Smurfit WestRock plc(SW) - 2024 Q2 - Quarterly Report

Explanatory Note This report details Smurfit Westrock's shell company status for the interim period ended June 30, 2024, prior to its business combination - This Quarterly Report on Form 10-Q is for the interim period ended June 30, 2024, which was before the consummation of the business combination between Smurfit Kappa and WestRock[7] - The combination, which created Smurfit Westrock plc, closed on July 5, 2024, subsequent to the period covered by this report. A detailed description is available in the Registration Statement on Form S-4[5] - As of June 30, 2024, and prior to the combination, Smurfit Westrock plc was a shell company with no assets, no operations, and only nominal capitalization. Upon the combination's closing, it ceased to be a shell company[3][7] PART I - FINANCIAL INFORMATION Financial Statements The unaudited consolidated interim financial statements reflect Smurfit Westrock's shell company status, showing minimal assets and a net loss before its significant business combination Consolidated Balance Sheet Highlights (Unaudited) | Metric | As of June 30, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $26,762 | $111 | | Total Assets | $26,762 | $111 | | Total Liabilities | $12,300 | $0 | | Total Stockholders' Equity | $14,462 | $111 | Consolidated Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Administrative expenses | $(12,300) | $(12,300) | | Consolidated net loss | $(12,300) | $(12,300) | | Basic/Diluted loss per share | $(2.56) | $(5.04) | - Cash flow from operating and investing activities was zero for the six months ended June 30, 2024. Net cash of $26,852 was provided by financing activities through the issuance of common stock[16] Notes to Consolidated Financial Statements The notes clarify Smurfit Westrock's shell company status and detail the post-period combination with WestRock, including accounting and subsequent financial events - The combination with WestRock closed on July 5, 2024. Each WestRock common stock was converted into one Smurfit Westrock share and $5.00 in cash. Smurfit Kappa was deemed the accounting acquirer under ASC 805[30][33] - Upon completion of the combination, former Smurfit Kappa shareholders own approximately 50.4% and former WestRock shareholders own approximately 49.6% of Smurfit Westrock[35] - Subsequent to the quarter end, on July 26, 2024, the Board approved a quarterly dividend of $0.3025 per ordinary share, payable on September 18, 2024[44] - On July 5, 2024, Smurfit Kappa cancelled its €1,350 million revolving credit facility and funded the prepayment of a $750 million WestRock term loan. Smurfit Westrock also became a guarantor of various outstanding debt securities of its new subsidiaries[42][43] Management's Discussion and Analysis of Financial Condition and Results of Operations The MD&A reiterates Smurfit Westrock's shell company status, reporting no operations or revenue prior to the July 5, 2024 combination, with a net loss from professional fees - The company had no historical operations and generated no revenue for the three or six months ended June 30, 2024. A net loss of $12,300 was incurred due to professional fees for its re-registration as an Irish public limited company[59] - As of June 30, 2024, the company's total assets consisted of $26,762 in cash and cash equivalents, sourced from capital contributions by stockholders. It had no off-balance sheet arrangements[60][61] - The report includes a detailed "Cautionary Note Regarding Forward-Looking Statements," highlighting numerous risks including integration challenges, macroeconomic uncertainty, pricing cycles, and potential tax implications of the combination[48][49][51] Quantitative and Qualitative Disclosures About Market Risk As a non-operating entity, the company's market risk was minimal, primarily limited to foreign exchange rate risk on its euro-denominated cash balance Foreign Currency Translation (Loss)/Gain | Period | Amount (USD) | | :--- | :--- | | Three months ended June 30, 2024 | $(198) | | Six months ended June 30, 2024 | $(201) | | Six months ended June 30, 2023 | $2 | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls during the quarter - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of the end of the period[65] - No changes in internal controls over financial reporting occurred during the second quarter of 2024 that materially affected, or are reasonably likely to materially affect, these controls[66] PART II - OTHER INFORMATION Legal Proceedings The company faces two lawsuits from purported WestRock stockholders challenging disclosures related to the combination, with an uncertain outcome and potential loss - Two lawsuits are pending, filed by purported WestRock stockholders, challenging the adequacy of disclosures in the proxy statement/prospectus related to the combination[68] Risk Factors The company reports no material changes to previously disclosed risk factors, incorporating by reference detailed risks related to the combination, business, tax, and share ownership - The company incorporates by reference the risk factors discussed in its Registration Statement on Form S-4 and WestRock's Annual Report on Form 10-K[69] - No material changes to the previously disclosed risk factors were reported[69] Other Items (2, 3, 4, 5) The company reported no activity for several items, consistent with its status as a non-operating shell company during the reporting period - The company reported 'None' or 'Not applicable' for the following items, indicating no activity: - Item 2: Unregistered Sales of Equity Securities and Use of Proceeds - Item 3: Defaults Upon Senior Securities - Item 4: Mine Safety Disclosures - Item 5: Other Information[69] Exhibits This section lists numerous exhibits, mostly incorporated by reference, detailing the combined entity's corporate structure, financing agreements, executive contracts, and officer certifications - Lists numerous exhibits related to the new corporate structure and financing, including the Amended Constitution, various indentures, credit agreements, and executive contracts[70][108][116] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[117][118]