Ranpak (US:PACK)2020-07-30 17:30markdown [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements for Ranpak Holdings Corp. and related disclosures [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Ranpak Holdings Corp.'s unaudited condensed consolidated financial statements for periods ended June 30, 2020, including statements of operations, balance sheets, changes in shareholders' equity, and cash flows, noting non-comparable Successor and Predecessor periods [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For the three months ended June 30, 2020, net revenue was **$66.1 million** with a net loss of **$8.5 million**, and for the six months, net revenue was **$129.5 million** with a net loss of **$12.1 million** Key Financial Performance (Successor Period) | Metric | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net Revenue | $66.1 million | $129.5 million | | Gross Profit | $27.0 million | $53.8 million | | Loss from Operations | $(2.1) million | $(2.7) million | | Net Loss | $(8.5) million | $(12.1) million | | Diluted Loss Per Share | $(0.12) | $(0.17) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets were **$1,108.1 million**, with total liabilities increasing to **$594.2 million** and total shareholders' equity decreasing to **$513.9 million** Balance Sheet Summary (in millions) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $22.6 | $19.7 | | Total current assets | $86.2 | $71.4 | | Goodwill | $448.6 | $448.8 | | Intangible assets, net | $444.4 | $458.6 | | **Total assets** | **$1,108.1** | **$1,104.4** | | Total current liabilities | $43.0 | $31.9 | | Long-term debt | $418.2 | $418.8 | | **Total liabilities** | **$594.2** | **$572.6** | | **Total shareholders' equity** | **$513.9** | **$531.8** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash provided by operating activities was **$22.3 million**, with a net increase in cash and cash equivalents of **$2.9 million** Cash Flow Summary - Six Months Ended June 30, 2020 (in millions) | Cash Flow Category | Amount | | :--- | :--- | | Net cash provided by operating activities | $22.3 | | Net cash used in investing activities | $(18.6) | | Net cash provided by (used in) financing activities | $(0.7) | | **Net Increase in Cash and Cash Equivalents** | **$2.9** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail financial statement explanations, including basis of presentation, revenue recognition, acquisitions, debt, and a restatement of prior 2019 interim financial statements - The financial statements are presented in 'Predecessor' (Rack Holdings, prior to **June 3, 2019**) and 'Successor' (Ranpak Holdings Corp., after **June 3, 2019**) periods, which are not comparable due to acquisition accounting[27](index=27&type=chunk)[29](index=29&type=chunk) - The company finalized the purchase accounting for the Ranpak Business Combination in **Q2 2020**, with total consideration of **$955.7 million**, resulting in **$447.2 million** of goodwill and **$473.7 million** of intangible assets[67](index=67&type=chunk)[68](对了](index=68&type=chunk) - Previously issued unaudited financial statements for the **2019** Predecessor and Successor periods were restated to correct errors related to the accounting for the Ranpak Business Combination, impacting cash flows, comprehensive income, and shareholders' equity[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk) Net Revenue by Geography - Six Months Ended June 30, 2020 (Successor) | Region | Net Revenue (in millions) | | :--- | :--- | | North America | $55.3 | | Europe/Asia | $74.2 | | **Total** | **$129.5** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance for the three and six months ended June 30, 2020, highlighting pro forma revenue growth of **13.2%** for **Q2 2020** and the impact of COVID-19, liquidity, and debt profile - The COVID-19 pandemic has led to strong demand from e-commerce end-users, offsetting reductions in other industries, though social distancing measures have delayed some new system installations[184](index=184&type=chunk) Pro Forma Performance vs. Prior Year | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $67.8 M | $59.9 M | +13.2% | | Adjusted EBITDA | $19.0 M | $16.8 M | +13.1% | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **% Change** | | Net Revenue | $132.6 M | $127.9 M | +3.7% | | Adjusted EBITDA | $37.1 M | $36.5 M | +1.6% | Installed Protective Packaging Systems Base (in thousands) | Machine Type | June 30, 2020 | June 30, 2019 | % Change | | :--- | :--- | :--- | :--- | | Cushioning | 33.1 | 31.9 | +3.8% | | Void-fill | 62.9 | 58.3 | +7.9% | | Wrapping | 13.5 | 10.1 | +33.7% | | **Total** | **109.5** | **100.3** | **+9.2%** | [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section analyzes income statement performance for **Q2 2020**, showing **13.2%** pro forma revenue growth driven by Europe/Asia and Void-fill/Wrapping products, alongside increased SG&A expenses due to public company costs and growth initiatives - **Q2 2020** pro forma net revenue increased **13.2%** on a constant currency basis, driven by a **19.3 percentage point** increase in paper consumable volume, partially offset by a **7.6 percentage point** decrease from pricing[199](index=199&type=chunk) - Pro forma SG&A expenses for **Q2 2020** increased **52.9%** to **$21.1 million** from **$13.8 million** in the prior year, attributed to severance costs, non-cash equity compensation, and increased public company costs[203](index=203&type=chunk) - Pro forma interest expense for **Q2 2020** decreased **35.3%** to **$5.5 million** from **$8.5 million** in the prior year, due to lower debt levels and interest rates[208](index=208&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, the company had **$22.6 million** in cash and full availability under its **$45.0 million** revolving credit facility, with total debt at **$419.8 million**, deemed sufficient for current requirements - The company's liquidity position includes **$22.6 million** in cash and cash equivalents and an undrawn **$45.0 million** revolving credit facility as of **June 30, 2020**[243](index=243&type=chunk) - In **February 2020**, the company amended its First Lien Credit Agreement to delay mandatory excess cash flow prepayments to the fiscal year ending **December 31, 2021**, and to increase capacity for share repurchases from employees and directors[88](index=88&type=chunk)[89](index=89&type=chunk)[257](index=257&type=chunk) - On **July 1, 2020**, the company completed an internal reorganization where Ranpak Corp. assumed all obligations of Ranger Packaging LLC as the 'U.S. Borrower' under the credit facilities[90](index=90&type=chunk)[259](index=259&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on variable-rate debt, foreign currency exchange rate volatility, and commodity price changes for paper, with interest rate swaps used to manage interest rate risk - A hypothetical **100 basis point** increase or decrease in interest rates would impact cash interest expense by **$2.1 million** for the six months ended **June 30, 2020**, mitigated by interest rate swaps[270](index=270&type=chunk) - For **H1 2020**, **57.3%** of net revenue (**$74.2 million**) was denominated in non-U.S. dollar currencies, primarily the Euro, where a **10%** change in the EUR/USD exchange rate would have impacted reported net revenue by approximately **$7.4 million**[273](index=273&type=chunk) [Item 4. Controls and Procedures](index=64&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of **June 30, 2020**, due to previously disclosed material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of **June 30, 2020**, due to previously identified material weaknesses in internal control over financial reporting[277](index=277&type=chunk) [PART II – OTHER INFORMATION](index=66&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers other required disclosures, including legal proceedings, risk factors, and other miscellaneous items [Item 1. Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings - There are no material legal proceedings to report for the period[283](index=283&type=chunk) [Item 1A. Risk Factors](index=66&type=page&id=Item%201A.%20Risk%20Factors) There were no material changes to the company's risk factors from those previously disclosed - No material changes in risk factors were reported from previous filings[284](index=284&type=chunk) [Other Items (2, 3, 4, 5, 6)](index=66&type=section&id=Other%20Items%20(2%2C%203%2C%204%2C%205%2C%206)) This section covers other required disclosures, including no unregistered sales of equity securities, no defaults upon senior securities, and a list of exhibits - The company reported no unregistered sales of equity securities or use of proceeds (Item 2)[285](index=285&type=chunk) - There were no defaults upon senior securities (Item 3)[286](index=286&type=chunk)