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Ranpak (PACK) - 2019 Q3 - Quarterly Report
Ranpak Ranpak (US:PACK)2019-11-07 14:11

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents Ranpak Holdings Corp.'s unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and notes, reflecting Predecessor and Successor periods Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) The company reported a net loss of $1.6 million for Q3 2019 (Successor) versus $0.3 million net income for Q3 2018 (Predecessor), reflecting post-acquisition changes Condensed Consolidated Statements of Operations (in millions) | Period | Net Sales | Income (Loss) from Operations | Net Income (Loss) | | :--- | :--- | :--- | :--- | | Successor (Q3 2019) | $69.1 | $1.0 | $(1.6) | | Predecessor (Q3 2018) | $65.1 | $1.9 | $0.3 | | Successor (Jun 3 - Sep 30, 2019) | $85.4 | $(4.1) | $(12.0) | | Predecessor (Jan 1 - Jun 2, 2019) | $106.4 | $(5.9) | $(19.0) | | Predecessor (9M 2018) | $191.9 | $8.2 | $(4.6) | Unaudited Condensed Consolidated Balance Sheets Total assets increased to $1,065.5 million (Successor) from $792.7 million (Predecessor) due to the Ranpak Business Combination, significantly impacting goodwill, intangibles, and long-term debt Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2019 (Successor) | Dec 31, 2018 (Predecessor) | | :--- | :--- | :--- | | Total Assets | $1,065.5 | $792.7 | | Goodwill | $411.6 | $355.7 | | Intangible assets, net | $465.5 | $293.7 | | Total Liabilities | $665.9 | $596.3 | | Long-term debt | $515.2 | $494.9 | | Total Shareholders' Equity | $399.6 | $196.4 | Unaudited Condensed Consolidated Statements of Cash Flows The Successor period (June 3-September 30, 2019) saw net cash used in operations ($11.6 million) and investing ($956.3 million for acquisition), largely offset by financing activities ($666.5 million), resulting in a $296.2 million net cash decrease Summary of Cash Flows (in millions) | Cash Flow Activity | Successor (Jun 3 - Sep 30, 2019) | Predecessor (Jan 1 - Jun 2, 2019) | Predecessor (9M 2018) | | :--- | :--- | :--- | :--- | | Net cash from Operating Activities | $(11.6) | $24.5 | $26.9 | | Net cash from Investing Activities | $(956.3) | $(10.8) | $(20.9) | | Net cash from Financing Activities | $666.5 | $(13.3) | $(5.4) | | Net Change in Cash | $(296.2) | $(7.3) | $2.6 | Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail the basis of presentation, acquisition accounting, debt structure, and segment information, emphasizing the Predecessor/Successor distinction post-Ranpak Business Combination - The financial statements are presented in two distinct, non-comparable periods: the 'Predecessor' period (Rack Holdings) before the June 3, 2019 business combination, and the 'Successor' period (Ranpak Holdings Corp.) after the combination, which applies the acquisition method of accounting2728 - The Ranpak Business Combination was consummated on June 3, 2019, for a total consideration of $799.6 million and €140.0 million in cash The acquisition was accounted for using the acquisition method, resulting in a new basis of accounting2146 Preliminary Purchase Price Allocation (in millions) | Item | Amount | | :--- | :--- | | Total Consideration, net of cash | $945.6 | | Total identifiable assets acquired | $658.1 | | Net identifiable liabilities acquired | $133.3 | | Goodwill | $420.8 | - In connection with the acquisition, the company entered into new First Lien credit facilities totaling approximately $530.8 million ($378.2 million USD and €140.0 million Euro) and a $45.0 million revolving facility6364 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the business combination's impact on financial comparability, presenting pro forma results, analyzing Q3 2019 sales growth, installed base expansion, liquidity, and market risks - The discussion emphasizes that the Ranpak Business Combination on June 3, 2019, created a new basis of accounting, making direct comparison of Predecessor and Successor financial statements difficult Pro forma and combined results are provided for better analysis132151152 Installed Protective Packaging Systems Base (in thousands) | Product Line | Sep 30, 2019 | Sep 30, 2018 | % Change | | :--- | :--- | :--- | :--- | | Cushioning machines | 32.1 | 31.0 | 3.6% | | Void-fill machines | 59.5 | 55.7 | 6.7% | | Wrapping machines | 10.7 | 8.5 | 26.5% | | Total | 102.3 | 95.2 | 7.5% | Q3 2019 vs Q3 2018 Pro Forma Performance Highlights | Metric | Q3 2019 (Pro Forma) | Q3 2018 (Predecessor) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $70.4M | $65.1M | 8.1% | | Gross Profit | $31.1M | $27.4M | 13.6% | | Net Income | $0.8M | $0.3M | 166.7% | | Adjusted EBITDA | $22.0M | $20.6M | 6.9% | - For Q3 2019, net sales growth was driven by a 5.4 percentage point increase from pricing on paper consumables and a 3.0 percentage point increase from automated box sizing equipment sales159 - The company's main liquidity needs are for capital expenditures on protective packaging systems, working capital for paper purchases, and debt service Management believes cash from operations and the new $45.0 million revolving credit facility are sufficient to meet current requirements203 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates on its $530.8 million floating-rate debt, foreign currency exposure (over 51% of sales in non-USD), and commodity prices, with some mitigation through swaps and negotiations - The company has $530.8 million in floating-rate term debt A 100 basis point change in interest rates would result in a $1.3 million change in annual cash interest expense227 - To hedge interest rate risk, the company has interest rate swap contracts with a combined notional value of $250.0 million, which mature on June 1, 2023228 - For the nine months ended September 30, 2019, 51.9% of net sales ($99.4 million) were denominated in foreign currencies, primarily the Euro A 10% change in the Euro-to-USD exchange rate would impact reported net sales by approximately $9.9 million231232 Controls and Procedures Due to the recent Ranpak Business Combination, the company's internal control framework is undergoing significant changes, preventing a full assessment of disclosure controls and procedures as of September 30, 2019 - Due to the recent business combination, the company's internal controls are undergoing significant changes, and the design of the new framework is still in preliminary stages236 - Management concluded that it was unable to conduct an assessment of the effectiveness of the company's disclosure controls and procedures as of September 30, 2019, due to the recent acquisition and ongoing integration236 PART II – OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - There are no legal proceedings to report241 Risk Factors No material changes to previously disclosed risk factors were reported for the quarter - No material changes in risk factors from the previous quarter were reported241 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or warrant repurchases during the quarter - There were no unregistered sales of equity securities in the period242 - The company did not repurchase any of its outstanding public warrants during the quarter under its $10.0 million repurchase program243 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None244 Mine Safety Disclosures This item is not applicable to the company - Not applicable244 Other Information The company reported no other information - None244 Exhibits This section lists exhibits filed with the Form 10-Q, including key agreements, corporate documents, and officer certifications