provides subscription-based home water filtration systems to residential customers, including under-counter and whole-home water filtration solutions. Just Energy also offers green products through its JustGreen program. The JustGreen electricity product offers customers the option of having all or a portion of their electricity sourced from renewable green sources such as wind, solar, hydropower or biomass. The JustGreen gas product offers carbon offset credits that allow customers to reduce or eliminate the carbon footprint of their homes or businesses. Additional green products offered through TerraPass allow customers to offset their carbon footprint without buying energy commodity products and can be offered in all states and provinces without being dependent on energy deregulation.

 

Just Energy markets its product offerings through multiple sales channels including brokers, digital and telesales marketing, door-to-door, retail and affinity relationships.

 

In March 2019, Just Energy formally approved and commenced a process to dispose of its businesses in Germany, Ireland and Japan. In June 2019, Just Energy also formally approved and commenced a process to dispose of its business in the United Kingdom (“U.K.”), as part of the Company’s Strategic Review. The decision was part of a strategic transition to focus on the core business in North America. The U.K. and Ireland businesses were disposed of during the three months ended December 31, 2019 as described in Note 16. The disposal of operations in Japan was completed in April 2020, and the disposal of operations in Germany is expected to be completed in the near future. As at September 30, 2020, these operations were classified as a disposal group held for sale and as a discontinued operation. Previously, these operations were reported within the Consumer segment, while a portion of the U.K. business was allocated to the Commercial segment.

 

 6

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

On September 28, 2020, the Company completed a comprehensive plan to strengthen and de-risk the business, positioning the Company for sustainable growth as an independent industry leader (the “Recapitalization”). The Recapitalization was undertaken through a plan of arrangement under the Canada Business Corporations Act (“CBCA”).  See further discussion in Note 9 and Note 12.

 

3.FINANCIAL STATEMENT PRESENTATION

 

(a)Compliance with IFRS

 

These Interim Financial Statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”), utilizing the accounting policies Just Energy outlined in its March 31, 2020 annual audited consolidated financial statements, except the adoption of new International Financial Reporting Standards (“IFRS”). Accordingly, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with IFRS, as issued by the IASB, have been omitted or condensed.

 

(b)Basis of presentation and interim reporting

 

These Interim Financial Statements should be read in conjunction with and follow the same accounting policies and methods of application as those used in the annual audited consolidated financial statements for the fiscal years ended March 31, 2020 and 2019.

 

The Interim Financial Statements are presented in Canadian dollars, the functional currency of Just Energy, and all values are rounded to the nearest thousand, except where otherwise indicated. The Interim Financial Statements are prepared on a going concern basis under the historical cost convention, except for certain financial assets and liabilities that are stated at fair value.

 

The interim operating results are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2021, due to seasonal variations resulting in fluctuations in quarterly results. Gas consumption by customers is typically highest in October through March and lowest in April through September. Electricity consumption is typically highest in January through March and July through September and lowest in October through December and April through June.

 

Certain figures in the comparative consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the current period’s Interim Financial Statements.

 

Principles of consolidation

 

The Interim Financial Statements include the accounts of Just Energy and its directly or indirectly owned subsidiaries and affiliates as at September 30, 2020. Subsidiaries and affiliates are consolidated from the date of acquisition and control and, continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries and affiliates are prepared for the same reporting period as Just Energy, using consistent accounting policies. All intercompany balances, sales, expenses and unrealized gains and losses resulting from intercompany transactions are eliminated on consolidation.

 

 7

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(c)Significant accounting judgments, estimates, and assumptions

 

The preparation of the Interim Financial Statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amount of assets, liabilities, income and expenses. The estimates and related assumptions based on previous experience and other factors are considered reasonable under the circumstances, the results of which form the basis for making the assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. There have been no material changes from the disclosures in the Annual Report for the period ended March 31, 2020 with regard to significant accounting judgments, estimates and assumptions.

 

COVID-19 impact

 

As a result of the continued and uncertain economic and business impact of the coronavirus disease (“COVID-19”) pandemic, Just Energy has reviewed the estimates, judgments and assumptions used in the preparation of the Interim Financial Statements, including with respect to: the determination of whether indicators of impairment exist for the assets and cash-generating units (“CGUs”) and the underlying assumptions used in the measurement of the recoverable amount of such assets or CGUs. Just Energy has also assessed the impact of COVID-19 on the estimates and judgments used in connection with the measurement of deferred income tax assets and the credit risk of Just Energy’s customers.  Although Just Energy determined that no significant revisions to such estimates, judgments or assumptions were required for the period ended September 30, 2020, revisions may be required in future periods to the extent that the negative impacts on the business arising from COVID-19 continue or worsen. Any such revision (due to COVID-19 or otherwise) may result in, among other things, write-downs or impairments to the assets or CGUs, and/or adjustments to the carrying amount of the accounts receivable, goodwill or to the valuation of the deferred income tax assets, any of which could have a material impact on the results of operations and financial condition. While Just Energy believes the COVID-19 pandemic to be temporary, the situation is dynamic and the impact of COVID-19 on the Company’s results of operations and financial condition, including the duration and the impact on overall customer demand, cannot be reasonably estimated at this time.

 

4.ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED

 

Adoption of International Financial Reporting Interpretations Committee (“IFRIC”) Agenda Decision 11, Physical Settlement of Contracts to Buy or Sell a Non-Financial Item (“Agenda Decision 11”)

 

The IFRIC reached a decision on Agenda Decision 11 during its meeting on March 5 and 6, 2019. The decision was in respect to a request about how an entity applies IFRS 9 to particular contracts to buy or sell a non-financial item at a fixed price.

 

The Company reviewed the agenda decision and determined that a change was required in its accounting policy related to contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments. These are contracts the Company enters into that are accounted for as derivatives at fair value through profit or loss but physically settled by the underlying non-financial item. The IFRIC concluded that IFRS 9 neither permits nor requires an entity to reverse the accumulated gain or loss previously recognized on the derivative and recognize a corresponding adjustment to cost of goods sold or inventory when the contract is physically settled. The presentation of the interim condensed consolidated statements of income (loss) has been amended to comply with the IFRIC agenda decision.

 

 8

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Prior to the adoption of Agenda Decision 11, realized gains and losses on financial swap contracts and options were included in cost of goods sold. Upon adoption of Agenda Decision 11, realized gains and losses on financial swap contracts are recorded in the line item realized loss on derivative instruments. As a result of Agenda Decision 11, the amount of cost of goods sold previously reported for the three and six months ended September 30, 2019, has increased by $230.7 million from $613.1 million and $1,150.9 million previously reported, respectively, to $843.8 million and $1,301.7 million, respectively, upon the adoption of IFRIC Agenda Decision 11 with a decrease in realized losses on derivative.

 

5.TRADE AND OTHER RECEIVABLES, NET

 

(a)Trade and other receivables

 

   As at   As at 
   Sept. 30, 2020   March 31, 2020 
Trade accounts receivable, net  $188,364   $241,969 
Accrued gas receivables   1,119    7,224 
Unbilled revenues, net   102,650    121,993 
Commodity receivables and other   63,959    32,721 
   $356,092   $403,907 

 

(b)Aging of accounts receivable

 

Customer credit risk

 

The lifetime expected credit loss reflects Just Energy’s best estimate of losses on the accounts receivable and unbilled revenue balances. Just Energy determines the lifetime expected credit loss by using historical loss rates and forward-looking factors if applicable. Just Energy is exposed to customer credit risk on its continuing operations in Alberta, Texas, Illinois (gas), California and Ohio (electricity). Credit review processes have been implemented to perform credit evaluations of customers and manage customer default. If a significant number of customers were to default on their payments, it could have a material adverse effect on the operations and cash flows of Just Energy. Management factors default from credit risk in its margin expectations for all of the above markets.

 

In the remaining markets, the local distribution companies (“LDCs”) provide collection services and assume the risk of any bad debts owing from Just Energy’s customers for a fee that is recorded in cost of goods sold. Management believes that the risk of the LDCs failing to deliver payment to Just Energy is minimal. There is no assurance that the LDCs providing these services will continue to do so in the future.

 

 9

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The aging of the trade accounts receivable from the markets where the Company bears customer credit risk was as follows:

 

   As at   As at 
   Sept. 30, 2020   March 31, 2020 
         
Current  $81,219   $83,431 
1–30 days   19,924    26,678 
31–60 days   5,709    6,513 
61–90 days   2,615    5,505 
Over 90 days   14,198    35,252 
   $123,665   $157,379 

 

(c)Allowance for doubtful accounts

 

Changes in the allowance for doubtful accounts related to the balances in the table above were as follows:

 

   As at   As at 
   Sept. 30, 2020   March 31, 2020 
         
Balance, beginning of period  $45,832   $182,365 
Provision for doubtful accounts   23,602    80,050 
Bad debts written off   (41,794)   (138,514)
Foreign exchange   5,400    3,124 
Assets classified as held for sale   -    (81,193)
Balance, end of period  $33,040   $45,832 
           
Allowance for doubtful accounts on accounts receivable  $30,642   $43,127 
Allowance for doubtful accounts on unbilled revenue   2,398    2,705 
Total allowance for doubtful accounts  $33,040   $45,832 

 

6.OTHER CURRENT AND NON-CURRENT ASSETS

 

   As at   As at 
(a) Other current assets  Sept. 30, 2020   March 31, 2020 
  Prepaid expenses and deposits  $14,385   $55,972 
  Customer acquisition costs   66,713    77,939 
  Green certificates assets   63,772    63,728 
  Gas delivered in excess of consumption   6,255    2,393 
  Inventory   3,346    3,238 
   $154,471   $203,270 

 

 10

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

   As at   As at 
(b) Other non-current assets  Sept. 30, 2020   March 31, 2020 
  Customer acquisition costs  $28,932   $43,686 
  Other long-term assets   8,357    12,764 
     $37,289   $56,450 

 

7.FINANCIAL INSTRUMENTS

 

(a)Fair value of derivative financial instruments and other

 

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Management has estimated the value of financial swaps, physical forwards and option contracts for electricity, natural gas, carbon and renewable energy certificates, and generation and transmission capacity contracts using a discounted cash flow method, which employs market forward curves that are either directly sourced from third parties or developed internally based on third-party market data. These curves can be volatile, thus leading to volatility in the mark to market with no immediate impact to cash flows. Gas options and green power options have been valued using the Black option pricing model using the applicable market forward curves and the implied volatility from other market traded options. Management periodically uses non-exchange-traded swap agreements based on cooling degree days (“CDDs”) and heating degree days (“HDDs”) measured in its utility service territories to reduce the impact of weather volatility on Just Energy’s electricity volumes, commonly referred to as “weather derivatives”. The fair value of these swaps on a given measurement station indicated in the derivative contract is determined by calculating the difference between the agreed strike and expected variable observed at the same station.

 

The following table illustrates unrealized gains (losses) related to Just Energy’s derivative financial instruments classified as fair value through profit or loss and recorded on the interim condensed consolidated statements of financial position as fair value of derivative financial assets and fair value of derivative financial liabilities, with their offsetting values recorded in unrealized loss in fair value of derivative instruments and other on the interim condensed consolidated statements of income (loss).

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2020   2019   2020   2019 
                 
Physical forward contracts and options (i)  $(115,147)  $95,536   $(66,767)  $(129,438)
Financial swap contracts and options (ii)   42,544    (27,679)   70,665    (43,314)
Foreign exchange forward contracts   (3,028)   1,926    (9,079)   1,699 
Share swap   -    (7,862)   -    (7,026)
Unrealized foreign exchange on the 6.5% convertible bond and 8.75% loan transferred to realized foreign exchange resulting from the Recapitalization   (12,218)   (3,340)   -    2,475 
Weather derivatives (iii)   1,769    (7,916)   (612)   (10,937)
Other derivative options   1,112    14,798    (1,826)   10,005 
Unrealized gain (loss) of derivative instruments and other  $(84,968)  $65,463   $(7,619)  $(176,536)

 

 

 11

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the interim condensed consolidated statement of financial position as at September 30, 2020:

 

   Financial assets (current)   Financial
assets
(non-current)
   Financial liabilities (current)   Financial liabilities (non-current) 
                 
Physical forward contracts and options (i)  $24,021   $15,946   $90,552   $80,345 
Financial swap contracts and options (ii)   11,127    4,541    10,244    4,552 
Foreign exchange forward contracts   -    -    109    1,415 
Weather derivatives (iii)   848    -    573    214 
Other derivative options   2,656    1,979    -    - 
As at September 30, 2020  $38,652   $22,466   $101,478   $86,526 

 

The following table summarizes certain aspects of the fair value of derivative financial assets and liabilities recorded in the consolidated statement of financial position as at March 31, 2020:

 

   Financial assets (current)   Financial assets
(non-current)
   Financial liabilities (current)   Financial liabilities (non-current) 
                 
Physical forward contracts and options (i)  $24,549   $17,673   $57,461   $51,836 
Financial swap contracts and options (ii)   6,915    1,492    53,917    24,432 
Foreign exchange forward contracts   4,519    3,036    -    - 
Weather derivatives (iii)   -    -    280    - 
Other derivative options   370    6,591    1,780    - 
As at March 31, 2020  $36,353   $28,792   $113,438   $76,268 

 

Below is a summary of the financial instruments classified through profit or loss as at September 30, 2020, to which Just Energy has committed:

 

(i) Physical forward contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 26,542,466 MWh, a weighted average price of $48.79/MWh and expiry dates up to December 31, 2029.

 

·Natural gas contracts with a total remaining volume of 81,119,737 GJs, a weighted average price of $2.95/GJ and expiry dates up to October 31, 2025.

 

·Renewable energy certificates (“RECs”) with a total remaining volume of 3,852,641 MWh, a weighted average price of $37.21/REC and expiry dates up to December 31, 2028.

 

·Electricity generation capacity contracts with a total remaining volume of 2,123 MWCap, a weighted average price of $6,344.71/MWCap and expiry dates up to May 31, 2024.

 

·Ancillary contracts with a total remaining volume of 230,805 MWh, a weighted average price of $20.68/MWh and expiry dates up to December 31, 2020.

 

(ii) Financial swap contracts and options consist of:

 

·Electricity contracts with a total remaining volume of 14,602,750 MWh, an average price of $42.98/MWh and expiry dates up to December 31, 2024.

 

 12

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

·Natural gas contracts with a total remaining volume of 106,079,580 GJs, an average price of $3.38/GJ and expiry dates up to December 31, 2025.

 

·Electricity generation capacity contracts with a total remaining volume of 3 MWCap, a weighted average price of $3,862.14/MWCap and expiry dates up to October 31, 2020.

 

·Ancillary contracts with a total remaining volume of 132,540 MWh, a weighted average price of $22.03/MWh and expiry dates up to December 31, 2020.

 

(iii) Weather derivatives consist of:

 

·HDD collar options with HDD strikes set at 0.8 to 1.32 degree day wide, total tick size of $12,500 per HDD and an expiry date of March 31, 2021.

 

·HDD natural gas swaps with price strikes ranging from US$1.75 to US$7.35/MmBTU and temperature strikes from 1,051 to 5,059 HDD and an expiry date of March 31, 2021.

 

·HDD natural gas swaps with price strikes to be set on futures index and temperature strikes from 1,051 to 5,059 HDD and an expiry date of March 31, 2022.

 

·Electricity call options with price strikes of $100/MWh, temperature strikes 84⁰ F to 103⁰ F and an expiry date of October 31, 2020.

 

·Put options for CDDs with temperature strikes at historical averages, total tick size of $22 per CDD and an expiry date of September 30 or October 31, 2020.

 

Share swap agreement

 

Just Energy had entered into a share swap agreement to manage the volatility associated with the Company’s restricted share grants and deferred share grants plans. The value, on inception, of the 2,500,000 shares under this share swap agreement was approximately $33.8 million. On August 22, 2018, Just Energy reduced the notional value of the share swap to $23.8 million through a payment of $10.0 million and renewed the share swap agreement. On March 31, 2020, the share swap agreement expired and settled. Net monthly settlements received (paid) under the share swap agreement were recorded in other loss in the statement of income.

 

These derivative financial instruments create a credit risk for Just Energy since they have been transacted with a limited number of counterparties. Should any counterparty be unable to fulfill its obligations under the contracts, Just Energy may not be able to realize the financial assets’ balance recognized in the Interim Financial Statements.

 

Fair value (“FV”) hierarchy of derivatives

 

Level 1

 

The fair value measurements are classified as Level 1 in the FV hierarchy if the fair value is determined using quoted unadjusted market prices. Currently there are no derivatives carried in this level.

 

Level 2

 

Fair value measurements that require observable inputs other than quoted prices in Level 1, either directly or indirectly, are classified as Level 2 in the FV hierarchy. This could include the use of statistical techniques to derive the FV curve from observable market prices. However, in order to be classified under Level 2, significant inputs must be directly or indirectly observable in the market. Just Energy values its New York Mercantile Exchange (“NYMEX”) financial gas fixed-for-floating swaps under Level 2.

 

 13

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Level 3

 

Fair value measurements that require unobservable market data or use statistical techniques to derive forward curves from observable market data and unobservable inputs are classified as Level 3 in the FV hierarchy. For the power supply contracts, Just Energy uses quoted market prices as per available market forward data and applies a price-shaping profile to calculate the monthly prices from annual strips and hourly prices from block strips for the purposes of mark to market calculations. The profile is based on historical settlements with counterparties or with the system operator and is considered an unobservable input for the purposes of establishing the level in the FV hierarchy. For the natural gas supply contracts, Just Energy uses three different market observable curves: (i) Commodity (predominately NYMEX), (ii) Basis and (iii) Foreign exchange. NYMEX curves extend for over five years (thereby covering the length of Just Energy’s contracts); however, most basis curves extend only 12 to 15 months into the future. In order to calculate basis curves for the remaining years, Just Energy uses extrapolation, which leads natural gas supply contracts to be classified under Level 3.

 

Weather derivatives are non-exchange-traded financial instruments used as part of a risk management strategy to mitigate the impact adverse weather conditions have on gross margin. The fair values of the derivatives are determined using an internally developed model that relies upon both observable inputs and significant unobservable inputs. Accordingly, the fair values of these derivatives are classified as Level 3. Market and contractual inputs to these models vary by contract type and would typically include notional amounts, reference weather stations, strike prices, temperature strike values, terms to expiration, historical weather data and historical commodity prices. The historical weather data and commodity prices were utilized to value the expected payouts with respect to weather derivatives and, as a result, are the most significant assumptions contributing to the determination of fair value estimates, and changes in these inputs can result in a significantly higher or lower fair value measurement.

 

For the share swap agreement, Just Energy used a forward interest rate curve along with a volume weighted average share price to model out its value. As the inputs had no observable market, it was classified as Level 3.

 

Just Energy’s accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

 

Fair value measurement input sensitivity

 

The main cause of changes in the fair value of derivative instruments is changes in the forward curve prices used for the fair value calculations. Just Energy provides a sensitivity analysis of these forward curves under the “Market risk” section of this note. Other inputs, including volatility and correlations, are driven off historical settlements.

 

 14

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at September 30, 2020:

 

   Level 1   Level 2   Level 3   Total 
Derivative financial assets  $-   $6,206   $54,912   $61,118 
Derivative financial liabilities   -    -    (188,004)   (188,004)
Total net derivative financial assets (liabilities)  $-   $6,206   $(133,092)  $(126,886)

 

The following table illustrates the classification of derivative financial assets (liabilities) in the FV hierarchy as at March 31, 2020:

 

   Level 1   Level 2   Level 3   Total 
Derivative financial assets  $-   $-   $65,145   $65,145 
Derivative financial liabilities   -    (38,676)   (151,030)   (189,706)
Total net derivative financial assets (liabilities)  $-   $(38,676)  $(85,885)  $(124,561)

 

Commodity price sensitivity – Level 3 derivative financial instruments

 

If the energy prices associated with only Level 3 derivative financial instruments including natural gas, electricity, verified emission-reduction credits and RECs had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit (loss) before income taxes for the period ended September 30, 2020 would have increased (decreased) by $154.5 million ($153.5 million), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.

 

A key assumption used when determining the significant unobservable inputs included in Level 3 of the FV hierarchy consists of up to 5% price extrapolation to calculate monthly prices that extend beyond the market observable 12- to 15-month forward curve.

 

The following table illustrates the changes in net fair value of financial assets (liabilities) classified as Level 3 in the FV hierarchy for the following periods:

 

   Six months ended   Year ended 
   Sept. 30, 2020   March 31, 2020 
Balance, beginning of period  $(85,885)  $17,310 
Total losses   (15,431)   (3,822)
Purchases   (18,350)   (43,663)
Sales   (1,250)   14,549 
Settlements   (12,175)   (70,259)
Balance, end of period  $(133,091)  $(85,885)

 

(b)Classification of non-derivative financial assets and liabilities

 

As at September 30, 2020 and March 31, 2020, the carrying value of cash and cash equivalents, restricted cash, trade and other receivables, and trade and other payables approximates their fair value due to their short-term nature.

 

 15

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Long-term debt recorded at amortized cost has a fair value as at September 30, 2020 of $500.0 million (March 31, 2020 - $596.2 million) and the interest payable on outstanding amounts is at rates that vary with bankers’ acceptances, London Interbank Offering Rate (“LIBOR”), Canadian bank prime rate or U.S. prime rate. Prior to the exchange under the Recapitalization transaction, the 8.75% loan, 6.75% $100M convertible debentures, 6.75% $160M convertible debentures and 6.5% convertible bonds, were fair valued based on market value; the 6.75% $100M convertible debentures, 6.75% $160M convertible debentures and 6.5% convertible bonds were classified as Level 1 in the FV hierarchy.

 

The risks associated with Just Energy’s financial instruments are as follows:

 

(i)Market risk

 

Market risk is the potential loss that may be incurred as a result of changes in the market or fair value of a particular instrument or commodity. Components of market risk to which Just Energy is exposed are discussed below.

 

Foreign currency risk

 

Foreign currency risk is created by fluctuations in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result of investments in U.S. operations.

 

The performance of the Canadian dollar relative to the U.S. dollar could positively or negatively affect Just Energy’s income, as a significant portion of Just Energy’s income is generated in U.S. dollars and is subject to currency fluctuations upon translation to Canadian dollars. Due to its growing operations in the U.S., Just Energy expects to have a greater exposure to foreign currency fluctuations in the future than in prior years. Just Energy has economically hedged between 50% and 100% of forecasted cross border cash flows that are expected to occur within the next 12 months and between 0% and 50% of certain forecasted cross border cash flows that are expected to occur within the following 13 to 24 months. The level of economic hedging is dependent on the source of the cash flows and the time remaining until the cash repatriation occurs.

 

Just Energy may, from time to time, experience losses resulting from fluctuations in the values of its foreign currency transactions, which could adversely affect its operating results. Translation risk is not hedged.

 

With respect to translation exposure, if the Canadian dollar had been 5% stronger or weaker against the U.S. dollar for the period ended September 30, 2020, assuming that all the other variables had remained constant, net income for the quarter ended September 30, 2020 would have been $3.7 million lower/higher and other comprehensive income (loss) would have been $7.1 million lower/higher.

 

Interest rate risk

 

Just Energy is only exposed to interest rate fluctuations associated with its floating rate credit facility. Just Energy’s current exposure to interest rates does not economically warrant the use of derivative instruments. Just Energy’s exposure to interest rate risk is relatively immaterial and temporary in nature. Just Energy does not currently believe that its long-term debt exposes the Company to material interest rate risks but has set out parameters to actively manage this risk within its Risk Management Policy.

 

A 1% increase (decrease) in interest rates would have resulted in an increase (decrease) of approximately $1.1 million in profit (loss) before income taxes for the quarter ended September 30, 2020 (September 30, 2019 - $0.5 million).

 

 16

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Commodity price risk

 

Just Energy is exposed to market risks associated with commodity prices and market volatility where estimated customer requirements do not match actual customer requirements. Management actively monitors these positions on a daily basis in accordance with its Risk Management Policy. This policy sets out a variety of limits, most importantly thresholds for open positions in the gas and electricity portfolios, which also feed a value at risk limit. Should any of the limits be exceeded, they are closed expeditiously or express approval to continue to hold is obtained. Just Energy’s exposure to market risk is affected by a number of factors, including accuracy of estimation of customer commodity requirements, commodity prices, volatility and liquidity of markets. Just Energy enters into derivative instruments in order to manage exposures to changes in commodity prices. The derivative instruments that are used are designed to fix the price of supply for estimated customer commodity demand and thereby fix margins. Derivative instruments are generally transacted over the counter. The inability or failure of Just Energy to manage and monitor the above market risks could have a material adverse effect on the operations and cash flows of Just Energy. Just Energy mitigates the exposure to variances in customer requirements that are driven by changes in expected weather conditions through active management of the underlying portfolio, which involves, but is not limited to, the purchase of options including weather derivatives. Just Energy’s ability to mitigate weather effects is limited by the degree to which weather conditions deviate from normal.

 

Commodity price sensitivity – all derivative financial instruments

 

If all the energy prices associated with derivative financial instruments including natural gas, electricity, verified emission-reduction credits and RECs had risen (fallen) by 10%, assuming that all of the other variables had remained constant, profit (loss) before income taxes for the quarter ended September 30, 2020 would have increased (decreased) by $155.7 million ($154.7 million), primarily as a result of the change in fair value of Just Energy’s derivative financial instruments.

 

For information on credit risk, refer to Note 5.

 

(ii)Physical supplier risk

 

Just Energy purchases the majority of the gas and electricity delivered to its customers through long-term contracts entered into with various suppliers. Just Energy has an exposure to supplier risk as the ability to continue to deliver gas and electricity to its customers is reliant upon the ongoing operations of these suppliers and their ability to fulfill their contractual obligations. As at September 30, 2020, Just Energy has applied an adjustment factor to determine the fair value of its financial instruments in the amount of $16.2 million (March 31, 2020 - $23.8 million) to accommodate for its counterparties’ risk of default.

 

(iii)Counterparty credit risk

 

Counterparty credit risk represents the loss that Just Energy would incur if a counterparty fails to perform under its contractual obligations. This risk would manifest itself in Just Energy replacing contracted supply at prevailing market rates, thus impacting the related customer margin. Counter party limits are established within the Risk Management Policy. Any exceptions to these limits require approval from the Risk Committee of the Board of Directors of Just Energy. The Risk Department and Risk Committee monitor current and potential credit exposure to individual counterparties and also monitor overall aggregate counterparty exposure. However, the failure of a counterparty to meet its contractual obligations could have a material adverse effect on the operations and cash flows of Just Energy.

 

 17

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

As at September 30, 2020, the estimated counterparty credit risk exposure amounted to $61.1 million (March 31, 2020 - $65.1 million), representing the risk relating to Just Energy’s exposure to derivatives that are in an asset position.

 

8.TRADE AND OTHER PAYABLES

 

   As at   As at 
   Sept. 30, 2020   March 31, 2020 
Commodity suppliers' accruals and payables  $379,686   $414,581 
Green provisions and repurchase obligations   80,766    103,245 
Sales tax payable   21,072    19,706 
Non-commodity trade accruals and accounts payable   56,921    117,473 
Current portion of payable to former joint venture partner   16,734    18,194 
Accrued gas payable   -    3,295 
Other payables   13,734    9,171 
   $568,913   $685,665 

 

9.LONG-TERM DEBT AND FINANCING

 

      As at   As at 
   Maturity  Sept. 30, 2020   March 31, 2020 
Senior secured credit facility (a)  December 31, 2023  $206,296   $236,389 
Less: Debt issue costs (a)      (4,625)   (1,644)
Filter Group financing (b)  October 25, 2023   6,438    9,690 
7.0% $15M subordinated notes (c)  September 27, 2026   15,000    - 
Less: Debt issue costs (c)      (2,000)   - 
10.25% term loan (d)  March 31, 2024   278,884    - 
8.75% loan (e)      -    280,535 
6.75% $100M convertible debentures (f)      -    90,187 
6.75% $160M convertible debentures (g)      -    153,995 
6.5% convertible bonds (h)      -    12,851 
       499,993    782,003 
Less: Current portion      (3,958)   (253,485)
      $496,035   $528,518 

 

 18

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Future annual minimum principal repayments are as follows:

 

   Less than           More than     
   1 year   1–3 years   4–5 years   5 years   Total 
                     
Senior secured credit facility (a)  $-   $206,296   $-   $-   $206,296 
Filter Group financing (b)   3,958    2,480    -    -    6,438 
7.0% $15M subordinated notes (c)   -    -    -    15,000    15,000 
10.25% term loan (d)   -    -    292,828    -    292,828 
   $3,958   $208,776   $292,828   $15,000   $520,562 

 

Interest is expensed based on the effective interest rate. The following table details the finance costs for the indicated periods:

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2020   2019   2020   2019 
Senior secured credit facility (a)  $5,382   $5,995   $10,517   $12,047 
Filter Group financing (b)   169    117    375    501 
8.75% loan (e)   8,791    10,283    18,055    17,620 
6.75% $100M convertible debentures (f)   2,354    2,337    4,762    4,674 
6.75% $160M convertible debentures (g)   3,452    3,462    6,948    6,892 
6.5% convertible bonds (h)   261    1,413    536    2,217 
Supplier finance and others (i)   9,335    4,844    10,404    8,046 
   $29,744   $28,451   $51,597   $51,997 

 

(a)As part of the Recapitalization, Just Energy extended the $335 million senior secured credit facility to December 2023, which was previously scheduled to mature in December 2020. Certain principal amounts outstanding under the letter of credit facility is guaranteed by Export Development Canada under its Account Performance Security Guarantee Program. Just Energy’s obligations under the $335 million senior secured credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a general security agreement and a pledge of the assets and securities of Just Energy and the majority of its operating subsidiaries and affiliates excluding, primarily, Filter Group, and German operations. Just Energy has also entered into an inter-creditor agreement in which certain commodity and hedge providers are also secured by the same collateral. As at September 30, 2020, the Company was compliant with all of its covenants. The tables below show Just Energy’s available capacity and its scheduled mandatory commitment reductions.

 

Senior secured credit facility as at September 30, 2020:

 

Total commitments  $335,000 
Outstanding advances   (206,296)
Letters of credit outstanding   (69,109)
Remaining capacity  $59,595 

 

 19

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Scheduled mandatory commitment reductions1:

 

March 31, 2021  $35,000 
September 30, 2021   35,000 
March 31, 2022   35,000 
September 30, 2022   35,000 
March 31, 2023   35,000 
September 30, 2023   35,000 

1In addition to the scheduled mandatory commitment reductions in the table above, Just Energy will be required to reduce the commitments for the sale of unrestricted subsidiaries and for asset dispositions in any fiscal year greater than $500,000. On November 30, 2021, the facility will also be reduced by the lesser of (a) $30 million less the aggregate of all commitment reductions made related to the after-tax proceeds from certain assets on or before November 30,2021, and (b) the cumulative EBITDA for the trailing five fiscal quarters measured at September 30, 2021 less $176.0 million.

 

Prior to September 28, 2020, interest was payable on outstanding loans at rates that vary with Bankers’ Acceptance rates, LIBOR, Canadian bank prime rate or U.S. prime rate. Under the terms of the operating credit facility, Just Energy was able to make use of Bankers’ Acceptances and LIBOR advances at stamping fees of 3.750%. Prime rate advances were at a rate of bank prime (Canadian bank prime rate or U.S. prime rate) plus 2.750% and letters of credit were at a rate of 3.750%.

 

Subsequent to the Recapitalization on September 28, 2020, under the terms of the senior secured credit facility, Just Energy is able to make use of Bankers’ Acceptances and LIBOR advances at stamping fees of 5.25%. Prime rate advances are at a rate of bank prime (Canadian bank prime rate or U.S. prime rate) plus 4.25% and letters of credit are at a rate of 5.25%. Interest rates are adjusted quarterly based on certain financial performance indicators.

 

As at September 30, 2020, the Canadian prime rate was 2.45% and the U.S. prime rate was 3.25%. As at September 30, 2020, $206.3 million has been drawn against the facility and total letters of credit outstanding as of September 30, 2020 amounted to $69.1 million (March 31, 2020- $72.5 million). Just Energy’s obligations under the senior credit facility are supported by guarantees of certain subsidiaries and affiliates and secured by a general security agreement and a pledge of the assets and securities of Just Energy and the majority of its operating subsidiaries and affiliates excluding, primarily, the Filter Group and German operations.

 

(b)Filter Group has a $6.4 million outstanding loan payable to Home Trust Company (“HTC”). The loan is a result of factoring receivables to finance the cost of rental equipment over a period of three to five years with HTC and bears interest at 8.99% per annum. Principal and interest are repayable monthly.

 

(c)As part of the Recapitalization, Just Energy issued $15 million principal amount of 7.0% subordinated notes (“7.0% $15M subordinated notes”) to holders of the subordinated convertible debentures, which has a six-year maturity. The 7.0% subordinated notes bear an annual interest rate of 7.0% payable in-kind semi-annually on March 15 and September 15. A $2.0 million fee related to the issuance of the notes was capitalized at inception to be amortized over the term of the agreement.

 

 20

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

(d)As part of the Recapitalization, Just Energy issued a US$205.9 million principal note (the “10.25% term loan”) maturing on March 31, 2024. The note bears interest at 10.25% and payments will be capitalized into the note. The interest is capitalized on a semi-annual basis on September 30 and March 31. Upon achieving certain financial measures, the Company will pay either 50% or 100% of the interest in cash at a 9.75% rate on a semi-annual basis. Certain senior debt to EBITDA ratios have been established as well as minimum EBITDA requirements for a trailing four quarter period. Voluntary prepayments are allowed within the agreement subject to a prepayment penalty of 5.0%. The 5.0% prepayment penalty is being amortized as finance costs over the term of the agreement.

 

(e)As part of the Recapitalization, the 8.75% loan was exchanged for its pro-rata share of the 10.25% term loan and 786,982 common shares. The loan had US$207.0 million outstanding plus accrued interest.

 

(f)As part of the Recapitalization, the 6.5% $100 million convertible debentures were exchanged for 3,592,069 common shares along with it’s pro-rata share of the $15 million subordinated note and the payment of accrued interest.

 

(g)As part of the Recapitalization, the 6.75% $160 million convertible debentures were exchanged for 5,747,310 common shares along with its pro-rata share of the $15 million subordinated note and the payment of accrued interest.

 

(h)As part of the Recapitalization, the 6.5% convertible bonds were exchanged for its pro-rata share of the 10.25% loan and 35,737 common shares. $9.2 million of the 6.5% convertible bonds were outstanding plus accrued interest.

 

(i)Supplier finance and other costs for the quarter ended September 30, 2020 primarily consists of charges for extended payment terms.

 

10.REPORTABLE BUSINESS SEGMENTS

 

Just Energy’s reportable segments are the Consumer segment and the Commercial segment.

 

The chief operating decision maker monitors the operational results of the Consumer and Commercial segments for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on certain non-IFRS measures such as base gross margin.

 

Transactions between segments are in the normal course of operations and are recorded at the exchange amount. Allocations made between segments for shared assets or allocated expenses are based on the number of residential customer equivalents in the respective segments.

 

Corporate and shared services report the costs related to management oversight of the business units, public reporting and filings, corporate governance and other shared services functions.

 

 21

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the three months ended September 30, 2020:

 

   Consumer   Commercial   Corporate and shared services   Consolidated 
                 
Sales  $402,903   $246,699   $-   $649,602 
Cost of goods sold   249,411    179,480    -    428,891 
Gross margin   153,492    67,219    -    220,711 
Depreciation of property and equipment   1,626    21    -    1,647 
Amortization of intangible assets   

3,147

    879    -    

4,026

 
Administrative expenses   10,438    4,763    28,756    43,957 
Selling and marketing expenses   29,666    18,246    -    47,912 
Other operating expenses   

11,954

    3,138    -    15,092 
Segment profit (loss) for the period  $96,661   $40,172   $(28,756)  $108,077 
Finance costs                  (29,744)
Restructuring costs                  (7,118)
Gain on Recapitalization transaction, net                  52,152 
Unrealized loss of derivative instruments and other                  (84,968)
Realized loss of derivative instruments                  (85,457)
Other expense, net                  (2,425)
Provision for income taxes                  (673)
Loss for the period from continuing operations                 $(50,156)
Loss from discontinued operations                  (1,210)
Loss for the period                  (51,366)
Capital expenditures  $2,695   $292   $-   $2,987 

 

 

 

 

 

 

 

 

 

 22

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the three months ended September 30, 2019:

 

   Consumer   Commercial   Corporate and shared services   Consolidated 
                 
Sales  $474,209   $294,231   $-   $768,440 
Cost of goods sold   487,424    356,364    -    843,788 
Gross margin   (13,215)   (62,133)   -    (75,348)
Depreciation of property and equipment   2,483    33    -    2,516 
Amortization of intangible assets   5,301    687    -    5,988 
Administrative expenses   9,290    6,527    25,649    41,466 
Selling and marketing expenses   34,578    19,701    -    54,279 
Other operating expenses   29,483    1,855    -    31,338 
Segment loss for the period  $(94,350)  $(90,936)  $(25,649)  $(210,935)
Finance costs                  (28,451)
Unrealized gain of derivative instruments and other                  65,463 
Realized gain of derivative instruments                  236,500 
Other income, net                  28,825 
Provision for income taxes                  (2,053)
Profit for the period from continuing operations                 $89,349 
Loss from discontinued operations                  (9,809)
Profit for the period                  79,540 
Capital expenditures  $731   $(199)  $-   $532 

 

 

 

 

 

 

 

 23

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the six months ended September 30, 2020:

 

   Consumer   Commercial   Corporate and shared services   Consolidated 
                 
Sales  $774,699   $468,037   $-   $1,242,736 
Cost of goods sold   434,852    318,036    -    752,888 
Gross margin   339,847    150,001    -    489,848 
Amortization of property, and equipment   4,287    47    -    4,334 
Amortization of intangible assets   6,851    1,767    -    8,618 
Administrative expenses   18,899    10,598    52,602    82,099 
Selling and marketing expenses   57,222    37,649    -    94,871 
Other operating expenses   21,069    6,655    -    27,724 
Segment profit (loss) for the period  $231,519   $93,285   $(52,602)  $272,202 
Finance costs                  (51,597)
Restructuring costs                  (7,118)
Gain on Recapitalization transaction, net                  50,341 
Unrealized loss of derivative instruments and other                  (7,619)
Realized loss of derivative instruments                  (219,903)
Other expense, net                  (3,057)
Provision for income taxes                  (1,307)
Profit for the period from continuing operations                  31,942 
Loss from discontinued operations                  (4,158)
Profit for the period                 $27,784 
                     
Capital expenditures  $4,216   $457   $-   $4,673 
                     
As at September 30, 2020                    
Total goodwill  $171,352   $96,654   $-   $268,006 
Total assets  $883,098   $254,569   $-   $1,137,667 
Total liabilities  $1,176,596   $131,820   $-   $1,308,416 

 

 

 

 

 

 

 

 

 

 

 

 

 

 24

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the six months ended September 30, 2019:

 

   Consumer   Commercial   Corporate and shared services   Consolidated 
                 
Sales  $884,207   $554,398   $-   $1,438,605 
Cost of goods sold   746,683    555,046         1,301,729 
Gross margin   137,524    (648)   -    136,876 
Amortization of property, and equipment   5,432    71    -    5,503 
Amortization of intangible assets   12,221    1,379    -    13,600 
Administrative expenses   20,525    12,678    49,066    82,269 
Selling and marketing expenses   76,378    39,605    -    115,983 
Other operating expenses   53,214    3,290    -    56,504 
Segment loss for the period  $(30,246)  $(57,671)  $(49,066)  $(136,983)
Finance costs                  (51,997)
Unrealized loss of derivative instruments and other                  (176,536)
Realized gain of derivative instruments                  156,568 
Other income, net                  28,085 
Recovery of income taxes                  241 
Loss for the period from continuing operations                 $(180,622)
Loss from discontinued operations                  (14,998)
Loss for the period                  (195,620)
                     
Capital expenditures  $5,650   $551   $-   $6,201 
                     
As at September 30, 2019                    
Total goodwill  $165,989   $159,479   $-   $325,468 
Total assets  $1,153,935   $407,935   $-   $1,561,870 
Total liabilities  $1,638,809   $228,500   $-   $1,867,309 

 

Sales from external customers

 

The revenue is based on the location of the customer.

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30, 2020   Sept. 30, 2019   Sept. 30, 2020   Sept. 30, 2019 
Canada  $63,891   $66,667   $122,038   $142,152 
United States   585,711    701,773    1,120,698    1,296,453 
Total  $649,602   $768,440   $1,242,736   $1,438,605 

 

For the three months ended September 30, 2020, revenue generated from the sale of electricity made up 95% of total revenue while gas amounted to 5%, compared to 94% for electricity and 6% for gas during the three months ended September 30, 2019. For the six months ended September 30, 2020, revenue generated from the sale of electricity and gas made up 92% and 8%, respectively, consistent with the prior period.

 

 25

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Non-current assets

 

Non-current assets by geographic segment consist of property and equipment and intangible assets and are summarized as follows:

 

   As at Sept. 30, 2020   As at March 31, 2020 
Canada  $232,671   $233,678 
United States   147,595    166,074 
Total  $380,266   $399,752 

 

11.INCOME TAXES

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30, 2020   Sept. 30, 2019   Sept. 30, 2020   Sept. 30, 2019 
Current income tax expense  $493   $3,051   $1,366   $3,513 
Deferred income tax expense (recovery)   180    (998)   (59)   (3,754)
Provision for (recovery of) income taxes  $673   $2,053   $1,307   $(241)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 26

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

12.SHAREHOLDERS’ CAPITAL

 

Just Energy is authorized to issue an unlimited number of common shares and 50,000,000 preference shares issuable in series, both with no par value. Shares outstanding have no preferences, rights or restrictions attached to them.

 

(a)Details of issued and outstanding shareholders’ capital are as follows:

 

   Six months ended   Year ended 
   Sept. 30, 2020   March 31, 2020 
   Shares   Amount   Shares   Amount 
Common shares:                
                 
Issued and outstanding                    
Balance, beginning of period   4,594,371   $1,099,864    4,533,211   $1,088,538 
Share-based awards exercised   798    176    61,160    11,326 
Issuance of shares due to Recapitalization   43,392,412    438,642    -    - 
Issuance cost   -    (1,572)   -    - 
Balance, end of period   47,987,581   $1,537,110    4,594,371   $1,099,864 
                     
Preferred shares:                    
                     
Issued and outstanding                    
Balance, beginning of period   4,662,165   $146,965    4,662,165   $146,965 
Exchanged to common shares   (4,662,165)   (146,965)   -    - 
Balance, end of period   -   $-    4,662,165   $146,965 
                     
Shareholders' capital   47,987,581   $1,537,110    9,256,536   $1,246,829 

 

The above table reflects the impacts of the Recapitalization including the extinguished convertible debentures, the settlement of the preferred shares and the issuance of new common shares. The common shares have been adjusted retrospectively to reflect the 33:1 share consolidation as part of Recapitalization (Note 12c).

 

(b)Dividends and distributions

 

In the second quarter of fiscal 2020, the Company suspended its dividend on common shares. For the quarters ended September 30, 2020 and September 30, 2019, respectively, no dividends per common share were declared by Just Energy. For the six months ended September 30, 2020, no dividends per common share were declared by Just Energy. For the six months ended September 30, 2019 one dividend of $0.125 per common share was declared by Just Energy resulting in a total dividend paid of $18.7 million.

 

As a result of the dividend suspension, distributions related to the dividends also ceased. There were no distributions during the three months ended September 30, 2020, consistent with the same quarter in fiscal 2020. Distributions for the six months ended September 30, 2020 were $23, which were consistent with the same period in the prior year. These distributions related to the shares which were paid to the Board of Directors in accordance with the terms of the Canadian and U.S. Plans during the periods.

 

On December 2, 2019, the Board suspended the dividend on its Series A Preferred Shares. For the quarters ended September 30, 2020 and September 30, 2019 no dividends per preferred shares were declared by Just Energy. For the six months ended September 30, 2020, no dividends per preferred share were declared by Just Energy. For the six months ended September 30, 2019 one dividend of $0.53125 per preferred share was declared by Just Energy resulting in a total dividend paid of $3.3 million.

 

 27

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

Under the senior secured credit facility and the 10.25% term loan, Just Energy is not allowed to pay dividends to the shareholders of Just Energy.

 

(c)Recapitalization transaction

 

On September 28, 2020, the Company completed a comprehensive plan to strengthen and de-risk the business, positioning the Company for sustainable growth as an independent industry leader (the “Recapitalization”). The Recapitalization was undertaken through a plan of arrangement under the CBCA and included:

 

·The consolidation of the Company’s common shares on a 1-for-33 basis;

 

·Exchange of the 6.75% $100M convertible debentures and the 6.75% $160M convertible debentures for common shares and $15 million principal amount of new subordinated notes (“7.0% $15M subordinated notes”). The 7.0% $15M subordinated notes have principal amount of $15 million, which was reduced through a tender offer for no consideration, subsequent to September 30, 2020, to $13.1 million;

 

·Extension of $335 million of the Company’s credit facilities to December 2023, with revised covenants and a schedule of commitment reductions throughout the term;

 

·Existing 8.75% loan and the remaining convertible bonds due December 31, 2020 were exchanged for a new term loan due March 2024 (the “10.25% term loan”) and common shares, with interest on the new term loan to be initially paid-in-kind until certain financial measures are achieved;

 

·Exchange of all of the 8.50%, fixed-to-floating rate, cumulative, redeemable, perpetual preferred shares for common shares;

 

·Accrued and unpaid interest paid in cash on the subordinated convertible debentures until September 28, 2020;

 

·The payment of certain expenses of the ad hoc group of convertible debenture holders;

 

·The issuance of approximately $3.7 million of common shares by way of an additional private placement to the Company’s term loan lenders at the same subscription price available to all securityholders pursuant to the new equity subscription offering, proceeds of which partially offset the incremental cash costs to the ad hoc group noted above;

 

·The entitlement of holders of Just Energy’s existing 8.75% loan, 6.5% convertible bonds, the subordinated convertible debentures, preferred shares and common shares as of July 23, 2020 to subscribe for post-consolidation common shares at a price per share of $3.412, with subscriptions totaling 15,174,950 common shares resulting in cash proceeds for Just Energy of approximately $52 million;

 

·Pursuant to the previously announced backstop commitments, the acquisition of 14,137,580 common shares by the backstop parties, on a post-consolidation basis resulting in cash proceeds for Just Energy of approximately $48.0 million; for a total aggregate proceeds from the equity subscription option of approximately $100.0 million, which was used to reduce debt and for general corporate purposes. In accordance with the Plan of Arrangement, the Board of Directors of Just Energy determined that the value of the equity subscription offer on September 28, 2020 was $4.868 per share;

 

·The settlement of litigation related to the 2018 acquisition of Filter Group Inc. pursuant to which shareholders of the Filter Group received an aggregate of $1.8 million in cash and 429,958 common shares; and

 

 28

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

·The implementation of a new management equity incentive plan that will permit the granting of various types of equity awards, including stock options, share appreciation rights, restricted shares and deferred shares; and

 

·The Recapitalization did not result in tax expense or cash taxes since any debt forgiveness resulting from the exchange of the convertible debentures was fully reduced by operating and capital losses previously not used.

 

The Recapitalization resulted in total net gain of $50.3 million for the six months ended September 30, 2020. The net gain reported in the consolidated statements of income (loss) is made up of the gain of $77.0 million related to reduction in debt, partially offset by $26.7 million of expense incurred in relation to the Recapitalization, which was not capitalized.

 

13.OTHER EXPENSES

 

(a)Other operating expenses

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2020   2019   2020   2019 
Amortization of other intangible assets  $4,026   $6,090   $8,618   $14,463 
Depreciation of property and equipment   1,647    2,515    4,334    5,503 
Bad debt expense   11,662    29,570    23,602    46,857 
Share-based compensation   3,430    1,667    4,122    8,784 
   $20,765   $39,842   $40,676   $75,607 

 

(b)Employee expenses

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2020   2019   2020   2019 
Wages, salaries and commissions  $37,155   $52,643   $73,374   $114,400 
Benefits   6,389    2,834    12,877    10,104 
   $43,544   $55,477   $86,251   $124,504 

 

 

 

 

 

 

 

 29

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

For the three months ended September 30, 2020, employee expenses of $17.0 million and $26.5 million are included in administrative expense and selling and marketing expenses, respectively, in the interim condensed consolidated statements of income (loss). Corresponding amounts of $15.5 million and $40.0 million, respectively, are reflected in the comparable quarter in fiscal 2020. For the six months ended September 30, 2020, employee expenses of $32.3 million and $54.0 million are included in administrative expense and selling and marketing expenses, respectively. Corresponding amounts of $38.9 million and $85.6 million, respectively, are reflected in the comparable quarter in fiscal 2020.

 

14.RESTRUCTURING COSTS

 

For the three months ended September 30, 2020, the Company incurred $7.1 million in restructuring costs in relation to the evolution of its senior management team announced in September 2020. These include cost management costs, structural reorganization and employee-related costs. Approximately $2.5 million of this remains unpaid as at September 30, 2020.

 

15.PROFIT (LOSS) PER SHARE

 

   Three months   Three months   Six months   Six months 
   ended   ended   ended   ended 
   Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2020   2019   2020   2019 
BASIC EARNINGS (LOSS) PER SHARE                    
Profit (loss) from continuing operations  $(50,156)  $89,349   $31,942   $(180,622)
Earnings (loss) available to shareholders   (51,366)   79,540    27,784    (195,620)
Basic weighted average shares outstanding   11,479,960    9,872,780    10,684,039    9,826,058 
Basic earnings (loss) per share from continuing operations   (4.37)   9.05    2.99    (18.38)
Basic earnings (loss) per share available to shareholders  $(4.47)  $8.06   $2.60   $(19.91)
                     
DILUTED EARNINGS (LOSS) PER SHARE                    
Profit (loss) from continuing operations  $(50,156)  $89,349   $31,942   $(180,622)
Adjusted earnings (loss) available to shareholders  $(51,366)  $79,540   $27,784   $(195,620)
Basic weighted average shares outstanding   11,479,960    9,872,780    10,684,039    9,826,058 
Dilutive effect of:                    
Restricted share grants   63,364     83,048 1     65,403 1    88,814 
Deferred share grants   77     5,525 1     12,609 1    5,717 
Shares outstanding on a diluted basis   11,543,401    9,961,353    10,762,050    9,920,589 
Diluted earnings (loss) from continuing operations per share available to shareholders   (4.37)   8.97    2.97    (18.38)
Diluted earnings (loss) per share available to shareholders  $(4.47)  $7.98   $2.58   $(19.91)

1 The assumed settlement of shares results in an anti-dilutive position; therefore, these items have not been included in the computation of diluted earnings (loss) per share.

 

 

 

 

 30

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

16.DISCONTINUED OPERATIONS

 

In March 2019, Just Energy formally approved and commenced the process to dispose of its businesses in Germany, Ireland and Japan. In June 2019, the U.K. was added to the disposal group. The decision was part of a strategic transition to focus on the core business in North America. On November 29, 2019, Just Energy closed its previously announced sale of Hudson U.K. to Shell Energy Retail Limited. On April 10, 2020, the Company announced that it has sold all of the shares of Just Energy Japan KK to Astmax Trading, Inc. The purchase price was nominal, as the business was still in its start-up phase with more liabilities than assets and had fewer than 1,000 customers. The sale of the Japanese subsidiary resulted in a loss on sale of $1.1 million primarily due to the realization of cumulative translation adjustments of exchange differences from accumulated other comprehensive income, which is included in profit (loss) from discontinued operations. As at September 30, 2020, the remaining operations were classified as discontinued operations. The tax impact on the discontinued operations is minimal.

 

Assets and liabilities classified under discontinued operations were as follows:

 

   As at   As at 
   Sept. 30, 2020   March 31, 2020 
ASSETS          
Current assets          
Cash and cash equivalents  $1,774   $898 
Current trade and other receivables   589    4,978 
Income taxes recoverable   12    12 
Other current assets   69    1,140 
    2,444    7,028 
Non-current assets          
Property and equipment   -    38 
Intangible assets   8    545 
ASSETS CLASSIFIED AS HELD FOR SALE  $2,452   $7,611 
           
Liabilities          
Current liabilities          
Trade and other payables  $2,362   $4,823 
Deferred revenue   83    83 
LIABILITIES ASSOCIATED WITH ASSETS CLASSIFIED AS HELD FOR SALE  $2,445   $4,906 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 31

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

17.COMMITMENTS AND CONTINGENCIES

 

Commitments for each of the next five years and thereafter are as follows:

 

As at September 30, 2020

 

   Less than 1 year   1–3 years   4–5 years   More than 5 years   Total 
Gas, electricity and non-commodity contracts  $681,679   $1,562,935   $337,880   $101,940   $2,684,434 

 

(a)Surety bonds and letters of credit

 

Pursuant to separate arrangements with several bond agencies, Just Energy has issued surety bonds to various counterparties including states, regulatory bodies, utilities and various other surety bond holders in return for a fee and/or meeting certain collateral posting requirements. Such surety bond postings are required in order to operate in certain states or markets. Total surety bonds issued as at September 30, 2020 amounted to $47.1 million (March 31, 2020 - $63.4 million).

 

As at September 30, 2020, Just Energy had total letters of credit outstanding in the amount of $69.1 million (Note 9(a)).

 

(b)Legal proceedings

 

Just Energy’s subsidiaries are party to a number of legal proceedings. Other than as set out below, Just Energy believes that each proceeding constitutes legal matters that are incidental to the business conducted by Just Energy and that the ultimate disposition of the proceedings will not have a material adverse effect on its consolidated earnings, cash flows or financial position.

 

In March 2012, Davina Hurt and Dominic Hill filed a lawsuit against Commerce Energy Inc. (“Commerce”), Just Energy Marketing Corp. and the Company in the Ohio Federal Court claiming entitlement to payment of minimum wage and overtime under Ohio wage claim laws and the Federal Fair Labor Standards Act (“FLSA”) on their own behalf and similarly situated door-to-door sales representatives who sold for Commerce in certain regions of the United States. The Court granted the plaintiffs’ request to certify the lawsuit as a class action. Approximately 1,800 plaintiffs opted into the federal minimum wage and overtime claims, and approximately 8,000 plaintiffs were certified as part of the Ohio state overtime claims. On October 6, 2014, the jury refused to find a willful violation but concluded that certain individuals were not properly classified as outside salespeople in order to qualify for an exemption under the minimum wage and overtime requirements. On September 28, 2018, the Court issued a final judgment, opinion and order. Just Energy filed its appeal to the Court of Appeals for the Sixth Circuit on October 25, 2018. On August 31, 2020 the Appeals Court denied the appeal in a 2-1 decision. Just Energy is planning to file a petition for certiorari seeking the United States Supreme Court review to resolve the newly created circuit split with the Court of Appeals for the Second Circuit unanimous decision in Flood v. Just Energy, 904 F.3d 219 (2d Cir. 2018) and with the inconsistency with the Supreme Court’s recent decision in Encino Motorcars, LLC v Navarro, 138 S. Ct. 1134, 1142 (2018), with broad, national, unsustainable implications for all employers who have outside sales employees. Notwithstanding, Just Energy’s petition, the Company has accrued approximately $6.0 million in the second quarter of fiscal 2021 for expected monies due in connection with this matter.

 

 

 

 

 

 

 32

JUST ENERGY GROUP INC.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended September 30, 2020

(unaudited in thousands of Canadian dollars, except where indicated and per share amounts)

 

In May 2015, Kia Kordestani, a former door-to-door independent contractor sales representative for Just Energy Corp., filed a lawsuit against Just Energy Corp., Just Energy Ontario L.P. and the Company (collectively referred to as “Just Energy”) in the Superior Court of Justice, Ontario, claiming status as an employee and seeking benefits and protections of the Employment Standards Act, 2000, such as minimum wage, overtime pay, and vacation and public holiday pay on his own behalf and similarly situated door-to-door sales representatives who sold in Ontario. On Just Energy’s request, Mr. Kordestani was removed as a plaintiff but replaced with Haidar Omarali, also a former door-to-door sales representative. On July 27, 2016, the Court granted Omarali’s request for certification, but refused to certify Omarali’s request for damages on an aggregate basis, and refused to certify Omarali’s request for punitive damages. Omarali’s motion for summary judgment was dismissed in its entirety on June 21, 2019. The matter is currently set for trial in November 2021. Just Energy denies the allegations and will vigorously defend against these claims.

 

On July 23, 2019, Just Energy announced that, as part of its Strategic Review process, management identified customer enrolment and non-payment issues, primarily in Texas. In response to this announcement, and in some cases in response to this and other subsequent related announcements, putative class action lawsuits were filed in the United States District Court for the Southern District of New York, in the United States District Court for the Southern District of Texas and in the Ontario Superior Court of Justice, on behalf of investors that purchased Just Energy Group Inc. securities during various periods, ranging from November 9, 2017 through August 19, 2019.  The U.S. lawsuits have been consolidated in the United States District Court for the Southern District of Texas with one lead plaintiff and the Ontario lawsuits have been consolidated with one lead plaintiff. The U.S. lawsuit seeks damages allegedly arising from violations of the United States Securities Exchange Act. The Ontario lawsuit seeks damages allegedly arising from violations of Canadian securities legislation and of common law.  The Ontario lawsuit was subsequently amended to, among other things, extend the period to July 7, 2020.  On September 2, 2020, pursuant to Just Energy’s plan of arrangement, the Superior Court of Justice (Ontario) ordered that all existing equity class action claimants shall be irrevocably and forever limited solely to recovery from the proceeds of the insurance policies payable on behalf of Just Energy or its directors and officers in respect of any such existing equity class action claims, and such existing equity class action claimants shall have no right to, and shall not, directly or indirectly, make any claim or seek any recoveries from any of the released parties or any of their respective current or former officers and directors in respect of any existing equity class action claims, other than enforcing their rights to be paid by the applicable insurer(s) from the proceeds of the applicable insurance policies. Just Energy denies the allegations and will vigorously defend against these claims.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33

 

Exhibit 99.2

 

Management’s discussion and analysis

– November 11, 2020

 

The following management’s discussion and analysis (“MD&A”) is a review of the financial condition and operating results of Just Energy Group Inc. (“Just Energy” or the “Company”) for the three and six months ended September 30, 2020. This MD&A has been prepared with all information available up to and including November 11, 2020. This MD&A should be read in conjunction with Just Energy’s unaudited interim condensed consolidated financial statements for the three and six months ended September 30, 2020. The financial information contained herein has been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). All dollar amounts are expressed in Canadian dollars unless otherwise noted. Quarterly reports, the annual report and supplementary information can be found on Just Energy’s corporate website at www.justenergygroup.com. Additional information can be found on SEDAR at www.sedar.com or on the U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

 

COVID-19 CONSIDERATIONS

 

The rapid outbreak of the novel strain of the coronavirus, specifically identified as the COVID-19 pandemic, has caused governments worldwide to enact emergency measures and restrictions to combat the spread of the virus. These measures and restrictions, which include the implementation of travel bans, mandated and voluntary business closures, self-imposed and mandatory quarantine periods, isolation orders and social distancing, have caused material disruption to businesses globally, resulting in economic slowdown. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The future impact of the COVID-19 pandemic on liquidity, volatility, credit availability, and market and financial conditions generally could change at any time. The duration and impact of the COVID-19 outbreak on the economy are unknown at this time and, as a result, it is difficult to estimate the longer-term impact on our operations and the markets for our products.

 

RECAPITALIZATION

 

On September 28, 2020, the Company completed a comprehensive plan to strengthen and de-risk the business, positioning the Company for sustainable growth as an independent industry leader (the “Recapitalization”). The Recapitalization was undertaken through a plan of arrangement under the Canada Business Corporations Act and included the following components:

 

·The consolidation of the Company’s common shares on a 1-for-33 basis;

 

·Exchange of the 6.75% $100M convertible debentures and the 6.75% $160M convertible debentures for common shares and $15 million principal amount of new subordinated notes (“7.0% $15M subordinated notes”). The 7.0% $15M subordinated notes have a principal amount of $15 million, which was reduced through a tender offer for no consideration, subsequent to September 30, 2020, to $13.1 million;

 

·Extension of $335 million of the Company’s credit facilities to December 2023, with revised covenants and a schedule of commitment reductions throughout the term;

 

·Existing 8.75% loan and the remaining convertible bonds due December 31, 2020 were exchanged for a new term loan due March 2024 (the “10.25% term loan”) and common shares, with interest on the new term loan to be initially paid-in-kind until certain financial measures are achieved;

 

·Exchange of all the 8.50%, fixed-to-floating rate, cumulative, redeemable, perpetual preferred shares for common shares;

 

·Initial reduction of annual cash interest expense by approximately $45 million;

 

·Accrued and unpaid interest paid in cash on the subordinated convertible debentures through September 28, 2020;

 

·The payment of certain expenses of the ad hoc group of convertible debenture holders;

 

  1.

 

 

·The issuance of approximately $3.7 million of common shares by way of an additional private placement to the Company’s term loan lenders at the same subscription price available to all securityholders pursuant to the new equity subscription offering, proceeds of which partially offset the incremental cash costs to the ad hoc group noted above;

 

·The entitlement of holders of Just Energy’s existing 8.75% loan, 6.5% convertible bonds, the subordinated convertible debentures, preferred shares and common shares as of July 23, 2020 to subscribe for post-consolidation common shares at a price per share of $3.412, with subscriptions totaling 15,174,950 common shares resulting in cash proceeds for Just Energy of approximately $52 million;

 

·Pursuant to the previously announced backstop commitments, the acquisition of 14,137,580 common shares by the backstop parties, on a post-consolidation basis resulting in cash proceeds for Just Energy of approximately $48.0 million; for a total aggregate proceeds from the equity subscription option of approximately $100.0 million, which was used to reduce debt and for general corporate purposes;

 

·In accordance with the Plan of Arrangement, the Board of Directors of Just Energy determined that the value of the equity subscription offer on September 28, 2020 was $4.868 per share;

 

·The settlement of litigation related to the 2018 acquisition of Filter Group Inc. pursuant to which shareholders of the Filter Group received an aggregate of $1.8 million in cash and 429,958 common shares;

 

·The implementation of a new management equity incentive plan that will permit the granting of various types of equity awards, including stock options, share appreciation rights, restricted shares, and deferred shares; and

 

·The Recapitalization did not result in tax expense or cash taxes since any debt forgiveness resulting from the exchange of the convertible debentures was fully reduced by operating and capital losses previously not used.

 

Forward-looking information

 

This MD&A may contain forward-looking statements and information, including statements and information regarding: guidance for Base EBITDA for the fiscal year ended March 31, 2021; the ability of the Company to reduce selling commission, selling non-commission and marketing and administrative expenses, and both the quantum of such reductions and the impact thereof on the Company’s current fiscal year; the Company’s ability to identify further opportunities to improve its cost structure; the impact of COVID-19; the Company’s transition from an RCE (defined in the Key Terms below) growth focus to retaining strong-fit customers that will drive greater profitability; improvement in the Company’s expected credit loss experience; the Company’s ability to attract and retain strong-fit customers and the impact thereof on the achievement by the Company of greater profitability; and the impact of the actions and remediation efforts taken or implemented by the Company in remediating the material weaknesses in the Company’s internal controls over financial reporting. These statements are based on current expectations that involve several risks and uncertainties which could cause actual results to differ from those anticipated. These risks include, but are not limited to, the impact of the evolving COVID-19 pandemic on the Company’s business, operations and sales, including risks associated with reliance on suppliers; uncertainties relating to the ultimate spread, severity and duration of COVID-19 and related adverse effects on the economies and financial markets of countries in which the Company operates; the ability of the Company to successfully implement its business continuity plans with respect to the COVID-19 pandemic; the Company’s ability to access sufficient capital to provide liquidity to manage its cash flow requirements; general economic, business and market conditions; the ability of management to execute its business plan; levels of customer natural gas and electricity consumption; extreme weather conditions; rates of customer additions and renewals; customer credit risk; rates of customer attrition; fluctuations in natural gas and electricity prices; interest and exchange rates; actions taken by governmental authorities including energy marketing regulation, increases in taxes and changes in government regulations and incentive programs; changes in regulatory regimes; results of litigation and decisions by regulatory authorities; competition; and the performance of acquired companies. Additional information on these and other factors that could affect Just Energy’s operations or financial results is included in Just Energy’s Annual Information Form and other reports on file with Canadian securities regulatory authorities, which can be accessed through the SEDAR website at www.sedar.com or by visiting EDGAR on the SEC’s website at www.sec.gov.

 

  2.

 

 

Company overview

 

Just Energy is a retail energy provider specializing in electricity and natural gas commodities and bringing energy efficient solutions and sustainable energy options to customers. Currently operating in the United States (“U.S.”) and Canada, Just Energy serves both residential and commercial customers, providing homes and businesses with a broad range of energy solutions that deliver comfort, convenience and control. Just Energy is the parent company of Amigo Energy, Filter Group Inc. (“Filter Group”), Hudson Energy, Interactive Energy Group, Tara Energy and TerraPass.

 

 

 

Continuing operations overview

 

CONSUMER SEGMENT

 

The sale of gas and electricity to customers with annual consumption equivalent to 15 RCEs or less is undertaken by the Consumer segment. Marketing of the energy products of this segment is primarily done through retail, online and telesales. Consumer customers make up 36% of Just Energy’s RCE base, which is currently focused on longer-term price-protected, flat-bill and variable rate product offerings, as well as JustGreen products. To the extent that certain markets are better served by shorter-term or enhanced variable rate products, the Consumer segment’s sales channels offer these products.

 

Just Energy also provides home water filtration systems with its line of consumer product and service offerings and is considering appropriate refinements to its value-added product offerings.

 

COMMERCIAL SEGMENT

 

Customers with annual consumption equivalent to over 15 RCEs are served by the Commercial segment. These sales are made through three main channels: brokers, door-to-door commercial independent contractors and inside commercial sales representatives. Commercial customers make up 64% of Just Energy’s RCE base. Products offered to Commercial customers range from standard fixed-price offerings to “one off” offerings, tailored to meet the customer’s specific needs. These products can be fixed or floating rate or a blend of the two, and normally have a term of less than five years. Gross margin per RCE for this segment is lower than it is for the Consumer segment, but customer acquisition costs and ongoing customer care costs per RCE are lower as well. Commercial customers also have significantly lower attrition rates than Consumer customers.

 

ABOUT THE ENERGY MARKETS

 

Just Energy offers products and services to address customers’ essential needs, including electricity and natural gas commodities, health and well-being products such as water quality and filtration devices, and utility conservation products which bring energy efficient solutions and renewable energy options to customers.

 

Natural gas

 

Just Energy offers natural gas customers a variety of products ranging from month-to-month variable-price contracts to five-year fixed-price contracts. Gas supply is purchased from market counterparties based on forecasted Consumer and small Commercial RCEs. For larger Commercial customers, gas supply is generally purchased concurrently with the execution of a contract. Variable rate products allow customers to maintain competitive rates while retaining the ability to lock into a fixed price at their discretion. Flat-bill products offer customers the ability to pay a fixed amount per period regardless of usage or changes in the price of the commodity.

 

  3.

 

 

The LDCs provide historical customer usage which, when normalized to average weather, enables Just Energy to purchase the expected normal customer load. Just Energy mitigates exposure to weather variations through active management of the gas portfolio, which involves, but is not limited to, the purchase of options, including weather derivatives. Just Energy’s ability to successfully mitigate weather effects is limited by the degree to which weather conditions deviate from normal. To the extent that balancing requirements are outside the forecasted purchase, Just Energy bears the financial responsibility for fluctuations in customer usage. To the extent that supply balancing is not fully covered through active management or the options employed, Just Energy’s realized gross margin may increase or decrease depending upon market conditions at the time of balancing.

 

Territory   Gas delivery method
Manitoba, Ontario, Quebec and Michigan   The volumes delivered for a customer typically remain constant throughout the year. Sales are not recognized until the customer consumes the gas. During the winter months, gas is consumed at a rate that is greater than delivery, resulting in accrued gas receivables, and, in the summer months, deliveries to LDCs exceed customer consumption, resulting in gas delivered in excess of consumption. Just Energy receives cash from the LDCs as the gas is delivered.
Alberta, British Columbia, Saskatchewan, California, Illinois, Indiana, Maryland, New Jersey, New York, Ohio and Pennsylvania   The volume of gas delivered is based on the estimated consumption and storage requirements for each month. The amount of gas delivered in the winter months is higher than in the spring and summer months. Cash flow received from most of these markets is greatest during the fall and winter quarters, as cash is normally received from the LDCs in the same period as customer consumption.

 

Electricity

 

Just Energy services various territories in Canada and the U.S. with electricity. A variety of electricity solutions are offered, including fixed-price, flat-bill and variable-price products on both short-term and longer-term contracts. Some of these products provide customers with price-protection programs for the majority of their electricity requirements. Just Energy uses historical usage data for all enrolled customers to predict future customer consumption and to help with long-term supply procurement decisions. Flat-bill products offer a consistent price regardless of usage.

 

Just Energy purchases power supply from market counterparties for Consumer and Commercial customers based on forecasted customer aggregation. Power supply is generally purchased concurrently with the execution of a contract for larger Commercial customers. Historical customer usage is obtained from LDCs, which, when normalized to average weather, provides Just Energy with expected normal customer consumption. Similar to gas, Just Energy mitigates exposure to weather variations through active management of the power portfolio and the purchase of options, including weather derivatives. Just Energy’s ability to successfully mitigate weather effects is limited by the degree to which weather conditions deviate from normal. To the extent that balancing power purchases are outside the acceptable forecast, Just Energy bears the financial responsibility for excess or short supply caused by fluctuations in customer usage. Any supply balancing not fully covered through customer pass-throughs, active management or the options employed may impact Just Energy’s gross margin depending upon market conditions at the time of balancing.

 

The Company continues its portfolio optimization process. As a result, the Company has reached an agreement to sell its California power portfolio for approximately $1.0 million subject to certain adjustments.  The transaction is expected to close in the third quarter of fiscal year 2021.

 

  4.

 

 

JustGreen

 

Many customers have the ability to choose an appropriate JustGreen program to supplement their natural gas and electricity contracts, providing an effective method to offset their carbon footprint associated with the respective commodity consumption.

 

JustGreen programs for gas customers involve the purchase of carbon offsets from carbon capture and reduction projects. JustGreen’s electricity product offers customers the option of having all or a portion of the volume of their electricity usage sourced from renewable green sources such as wind, solar, hydropower or biomass, via power purchase agreements and renewable energy certificates. Additional green products allow customers to offset their carbon footprint without buying energy commodity products and can be offered in all states and provinces without being dependent on energy deregulation.

 

Just Energy currently sells JustGreen gas and electricity in eligible markets across North America. Of all Consumer customers who contracted with Just Energy in the past year, 50% purchased JustGreen for some or all of their energy needs. On average, these customers elected to purchase 93% of their consumption as green supply. For comparison, as reported for the trailing 12 months ended September 30, 2019, 54% of Consumer customers who contracted with Just Energy chose to include JustGreen for an average of 84% of their consumption. As at September 30, 2020, JustGreen makes up 17% of the Consumer gas portfolio, compared to 8% a year ago. JustGreen makes up 22% of the Consumer electricity portfolio, compared to 20% in the prior comparable period.

 

TerraPass

 

Through TerraPass, customers can offset their environmental impact by purchasing high quality environmental products. TerraPass supports projects throughout North America that destroy greenhouse gases, produce renewable energy and restore freshwater ecosystems. Each project is made possible through the purchase of renewable energy credits and carbon offsets. TerraPass offers various purchase options for residential or commercial customers, depending on the impact the customer wishes to make.

 

Key terms

 

“6.5% convertible bonds” refers to the US$150 million in convertible bonds issued in January 2014, which would have matured on December 31, 2020. As at September 28, 2020, the 6.5% convertible bonds had US$9.2 million outstanding. The 6.5% convertible bonds were exchanged on September 28, 2020 for common equity and a pro-rata portion of the 10.25% term loan as part of the Recapitalization.

 

“6.75% $160M convertible debentures” refers to the $160 million in convertible debentures issued in October 2016, which had a maturity date of December 31, 2021 and traded as TSX: JE.DB.C. The 6.75% convertible debentures were exchanged on September 28, 2020 for common equity and its pro-rata allocation of the 7.0% $15M subordinated notes issued as part of the Recapitalization.

 

“6.75% $100M convertible debentures” refers to the $100 million in convertible debentures issued in February 2018, which had a maturity date of March 31, 2023 and traded as TSX: JE.DB.D. The 6.75% convertible debentures were exchanged on September 28, 2020 for common shares and its pro-rata allocation of the 7.0% $15M subordinated notes issued as part of the Recapitalization.

 

“7.0% $15M subordinated notes” refers to the $15 million subordinated notes with a six-year maturity and bearing an annual interest rate of 7.0% (payable in kind semi-annually) issued in relation to the Recapitalization on September 28, 2020, which have a maturity date of September 15, 2026.

 

“8.75% loan” refers to the US$250 million non-revolving multi-draw senior unsecured term loan facility entered into on September 12, 2018. The 8.75% loan was exchanged on September 28, 2020 for common shares and a pro-rata portion of the 10.25% term loan as part of the Recapitalization.

 

“10.25% term loan” refers to the US$206 million senior unsecured term loan facility entered into on September 28, 2020 pursuant to the Recapitalization, which has a maturity date of March 31, 2024.

 

“Base gross margin per RCE” refers to the energy Base gross margin realized on Just Energy’s RCE customer base, including gains (losses) from the sale of excess commodity supply.

 

  5.

 

 

“Commodity RCE attrition” refers to the percentage of energy customers whose contracts were terminated prior to the end of the term either at the option of the customer or by Just Energy.

 

“Customer count” refers to the number of customers with a distinct address rather than RCEs (see key term below).

 

“Failed to renew” means customers who did not renew expiring contracts at the end of their term.

 

“Filter Group financing” refers to the outstanding loan balance between Home Trust Company (“HTC”) and Filter Group. The loan bears an annual interest rate of 8.99%.

 

“LDC” means a local distribution company; the natural gas or electricity distributor for a regulatory or governmentally defined geographic area.

 

“Liquidity” means cash on hand plus available capacity under the senior secured credit facility.

 

“Maintenance capital expenditures” means the necessary property and equipment and intangible asset capital expenditures required to maintain existing operations at functional levels.

 

“Preferred shares” refers to the 8.50%, fixed-to-floating rate, cumulative, redeemable, perpetual preferred shares that were initially issued at a price of US$25.00 per preferred share in February 2017 and subsequently through an at-the-market offering. The cumulative feature means that preferred shareholders were entitled to receive dividends at a rate of 8.50% on the initial offer price, as and if declared by the Board of Directors. The preferred shares were exchanged on September 28, 2020 for common shares as part of the Recapitalization.

 

“RCE” means residential customer equivalent, which is a unit of measurement equivalent to a customer using 2,815 m3 (or 106 GJs or 1,000 Therms or 1,025 CCFs) of natural gas on an annual basis or 10 MWh (or 10,000 kWh) of electricity on an annual basis, which represents the approximate amount of gas and electricity, respectively, used by a typical household in Ontario, Canada.

 

“Selling commission expenses” means customer acquisition costs amortized under IFRS 15 or directly expensed within the current period and consist of commissions paid to independent sales contractors, brokers and sales agents. “Selling non-commission and marketing expenses” means the cost of selling overhead, including marketing cost not directly associated with the costs of direct customer acquisition costs within the current period. The total of these selling commission expenses and selling non-commission and marketing expenses is reflected on the statement of income (loss) as selling and marketing expenses.

 

“Strategic Review” means the Company’s formal review announced on June 6, 2019 to evaluate strategic alternatives available to the Company. The Company finalized the Strategic Review with the completed Recapitalization on September 28, 2020.

 

Non-IFRS financial measures

 

Just Energy’s unaudited interim condensed consolidated financial statements are prepared in accordance with IFRS. The financial measures that are defined below do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. These financial measures should not be considered as an alternative to, or more meaningful than, net income (loss), cash flow from operating activities and other measures of financial performance as determined in accordance with IFRS; however, the Company believes that these measures are useful in providing relative operational profitability of the Company’s business.

 

BASE GROSS MARGIN

 

“Base gross margin” represents gross margin adjusted to include the effect of applying IFRS Interpretation Committee Agenda Decision 11, “Physical Settlement of Contracts to Buy or Sell a Non-Financial Item, for realized gains (losses) on derivative instruments and other. Base gross margin is a key measure used by management to assess performance and allocate resources. Management believes that these realized gains (losses) on derivative instruments reflect the long-term financial performance of Just Energy and thus have included them in the Base gross margin calculation.

 

  6.

 

 

EBITDA

 

“EBITDA” refers to earnings before finance costs, income taxes, depreciation and amortization with an adjustment for discontinued operations. EBITDA is a non-IFRS measure that reflects the operational profitability of the business.

 

Base EBITDA

 

“Base EBITDA” refers to EBITDA adjusted to exclude the impact of unrealized mark to market gains (losses) arising from IFRS requirements for derivative financial instruments, realized gains (losses) related to gas held in storage until gas is sold, Texas residential enrolment and collections impairment, Strategic Review costs, impairment of goodwill and intangible assets, discontinued operations, restructuring and non-cash gains (losses) and costs related to the Recapitalization as well as adjustments reflecting share-based compensation, non-controlling interest, gains or losses on investments and amortization of sales commissions with respect to Filter Group. This measure reflects operational profitability as the non-cash share-based compensation expense is treated as an equity issuance for the purposes of this calculation, since it will be settled in common shares; the mark to market gains (losses) are associated with supply already sold in the future at fixed prices; and the mark to market gains (losses) of weather derivatives are not yet realized. The Texas residential enrolment and collections impairment, Strategic Review costs, non-cash gains (losses) and costs related to the Recapitalization, restructuring, discontinued operations and gains or losses on investments are one-time, non-recurring events. Management has isolated the impact of the incremental Texas residential enrolment and collections recorded as at June 30, 2019, as presented in Base EBITDA. All other bad debt charges, including any residual bad debt from the Texas enrolment and collection issues, are included in Base EBITDA from July 1, 2019 onward.

 

Just Energy ensures that customer margins are protected by entering into fixed-price supply contracts. Under IFRS, the customer contracts are not marked to market; however, there is a requirement to mark to market the future supply contracts. This creates unrealized and realized gains (losses) depending upon current supply pricing. Management believes that the unrealized mark to market gains (losses) do not impact the long-term financial performance of Just Energy and has excluded them from the Base EBITDA calculation.

 

Just Energy uses derivative financial instruments to hedge the gas held in storage for future delivery to our customers. Under IFRS, the customer contracts are not marked to market: however, there is a requirement to report the realized gains (losses) in the current period instead of recognizing them as a cost of inventory until delivery to the customer. Just Energy excludes the realized gains (losses) to EBITDA during the injection season and includes them during the withdrawal season in accordance with the customers receiving the gas. Management believes that including the realized gains (losses) during the withdrawal season when the customers receive the gas is more reflective of the operations of the business.

 

Just Energy recognizes the incremental acquisition costs of obtaining a customer contract as an asset since these costs would not have been incurred if the contract was not obtained and are recovered through the consideration collected from the contract. Commissions and incentives paid for commodity contracts and value-added products contracts are capitalized and amortized over the term of the contract. Amortization of these costs with respect to commodity contracts is included in the calculation of Base EBITDA (as selling commission expenses). Amortization of incremental acquisition costs on value-added product contracts is excluded from the Base EBITDA calculation as value-added products are considered to be a lease asset akin to a fixed asset whereby amortization or depreciation expenses are excluded from Base EBITDA.

 

fREE CASH FLOW AND UnLEVERED FREE CASH FLOW

 

Free cash flow represents cash flow from operations less maintenance capital expenditures. Unlevered free cash flow represents free cash flows plus finance costs excluding the non-cash portion.

 

Embedded gross margin (“EGM”)

 

EGM is a rolling five-year measure of management’s estimate of future contracted energy and product gross margin. The commodity embedded gross margin is the difference between existing energy customer contract prices and the cost of supply for the remainder of the term, with appropriate assumptions for commodity RCE attrition and renewals. The product gross margin is the difference between existing value-added product customer contract prices and the cost of goods sold on a five-year or ten-year undiscounted basis for such customer contracts, with appropriate assumptions for value-added product attrition and renewals. It is assumed that expiring contracts will be renewed at target margin renewal rates.

 

  7.

 

 

EGM indicates the gross margin expected to be realized over the next five years from existing customers. It is intended only as a directional measure for future gross margin. It is neither discounted to present value nor is it intended to consider administrative and other costs necessary to realize this margin. As the mix of customers continues to reflect a higher proportion of Commercial volume, the EGM may, depending on currency rates, grow at a slower pace than customer growth; however, the underlying costs necessary to realize this margin will also decline.

 

Financial and operating highlights

 

For the three months ended September 30.

(thousands of dollars, except where indicated and per share amounts)

 

         % increase     
    Fiscal 2021    (decrease)   Fiscal 2020 
Sales  $649,602    (15)%  $768,440 
Cost of goods sold   428,891    (49)%   843,788 
Gross margin   220,711    NMF3   (75,348)
Realized gain (loss) of derivative instruments and other   (82,438)   (136)%   230,732 
Base gross margin1   138,273    (11)%   155,384 
Administrative expenses2   43,957    6%   41,466 
Selling commission expenses   34,894    4%   33,499 
Selling non-commission and marketing expense   13,017    (37)%   20,780 
Bad debt expense   11,662    (61)%   29,570 
Restructuring costs   7,118    NMF3   - 
Finance costs   29,744    5%   28,451 
Profit (loss) from continuing operations   (50,156)   NMF3   89,349 
Loss from discontinued operations   (1,210)   (88)%   (9,809)
Profit (loss) for the period4   (51,366)   NMF3   79,540 
Earnings (loss) per share from continuing operations available to shareholders – basic   (4.37)       9.05 
Earnings (loss) per share from continuing operations available to shareholders – diluted   (4.37)       8.97 
Base EBITDA from continuing operations1   32,774    (33)%   49,069 
Total gross customer (RCE) additions   86,000    (49)%   168,000 
Total net customer (RCE) additions   (97,000)   49%   (65,000)

1 See “Non-IFRS financial measures” on page 6.

2 Includes $0.3 million and $3.6 million of Strategic Review costs for the second quarter of fiscal 2021 and 2020, respectively.

3 Not a meaningful figure.

4 Profit (loss) includes the impact of unrealized gains (losses), which represents the mark to market of future commodity supply acquired to cover future customer demand as well as weather hedge contracts entered into as part of the Company’s risk management practice. The supply has been sold to customers at fixed prices, minimizing any realizable impact of mark to market gains and losses.

 

Just Energy’s sales decreased by 15% from $768.4 million to $649.6 million for the three months ended September 30, 2020. The decline in sales is primarily due to the decrease in the overall RCE customer base from the prior comparable quarter resulting from the shift in focus to the Company’s strategy to increase the credit quality of customers and to onboard higher quality customers; a reduction in the Company’s customer base due to regulatory restrictions in Alberta, Ontario and California; selling constraints posed by COVID-19; as well as competitive pressures on pricing in the U.S. Base gross margin for the three months ended September 30, 2020 decreased by 11% to $138.3 million primarily driven by a decline in the customer base, partially offset by optimization of weather hedge costs.

 

  8.

 

 

Base EBITDA from continuing operations for the quarter was $32.8 million, a decrease of 33% compared to the second quarter of fiscal 2020. The decrease was primarily attributable to a one time $6.0 million legal provision in the current quarter, as further discussed in the “Legal proceedings” section below, lower Base gross margin and a non-recurring $15.2 million gain in other income during the prior comparable quarter due to the reduction of the contingent consideration from the Company’s acquisition of Filter Group, partially offset by lower selling non-commission and marketing expense and lower bad debt expense resulting from prior year cost containment efforts and improving customer enrolment controls and operational processes.

 

Administrative expenses were $44.0 million for the three months ended September 30, 2020, an increase of 6% from the prior comparable quarter. Excluding the one-time non-recurring $6.0 million legal provision, the administrative expenses were 7% lower than the comparable quarter in fiscal year 2020 as discussed further in the “Legal proceedings” section below.

 

Selling commission expenses for the three months ended September 30, 2020 were $34.8 million, a 4% increase from the prior comparable quarter due to increased residual expense from previously acquired customers, partially offset by lower commission spend amid COVID-19 and a switch of focus to more digital and telesales initiatives. Selling non-commission and marketing expense declined 37% from $20.8 million for the three months ended September 30, 2019 to $13.0 million for the three months ended September 30, 2020 as a result of cost reductions due to the suspension of the door-to-door sales channel, prior year realized cost savings and continued focus on cost containment offset by increased spend on digital and telesales.

 

Bad debt expense was $11.7 million for the three months ended September 30, 2020, a decrease of 61% from $29.6 million recorded for the prior comparable quarter. The significant decrease in bad debt was a result of operating enhanced controls and operational processes associated with the Texas residential enrolment and collections impairment. The Company continues to see improvement in its expected credit loss experience since identifying and remediating certain enrolment control gaps previously disclosed by the Company.

 

Finance costs for the three months ended September 30, 2020 amounted to $29.7 million, an increase of 5% from $28.5 million, due to higher supplier finance costs.

 

 

 

  9.

 

 

Financial and operating highlights

 

For the six months ended September 30.

(thousands of dollars, except where indicated and per share amounts)

 

         % increase     
    Fiscal 2021    (decrease)   Fiscal 2020 
Sales  $1,242,736    (14)%  $1,438,605 
Cost of goods sold   752,888    (42)%   1,301,729 
Gross margin   489,848    NMF3   136,876 
Realized gain (loss) of derivative instruments and other   (215,296)   NMF3   150,800 
Base gross margin1   274,552    (5)%   287,676 
Administrative expenses2   82,099    -        82,269 
Selling commission expenses   70,873    3%   69,000 
Selling non-commission and marketing expense   23,998    (49)%   46,983 
Bad debt expense   23,602    (50)%   46,857 
Restructuring costs   7,118    -        - 
Finance costs   51,597    (1)%   51,997 
Profit (loss) from continuing operations   31,942    NMF3   (180,622)
Loss from discontinued operations   (4,158)   (72)%   (14,998)
Profit (loss) for the period4   27,784    NMF3   (195,620)
Earnings (loss) per share from continuing operations available to shareholders - basic   2.99        (18.38)
Earnings (loss) per share from continuing operations available to shareholders - diluted   2.97        (18.38)
Base EBITDA from continuing operations1   73,253    -        73,254 
Unlevered free cash flow1   53,146    (48)%   102,443 
Embedded gross margin1   1,520,800    (20)%   1,892,000 
RCE count   3,086,000    (12)%   3,500,000 
Total gross RCE additions   132,000    (64)%   364,000 
Total net RCE additions (reductions)   (302,000)   (119)%   (138,000)

1 See “Non-IFRS financial measures” on page 6.

2 Includes $2.1 million and $3.6 million of Strategic Review costs for the six months ended September 30, 2020 and 2019.

3 Not a meaningful figure.

4 Profit (loss) includes the impact of unrealized gains (losses), which represents the mark to market of future commodity supply acquired to cover future customer demand as well as weather hedge contracts entered into as part of the Company’s risk management practice. The supply has been sold to customers at fixed prices, minimizing any realizable impact of mark to market gains and losses.

 

For the six months ended September 30, 2020, sales were $1.2 billion and Base gross margin was $274.5 million, 14% lower and 5% lower, respectively, than the prior comparable period. Base EBITDA was $73.3 million which is consistent with the prior comparable period. The consistent performance of Base EBITDA was largely attributable to lower bad debt expense from operating enhanced customer enrolment controls, and lower selling cost from reductions in the door-to-door sales channel, partially offset by a one-time legal provision of $6.0 million as discussed further in the “Legal proceedings” section below, a decline in the RCE customer base and the prior year one-time gain of $15.2 million in other income relating to the reduction of the Filter Group contingent consideration.

 

Administrative expenses remained flat at $82.1 million for the six months ended September 30, 2020. Excluding the impact of the Strategic Review costs on each of the six-month periods ended September 30, administrative expenses increased 2% due to the one-time legal provision recognized in the second quarter of fiscal 2021, offset by savings realized from the restructuring actions and continued focus on costs. Selling commission expenses increased 3% to $70.8 million due to the increase of residual expense from previously signed customers, partially offset by lower commission spend amid COVID-19 for the six months ended September 30, 2020 compared to the prior comparable period.

 

  10.

 

 

Selling non-commission and marketing expenses declined 49% from $47.0 million for the six months ended September 30, 2019 to $24.0 million for the six months ended September 30, 2020 due to the suspension in the door-to-door sales channel and continue focus on costs offset by increased spend on digital and telesales.

 

Bad debt expense was $23.6 million for the six months ended September 30, 2020, a decrease of 50% from $46.9 million recorded for the prior comparable period. The significant decrease in bad debt was a result of operating enhanced controls and operational processes associated with the Texas residential enrollment and collections impairment. The Company continues to see improvement in its expected credit loss experience since identifying and remediating certain enrollment control gaps previously disclosed by the Company.

 

Finance costs were $51.6 million for the six months ended September 30, 2020, a decrease of 1% over the previous comparable period, primarily driven by lower interest expense from the decreased prime rate and interest rates during COVID-19 offset by increased supplier finance costs.

 

EGM amounted to $1,520.8 million as at September 30, 2020, a decrease of 20% compared to the EGM as at September 30, 2019, resulting from the decline in the commodity customer base, offset by favourable foreign exchange fluctuations.

 

Unlevered free cash flow for the six months ended September 30, 2020 was an inflow of $53.1 million compared to an inflow of $102.4 million for the prior comparable quarter. The decrease in the unlevered free cash flow was primarily driven by the additional transaction costs incurred for the Recapitalization and restructuring that occurred during the second quarter of fiscal 2021, partially offset by lower maintenance capital expenditures and cash finance costs resulting from the Recapitalization.

 

Base gross margin1

 

For the three months ended September 30.

(thousands of dollars)

 

    Fiscal 2021    Fiscal 2020 
    Consumer    Commercial    Total    Consumer    Commercial    Total 
Gas  $14,839   $4,042   $18,881   $10,269   $1,031   $11,300 
Electricity   89,607    29,786    119,393    105,726    38,358    144,084 
   $104,446   $33,828   $138,274   $115,995   $39,389   $155,384 
Decrease   (10)%   (14)%   (11)%               

 

For the six months ended September 30.

(thousands of dollars)

 

    Fiscal 2021    Fiscal 2020 
    Consumer    Commercial    Total    Consumer    Commercial    Total 
Gas  $42,656   $10,471   $53,127   $27,342   $3,123   $30,465 
Electricity   172,816    48,610    221,426    194,629    62,582    257,211 
   $215,472   $59,081   $274,553   $221,971   $65,705   $287,676 
Decrease   (3)%   (10)%   (5)%               

1 See “Non-IFRS financial measures” on page 6.

 

 

  11.

 

 

CONSUMER SEGMENT

 

Base gross margin for the three months ended September 30, 2020 for the Consumer segment was $104.4 million, a decrease of 10% from $116.0 million recorded in the prior comparable quarter. For the six months ended September 30, 2020, Base gross margin for the Consumer segment was $215.5 million a decrease of 3% from Base gross margin of $222.0 million for the six months ended September 30, 2019, primarily driven by a decline in the RCE customer base, partially offset by higher consumption loads as a result of COVID-19 and lower costs derived from optimization of weather hedge costs.

 

Average realized Base gross margin for the Consumer segment for the rolling 12 months ended September 30, 2020 was $373/RCE, representing a 17% increase from $320/RCE reported in the prior comparable quarter. The increase is primarily attributable to improved margin from supply management activities driving lower costs, a favorable impact from resettlements and prior period adjustments made in the current year.

 

Gas

 

Base gross margin from gas customers in the Consumer segment was $14.8 million for the three months ended September 30, 2020, an increase of 45% from $10.3 million recorded in the prior comparable quarter. The change is primarily a result of improved margin from supply management activities driving lower costs and favourable impact from resettlements relative to the prior year, partially offset by a decline in the RCE customer base. For the six months ended September 30, 2020, the Base gross margin contribution from the gas markets increased by 56% from the prior comparable period to $42.7 million primarily as a result of improved margin from lower commodity costs, supply management activities driving lower costs and favourable impact from resettlements relative to the prior year, partially offset by a decline in the RCE customer base.

 

Electricity

 

Base gross margin from electricity customers in the Consumer segment was $89.6 million for the three months ended September 30, 2020, a 15% decrease from $105.7 million recorded in the prior comparable quarter primarily driven by a decline in the customer base in Texas and Ontario. For the six months ended September 30, 2020, Base gross margin from electricity markets decreased 11% to $172.8 million, due to a decline in the RCE customer base, partially offset by optimization of weather hedge costs and higher consumption loads as a result of COVID-19.

 

COMMERCIAL SEGMENT

 

Base gross margin for the Commercial segment was $33.8 million for the three months ended September 30, 2020, a decrease of 14% from $39.4 million recorded in the prior comparable quarter. For the six months ended September 30, 2020, Base gross margin for the Commercial segment was $59.1 million, a decrease of 10% from $65.7 million recorded for the six months ended September 30, 2019. The decrease in Base gross margin was primarily due to a decline in the RCE customer base and lower load from commercial customers amid COVID-19.

 

Average realized Base gross margin for the preceding 12 months ended September 30, 2020 was $94/RCE, consistent with the prior comparable period.

 

Gas

 

Gas Base gross margin for the Commercial segment was $4.0 million for the three months ended September 30, 2020, an increase from $1.0 million recorded in the prior comparable quarter driven by improved margin from supply management activities driving lower costs and favourable impact from resettlements relative to the prior year, partially offset by a decline in the RCE customer base. For the six months ended September 30, 2020, Base gross margin contribution from the gas markets increased by $8.3 million from the prior comparable period to $10.5 million, due to improved margin from supply management activities and favourable impact from resettlements relative to the prior year.

 

 

  12.

 

 

Electricity

 

The Commercial segment’s electricity Base gross margin for the three months ended September 30, 2020 was $29.8 million, a decrease of 22% from $38.4 million recorded in the prior comparable quarter. Base gross margin from the Commercial electricity markets for the six months ended September 30, 2020 was $48.6 million, a decrease of 22% from $62.6 million recorded in the six months ended September 30, 2019. Base gross margin for both the three and six months ended September 30, 2020 decreased from the prior comparable periods, primarily driven by a contraction in the RCE customer base and lower load from commercial customers amid COVID-19.

 

Base EBITDA

 

For the three months ended September 30.

(thousands of dollars)

 

      Fiscal 2021     Fiscal 2020
Reconciliation to interim condensed consolidated statements of income (loss)            
Profit (loss) for the period   $ (51,366)   $ 79,540
Add:            
Finance costs     29,744     28,451
Provision for income taxes     673     2,053
Depreciation and amortization     5,719     9,154
EBITDA   $ (15,230)   $ 119,198
Add (subtract):            
Unrealized (gain) loss of derivative instruments and other     84,968     (65,463)
Realized (gain) loss included in cost of goods sold     3,019     (5,768)
Strategic Review costs     295     3,632
Loss from discontinued operations     1,210     9,809
Gain on Recapitalization transaction, net     (52,152)     -
Restructuring costs     7,118     -
Filter Group contingent consideration revaluation     -     (14,020)
Share-based compensation     3,430     1,667
Loss attributable to non-controlling interest     116     14
Base EBITDA   $ 32,774   $ 49,069
             
Gross margin per interim condensed consolidated statements of income (loss)   $ 220,711   $ (75,348)
Realized loss of derivative instruments and other     (82,438)     230,732
Base gross margin     138,273     155,384
Add (subtract):            
Administrative expenses     (43,957)     (41,466)
Selling commission expenses     (34,894)     (33,499)
Selling non-commission and marketing expense     (13,017)     (20,780)
Bad debt expense     (11,662)     (29,570)
Amortization included in cost of sales     45     549
Strategic Review costs     295     3,632
Other income (expense)     (2,425)     14,805
Loss attributable to non-controlling interest     116     14
Base EBITDA   $ 32,774   $ 49,069

 

 

  13.

 

 

Base EBITDA

 

For the six months ended September 30.

(thousands of dollars)

 

      Fiscal 2021     Fiscal 2020
Reconciliation to interim condensed consolidated statements of income (loss)            
Profit (loss) for the period   $ 27,784   $ (195,620)
Add (subtract):            
Finance costs     51,597     51,997
Provision for (recovery of) income taxes     1,307     (241)
Depreciation and amortization     13,071     21,093
EBITDA   $ 93,759   $ (122,771)
Add (subtract):            
Unrealized (gain) loss of derivative instruments and other     7,619     176,536
Realized (gain) loss included in cost of goods sold     4,607     (5,768)
Strategic Review costs     2,098     3,632
Loss from discontinued operations     4,158     14,998
Texas residential enrolment and collections impairment     -     4,900
Filter Group contingent consideration revaluation     -     (7,091)
Restructuring costs     7,118     -
Gain on Recapitalization transaction, net     (50,341)     -
Share-based compensation     4,122     8,784
Loss attributable to non-controlling interest     113     34
Base EBITDA   $ 73,253   $ 73,254
             
Gross margin per interim condensed consolidated statements of income (loss)   $ 489,848   $ 136,876
Realized loss of derivative instruments and other     (215,296)     150,800
Base gross margin     274,552     287,676
Add (subtract):            
Administrative expenses     (82,099)     (82,269)
Selling commission expenses     (70,873)     (69,000)
Selling non-commission and marketing expense     (23,998)     (46,983)
Bad debt expense     (23,602)     (46,857)
Texas residential enrolment and collections impairment     -     4,900
Amortization included in cost of sales     119     1,127
Strategic Review costs     2,098     3,632
Other income (expense)     (3,057)     20,994
Loss attributable to non-controlling interest     113     34
Base EBITDA   $ 73,253   $ 73,254

 

 

  14.

 

 

Summary of quarterly results for continuing operations

(thousands of dollars, except per share amounts)

 

    Q2    Q1    Q4    Q3 
    Fiscal 2021    Fiscal 2021    Fiscal 2020    Fiscal 2020 
Sales  $649,602   $593,134   $675,683   $658,521 
Cost of goods sold   428,891    323,997    388,174    446,552 
Gross margin   220,711    269,137    287,509    211,969 
Realized loss of derivative instruments and other   (82,438)   (132,858)   (107,089)   (69,485)
Base gross margin   138,273    136,279    180,420    142,484 
Administrative expenses   43,957    38,142    46,051    39,616 
Selling commission expenses   34,895    35,979    36,983    36,698 
Selling non-commission and marketing expense   13,017    10,981    16,584    14,572 
Bad debt expense   11,662    11,940    13,197    19,996 
Restructuring costs   7,118    -    -    - 
Finance costs   29,744    21,853    26,770    28,178 
Profit (loss) for the period from continuing operations   (50,156)   82,098    (138,210)   20,600 
Profit (loss) for the period from discontinued operations, net   (1,210)   (2,948)   (2,721)   6,293 
Profit (loss) for the period   (51,366)   79,150    (140,931)   26,893 
Base EBITDA from continuing operations   32,774    40,479    74,632    37,949 

 

    Q2    Q1    Q4    Q3 
    Fiscal 2020    Fiscal 2020    Fiscal 2019    Fiscal 2019 
Sales  $768,440   $670,165   $797,409   $734,205 
Cost of goods sold   843,788    457,941    574,543    584,136 
Gross margin   (75,348)   212,224    222,866    150,069 
Realized gain (loss) of derivative instruments and other   230,732    (79,932)   (50,435)   14,392 
Base gross margin   155,384    132,292    172,431    164,461 
Administrative expenses   41,466    40,803    38,998    41,921 
Selling commission expenses   33,499    35,502    39,480    28,973 
Selling non-commission and marketing expense   20,780    26,202    23,861    22,733 
Bad debt expense   29,570    17,288    35,012    51,353 
Restructuring costs   -    -    8,862    2,746 
Finance costs   28,451    23,546    (28,581)   (22,762)
Profit (loss) for the period from continuing operations   89,349    (269,971)   (25,817)   35,890 
Profit (loss) for the period from discontinued operations, net   (9,809)   (5,189)   (93,593)   (90,156)
Profit (loss) for the period   79,540    (275,160)   (119,410)   (54,266)
Base EBITDA from continuing operations   49,069    24,184    59,479    57,105 

 

 

  15.

 

 

Segmented reporting1

 

For the three months ended September 30.

(thousands of dollars)