Ranpak (PACK) - 2020 Q4 - Annual Report

PART I ITEM 1. BUSINESS Ranpak is a global provider of sustainable product protection and automation solutions, utilizing a 'razor/razor-blade' business model - Ranpak operates a 'razor/razor-blade' business model, primarily generating revenue from high-margin paper consumables used with its installed protective packaging systems[21][40] - Paper packaging consumables are fiber-based, biodegradable, renewable, and curb-side recyclable, with a majority from recycled content and SFI/FSC certified suppliers, meeting sustainability demands[23][27] 2020 Net Revenue by Product Line and Geography | Category | % of Net Revenue (2020) | | :------------------- | :---------------------- | | Void-Fill | 41.9% | | Cushioning | 42.2% | | Wrapping | 13.0% | | Automation | 2.9% | | Region | % of Net Revenue (2020) | | :---------- | :---------------------- | | North America | 42.7% | | Europe | 47.0% | | Asia & Other | 10.3% | ITEM 1A. RISK FACTORS The company faces risks from COVID-19, supply chain, paper pricing, distributor reliance, consumer preferences, and indebtedness - The COVID-19 pandemic caused delays in component acquisition and product installation, potentially impacting future growth in protective packaging systems and automation sales[107][108][109] - Ranpak is highly dependent on limited paper suppliers, with 44.9% of North American raw paper from a single source in 2020, risking supply disruption and price increases[91][111] - The business model relies heavily on third-party distributors (accounting for 85.5% of 2020 net revenue), creating vulnerability to relationship changes or unmet sales expectations[28][188] - Outstanding indebtedness could adversely affect financial condition, requiring a substantial portion of cash flow for debt payments and limiting future growth financing[150] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments to report - The company has no unresolved staff comments[204] ITEM 2. PROPERTIES Ranpak's global headquarters are in Ohio, European headquarters in The Netherlands, with assembly and paper conversion facilities across regions - Ranpak's global headquarters are in Concord Township, Ohio, and European headquarters in Heerlen, The Netherlands[205] - The company has assembly facilities in Concord Township, Ohio; Heerlen, The Netherlands; and Nyrany, Czech Republic[206] - Paper consumables are converted in Concord Township, Ohio; Kansas City, Missouri; Raleigh, North Carolina; Reno, Nevada; Heerlen, The Netherlands; and Nyrany, Czech Republic[206] - A new dedicated Ranpak Automation facility was opened in Kerkrade, the Netherlands in 2020 to enhance production capacity and R&D[88][206] ITEM 3. LEGAL PROCEEDINGS Ranpak is involved in various legal proceedings, including intellectual property litigation, with management assessing and accruing for potential losses - Ranpak is subject to legal proceedings and claims in the ordinary course of business, including intellectual property litigation[101][208] - Management evaluates claims and accrues for probable and reasonably estimable losses, anticipating no material adverse effect on financial condition, liquidity, or cash flows from currently known contingencies[521] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Ranpak Holdings Corp - The company has no mine safety disclosures to report[209] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Ranpak's Class A Common Shares are listed on the NYSE under 'PACK', with no cash dividends intended due to debt covenants - Ranpak's Class A Common Shares are listed on the NYSE under the ticker symbol 'PACK'[210] - As of March 2, 2021, there were 23 holders of record for Class A Common Shares and 2 for Class C Common Shares[210] - The company has not paid cash dividends and does not intend to in the foreseeable future, with dividend payments limited by restrictive covenants in its credit facilities[211] ITEM 6. SELECTED FINANCIAL DATA Ranpak has eliminated the five-year selected financial data requirement due to recent amendments and non-comparable Predecessor/Successor periods - Ranpak has elected to provide disclosure consistent with the November 2020 Amendments, eliminating the requirement for five-year selected financial data in tabular form[217] - Financial statements are presented on a Predecessor/Successor basis due to the Ranpak Business Combination on June 3, 2019, which created a new basis of accounting and makes periods non-comparable[216] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes Ranpak's financial performance for 2020, covering revenue, expenses, non-GAAP measures, liquidity, and accounting policies Key Financial Highlights (GAAP) (in millions) | Metric | 2020 | Successor Period (Jun 3 - Dec 31, 2019) | 1H 2019 Predecessor Period (Jan 1 - Jun 2, 2019) | | :---------------------- | :------ | :-------------------------------------- | :----------------------------------------------- | | Net Revenue | $298.2 | $163.1 | $106.4 | | Gross Profit | $122.6 | $65.7 | $45.2 | | Income (Loss) from Operations | $11.7 | $8.1 | $(5.9) | | Net Loss | $(23.4) | $(17.2) | $(19.0) | Key Financial Highlights (Non-GAAP Pro Forma) (in millions) | Metric | 2020 | 2019 | $ Change | % Change | | :---------------------- | :------ | :------ | :------- | :------- | | Net Revenue | $298.9 | $277.4 | $21.5 | 7.8% | | Gross Profit | $123.0 | $118.8 | $4.2 | 3.5% | | Income (Loss) from Operations | $11.5 | $23.4 | $(11.9) | (50.9)% | | Net Loss | $(23.4) | $(11.0) | $(12.4) | 112.7% | | EBITDA | $67.9 | $84.5 | $(16.6) | (19.6)% | | AEBITDA | $93.7 | $87.3 | $6.4 | 7.3% | - Net revenue increased by $28.7 million (10.6%) in 2020 compared to 2019 (combined Predecessor/Successor periods), driven by a 13.1% increase in paper consumable product volume, partially offset by a 5.2% decrease in price[254] - Pro forma AEBITDA increased by $6.4 million (7.3%) to $93.7 million in 2020 on a constant currency basis, reflecting growth despite increased public company costs and severance[266] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Ranpak manages interest rate risk with swaps, faces foreign currency exposure (primarily Euro), and mitigates commodity price risk through annual negotiations - A hypothetical 100 basis point increase or decrease in applicable base interest rates would have resulted in a $4.4 million impact on cash interest expense in 2020[324] - 57.3% of Ranpak's 2020 net revenue ($170.8 million) was denominated in non-U.S. dollars, primarily Euro, exposing the company to foreign currency exchange risk[329] - The company uses fixed interest rate swap agreements to manage exposure to fluctuations in interest rates on variable interest rate debt[324] - Ranpak negotiates paper prices annually with suppliers to mitigate commodity price fluctuations, but its competitive market makes it difficult to pass on all increases[236][330] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section includes Ranpak's audited consolidated financial statements, notes, and the independent auditor's report, presented on a Predecessor/Successor basis - The consolidated financial statements include the Report of Independent Registered Public Accounting Firm, affirming fair presentation in accordance with U.S. GAAP[338] - Financial statements are presented on a Predecessor/Successor basis due to the Ranpak Business Combination on June 3, 2019, impacting comparability across periods[362][363] Consolidated Balance Sheet Highlights (in millions) | Metric | December 31, 2020 | December 31, 2019 | | :---------------------- | :---------------- | :---------------- | | Total Assets | $1,133.5 | $1,104.4 | | Total Liabilities | $610.6 | $572.6 | | Total Shareholders' Equity | $522.9 | $531.8 | Consolidated Cash Flow Highlights (in millions) | Metric | 2020 | Successor Period (Jun 3 - Dec 31, 2019) | 1H 2019 Predecessor Period (Jan 1 - Jun 2, 2019) | | :------------------------------------ | :------ | :-------------------------------------- | :----------------------------------------------- | | Net Cash Provided by Operating Activities | $63.8 | $9.6 | $16.7 | | Net Cash Used in Investing Activities | $(34.5) | $(657.1) | $(10.8) | | Net Cash Provided by (Used in) Financing Activities | $(1.6) | $665.4 | $(14.4) | | Cash and Cash Equivalents, End of Period | $48.5 | $19.7 | $10.2 | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There have been no changes in or disagreements with accountants on accounting and financial disclosures - The company reports no changes in or disagreements with accountants on accounting and financial disclosures[565] ITEM 9A. CONTROLS AND PROCEDURES Ranpak's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with prior material weaknesses remediated - Disclosure controls and procedures were evaluated and concluded to be effective as of December 31, 2020[566] - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2020[567] - Previously reported material weaknesses related to control environment, risk assessment, and control activities were fully remediated in 2020 by hiring qualified staff and implementing new controls[568] ITEM 9B. OTHER INFORMATION There is no other information to report under this item - The company has no other information to report under this item[570] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[571] ITEM 11. EXECUTIVE COMPENSATION Information concerning executive compensation is incorporated by reference from the 2021 proxy statement - Executive compensation details are incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[572] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the 2021 proxy statement - Security ownership information for beneficial owners and management is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[573] ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information on certain relationships, related person transactions, and director independence is incorporated by reference from the 2021 proxy statement - Details on certain relationships, related person transactions, and director independence are incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[574] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information concerning principal accounting fees and services is incorporated by reference from the 2021 proxy statement - Information on principal accounting fees and services is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[575] PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES This section lists consolidated financial statements, Schedule II, and a comprehensive index of exhibits - The report includes consolidated financial statements, Schedule II – Valuation and Qualifying Accounts and Reserves for 2020, 2019, and 2018[576][577] - A comprehensive exhibit index lists all documents filed or incorporated by reference[582] ITEM 16. FORM 10-K SUMMARY This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[579] SIGNATURES The report is duly signed by Ranpak Holdings Corp.'s Senior Vice President and Chief Financial Officer, affirming compliance with the Securities Exchange Act - The report is signed by the Senior Vice President and Chief Financial Officer, William Drew, and other directors[588][591] - Signatures affirm compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934[586][590]