UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
September 30,or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to .
Commission File Number 001-38348
RANPAK HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware | 98-1377160 |
(State or | (I.R.S. Employer | |
incorporation or organization) | Identification Number) |
7990 Auburn Road
Concord Township,
(Address of Principal Executive Offices)
(440) 354-4445
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and formal fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Ordinary Shares, par value $0.0001 per share | PACK | New York Stock Exchange | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ☒As of November 5, 2019,4, 2020, the registrant had 47,361,35268,999,035 of its Class A common shares, $0.0001 par value per share, outstanding (which includes 6,116,4546,116,453 Class A common shares that are subject to an earn-out provision as described in Part 1, Item 1 of this report) and 6,511,293 of its Class C common shares, $0.0001 par value per share, outstanding, of which 731,383 Class C common shares are subject to an earn-out.
Ranpak Holdings Corp.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2019
Table of Contents
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1 | ||
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29 | ||
51 | ||
51 | ||
52 | ||
52 | ||
52 | ||
52 | ||
52 | ||
52 | ||
52 | ||
53 | ||
54 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Index to Unaudited Condensed Consolidated Financial Statements
Ranpak Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Successor – for the Three Months Ended September 30, 2020 and 2019, the Nine Months Ended September 30, 2020 and the Period June 3, 2019 through September 30, 2019
Predecessor – for the Period January 1, 2019 through June 2, 2019
Unaudited Condensed Consolidated Balance Sheets – September 30, 2020 and December 31, 2019
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
Successor – for the Three Months Ended September 30, 2020 and 2019, the Nine Months Ended September 30, 2020 and the Period June 3, 2019 through September 30, 2019
Predecessor – for the Period January 1, 2019 through June 2, 2019
Unaudited Condensed Consolidated Statements of Cash Flows
Successor – for the Nine Months Ended September 30, 2020 and the Period June 3, 2019 through September 30, 2019
Predecessor – for the Period January 1, 2019 through June 2, 2019
Notes to the Unaudited Condensed Consolidated Financial Statements
Ranpak Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss)
(in millions, except share and per share data)
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| – September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
Paper revenue |
| $ | 64.9 |
|
| $ | 57.0 |
|
| $ | 171.2 |
|
| $ | 72.7 |
|
|
| $ | 88.8 |
|
Machine lease revenue |
|
| 10.4 |
|
|
| 9.3 |
|
|
| 28.3 |
|
|
| 11.8 |
|
|
|
| 14.4 |
|
Other revenue |
|
| 1.5 |
|
|
| 2.8 |
|
|
| 6.8 |
|
|
| 0.9 |
|
|
|
| 3.2 |
|
Net revenue |
|
| 76.8 |
|
|
| 69.1 |
|
|
| 206.3 |
|
|
| 85.4 |
|
|
|
| 106.4 |
|
Cost of goods sold |
|
| 46.6 |
|
|
| 39.6 |
|
|
| 122.3 |
|
|
| 52.6 |
|
|
|
| 61.2 |
|
Gross profit |
|
| 30.2 |
|
|
| 29.5 |
|
|
| 84.0 |
|
|
| 32.8 |
|
|
|
| 45.2 |
|
Selling, general and administrative expenses |
|
| 17.8 |
|
|
| 17.7 |
|
|
| 58.1 |
|
|
| 22.5 |
|
|
|
| 23.8 |
|
Transaction costs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0.3 |
|
|
|
| 7.4 |
|
Depreciation and amortization expense |
|
| 7.7 |
|
|
| 10.3 |
|
|
| 22.9 |
|
|
| 13.3 |
|
|
|
| 17.7 |
|
Other operating expense, net |
|
| 1.9 |
|
|
| 0.5 |
|
|
| 2.9 |
|
|
| 0.8 |
|
|
|
| 2.2 |
|
Income (loss) from operations |
|
| 2.8 |
|
|
| 1.0 |
|
|
| 0.1 |
|
|
| (4.1 | ) |
|
|
| (5.9 | ) |
Interest expense |
|
| 4.9 |
|
|
| 9.5 |
|
|
| 16.6 |
|
|
| 17.5 |
|
|
|
| 20.2 |
|
Foreign currency (gain) loss |
|
| 3.2 |
|
|
| (3.2 | ) |
|
| 3.1 |
|
|
| (1.6 | ) |
|
|
| (2.2 | ) |
Loss before income tax expense |
|
| (5.3 | ) |
|
| (5.3 | ) |
|
| (19.6 | ) |
|
| (20.0 | ) |
|
|
| (23.9 | ) |
Income tax expense (benefit) |
|
| 0.8 |
|
|
| (3.7 | ) |
|
| (1.4 | ) |
|
| (6.1 | ) |
|
|
| (4.9 | ) |
Net loss |
| $ | (6.1 | ) |
| $ | (1.6 | ) |
| $ | (18.2 | ) |
| $ | (13.9 | ) |
|
| $ | (19.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
| ― |
|
| ― |
|
| ― |
|
| $ | - |
|
|
| $ | (19,195.40 | ) | |||
Weighted average number of shares outstanding |
| ― |
|
| ― |
|
| ― |
|
|
| - |
|
|
|
| 995 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two-class method |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.08 | ) |
| $ | (0.03 | ) |
| $ | (0.25 | ) |
| $ | (0.26 | ) |
|
| ― |
| |
Diluted |
| $ | (0.08 | ) |
| $ | (0.03 | ) |
| $ | (0.25 | ) |
| $ | (0.26 | ) |
|
| ― |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding - Class A and C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 72,396,183 |
|
|
| 53,871,068 |
|
|
| 71,401,580 |
|
|
| 53,870,568 |
|
|
| ― |
| |
Diluted |
|
| 72,396,183 |
|
|
| 53,871,068 |
|
|
| 71,401,580 |
|
|
| 53,870,568 |
|
|
| ― |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
| $ | 8.4 |
|
| $ | (11.1 | ) |
| $ | 7.9 |
|
| $ | (6.3 | ) |
|
| $ | (4.0 | ) |
Interest rate swap adjustments |
|
| (0.5 | ) |
|
| 0 |
|
|
| (12.2 | ) |
|
| 0 |
|
|
|
| 0 |
|
Total other comprehensive income (loss), before tax |
|
| 7.9 |
|
|
| (11.1 | ) |
|
| (4.3 | ) |
|
| (6.3 | ) |
|
|
| (4.0 | ) |
Provision (benefit) for income taxes related to other comprehensive income (loss) |
|
| 0.1 |
|
|
| 0 |
|
|
| (2.1 | ) |
|
| 0 |
|
|
|
| 0 |
|
Total other comprehensive income (loss), net of tax |
|
| 7.8 |
|
|
| (11.1 | ) |
|
| (2.2 | ) |
|
| (6.3 | ) |
|
|
| (4.0 | ) |
Comprehensive income (loss), net of tax |
| $ | 1.7 |
|
| $ | (12.7 | ) |
| $ | (20.4 | ) |
| $ | (20.2 | ) |
|
| $ | (23.0 | ) |
Successor | Predecessor | |||||||||||||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||||||
Net sales | $ | 69.1 | $ | 85.4 | $ | 106.4 | $ | 65.1 | $ | 191.9 | ||||||||||
Cost of sales | 39.6 | 52.6 | 61.2 | 37.7 | 109.7 | |||||||||||||||
Selling, general and administrative | 17.7 | 22.5 | 23.8 | 12.6 | 37.8 | |||||||||||||||
Transaction costs | — | 0.3 | 7.4 | 1.0 | 1.2 | |||||||||||||||
Depreciation and amortization | 10.3 | 13.3 | 17.7 | 10.7 | 32.3 | |||||||||||||||
Other operating expense, net | 0.5 | 0.8 | 2.2 | 1.2 | 2.7 | |||||||||||||||
Income (loss) from operations | 1.0 | (4.1 | ) | (5.9 | ) | 1.9 | 8.2 | |||||||||||||
Interest expense | 9.5 | 17.5 | 20.2 | 8.0 | 22.9 | |||||||||||||||
Foreign currency gain | (3.2 | ) | (4.1 | ) | (2.2 | ) | (0.9 | ) | (4.2 | ) | ||||||||||
Income (loss) before income taxes | (5.3 | ) | (17.5 | ) | (23.9 | ) | (5.2 | ) | (10.5 | ) | ||||||||||
Income tax benefit | (3.7 | ) | (5.5 | ) | (4.9 | ) | (5.5 | ) | (5.9 | ) | ||||||||||
Net income (loss) | $ | (1.6 | ) | $ | (12.0 | ) | $ | (19.0 | ) | $ | 0.3 | $ | (4.6 | ) | ||||||
Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation adjustments | (11.1 | ) | (6.3 | ) | 23.6 | (1.1 | ) | (5.4 | ) | |||||||||||
Comprehensive income (loss) | $ | (12.7 | ) | $ | (18.3 | ) | $ | 4.6 | $ | (0.8 | ) | $ | (10.0 | ) | ||||||
Net (loss) income per share—basic and diluted | ||||||||||||||||||||
Net income (loss) per share | $ | (19,195.40 | ) | $ | 279.43 | $ | (4,660.08 | ) | ||||||||||||
Weighted-average shares outstanding | 995 | 995 | 995 | |||||||||||||||||
Two-class method | ||||||||||||||||||||
Net loss per common stock, Class A and C-basic and diluted | (0.03 | ) | (0.22 | ) | ||||||||||||||||
Weighted average number of Class A and C common stock outstanding, basic and diluted | 53,871,068 | 53,870,568 |
See notes to unaudited condensed consolidated financial statements.
Ranpak Holdings Corp.
Condensed Consolidated Balance Sheets
(in millions, except share data)
|
| September 30, 2020 |
|
| December 31, 2019 |
| |||
|
| (unaudited) |
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
| |
Current assets |
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
| $ | 31.3 |
|
| $ | 19.7 |
| |
Accounts receivable, net |
|
| 42.4 |
|
|
| 36.1 |
| |
Inventories, net |
|
| 13.5 |
|
|
| 11.6 |
| |
Income tax receivable |
|
| 6.2 |
|
|
| 1.5 |
| |
Prepaid expenses and other current assets |
|
| 3.5 |
|
|
| 2.5 |
| |
Total current assets |
|
| 96.9 |
|
|
| 71.4 |
| |
|
|
|
|
|
|
|
|
| |
Property, plant and equipment, net |
|
| 126.0 |
|
|
| 122.5 |
| |
Goodwill |
|
| 453.1 |
|
|
| 448.8 |
| |
Intangible assets, net |
|
| 441.8 |
|
|
| 458.6 |
| |
Other assets |
|
| 3.2 |
|
|
| 3.1 |
| |
Total assets |
| $ | 1,121.0 |
|
| $ | 1,104.4 |
| |
|
|
|
|
|
|
|
|
| |
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
| |
Current liabilities |
|
|
|
|
|
|
|
| |
Accounts payable |
| $ | 21.8 |
|
| $ | 12.3 |
| |
Accrued liabilities and other |
|
| 25.6 |
|
|
| 15.5 |
| |
Current portion of long-term debt |
|
| 1.6 |
|
|
| 1.6 |
| |
Deferred machine fee revenue |
|
| 0.8 |
|
|
| 2.5 |
| |
Total current liabilities |
|
| 49.8 |
|
|
| 31.9 |
| |
|
|
|
|
|
|
|
|
| |
Long-term debt |
|
| 424.8 |
|
|
| 418.8 |
| |
Deferred tax liabilities |
|
| 115.8 |
|
|
| 115.0 |
| |
Derivative instruments |
|
| 11.3 |
|
|
| 4.6 |
| |
Other liabilities |
|
| 2.0 |
|
|
| 2.3 |
| |
Total liabilities |
|
| 603.7 |
|
|
| 572.6 |
| |
|
|
|
|
|
|
|
|
| |
Commitments and contingencies – Note 13 |
|
|
|
|
|
|
|
| |
Shareholders' equity |
|
|
|
|
|
|
|
| |
Class A common stock, $0.0001 par, 200,000,000 shares |
|
|
|
|
|
|
|
| |
authorized at September 30, 2020 and December 31, 2019 |
|
|
|
|
|
|
|
| |
Shares issued and outstanding: 68,991,155 and 64,293,741 |
|
|
|
|
|
|
|
| |
at September 30, 2020 and December 31, 2019, respectively |
|
| 0 |
|
|
| 0 |
| |
Class C common stock, $0.0001 par, 200,000,000 shares |
|
|
|
|
|
|
|
| |
authorized at September 30, 2020 and December 31, 2019 |
|
|
|
|
|
|
|
| |
Shares issued and outstanding: 6,511,293 at September 30, 2020 |
|
|
|
|
|
|
|
| |
and December 31, 2019 |
|
| 0 |
|
|
| 0 |
| |
Additional paid-in capital |
|
| 563.4 |
|
|
| 557.5 |
| |
Accumulated deficit |
|
| (47.3 | ) |
|
| (29.1 | ) | |
Accumulated other comprehensive income |
|
| 1.2 |
|
|
| 3.4 |
| |
Total shareholders' equity |
|
| 517.3 |
|
|
| 531.8 |
| |
Total liabilities and shareholders' equity |
| $ | 1,121.0 |
|
| $ | 1,104.4 |
|
Successor | Predecessor | |||||||
September 30, 2019 | December 31, 2018 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 13.6 | $ | 17.5 | ||||
Receivables, net | 28.5 | 31.5 | ||||||
Inventories, net | 12.5 | 11.8 | ||||||
Income tax receivable | 6.1 | 3.4 | ||||||
Prepaid expenses and other current assets | 2.8 | 4.1 | ||||||
Total current assets | 63.5 | 68.3 | ||||||
Property, plant and equipment, net | 121.2 | 73.0 | ||||||
Goodwill | 411.6 | 355.7 | ||||||
Intangible assets, net | 465.5 | 293.7 | ||||||
Other assets | 3.7 | 2.0 | ||||||
Total Assets | $ | 1,065.5 | $ | 792.7 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 11.4 | $ | 12.3 | ||||
Accrued liabilities and other | 12.1 | 10.8 | ||||||
Current portion of long-term debt | 5.4 | 4.4 | ||||||
Deferred machine fee revenue | 2.4 | 0.3 | ||||||
Total current liabilities | 31.3 | 27.8 | ||||||
Long-term debt | 515.2 | 494.9 | ||||||
Deferred income taxes | 110.9 | 69.8 | ||||||
Capital lease obligations | 6.0 | 0.2 | ||||||
Other liabilities | 2.5 | 3.6 | ||||||
Total Liabilities | 665.9 | 596.3 | ||||||
Commitments and Contingencies — Note 7 | ||||||||
Shareholders' Equity | ||||||||
Common stock, $0.01 par; 1,000 shares authorized; 995 shares issued and outstanding at December 31, 2018 | — | — | ||||||
Class A common stock, $0.0001 par; 200,000,000 shares authorized, 47,361,352 shares issued and outstanding at September 30, 2019 | — | — | ||||||
Class C common stock, $0.0001 par value, 200,000,000 shares authorized, 6,511,293 issued and outstanding at September 30, 2019 | — | — | ||||||
Additional paid-in capital | 429.8 | 291.4 | ||||||
Accumulated deficit | (23.9 | ) | (69.9 | ) | ||||
Treasury stock, zero shares, at September 30, 2019 and 5 shares, at cost, December 31, 2018 | — | (1.5 | ) | |||||
Accumulated other comprehensive loss | (6.3 | ) | (23.6 | ) | ||||
Total Shareholders' Equity | 399.6 | 196.4 | ||||||
Total Liabilities and Shareholders' Equity | $ | 1,065.5 | $ | 792.7 |
See notes to unaudited condensed consolidated financial statements.
3
Ranpak Holdings Corp.
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
(in millions, except share data)
|
| Ordinary Shares |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
|
| Class A |
|
| Class B |
|
| Class A |
|
| Class C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Additional Paid-In Capital |
|
| Accumulated Earnings (Deficit) |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total |
| ||||||||||||
Successor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 3, 2019 |
|
| 2,770,967 |
|
| $ | - |
|
|
| 11,250,000 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 16.9 |
|
| $ | (11.9 | ) |
| $ | - |
|
| $ | 5.0 |
|
Forward purchase shares |
|
| 15,000,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Additional shares purchased |
|
| 16,149,317 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Conversion of forward purchase and additional shares |
|
| (31,149,317 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 25,454,282 |
|
|
| - |
|
|
| 5,695,035 |
|
|
| - |
|
|
| 267.0 |
|
|
| - |
|
|
| - |
|
|
| 267.0 |
|
Shares canceled |
|
| - |
|
|
| - |
|
|
| (3,854,664 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (33.0 | ) |
|
| - |
|
|
| - |
|
|
| (33.0 | ) |
Convert Class B |
|
| - |
|
|
| - |
|
|
| (7,395,336 | ) |
|
| - |
|
|
| 6,663,953 |
|
|
| - |
|
|
| 731,383 |
|
|
| - |
|
|
| 63.4 |
|
|
| - |
|
|
| - |
|
|
| 63.4 |
|
Convert public shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,581,346 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 125.0 |
|
|
| - |
|
|
| - |
|
|
| 125.0 |
|
Convert private placement warrants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 658,051 |
|
|
| - |
|
|
| 84,875 |
|
|
| - |
|
|
| 6.4 |
|
|
| - |
|
|
| - |
|
|
| 6.4 |
|
Public shares redeemed |
|
| (2,770,967 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Amortization of restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0.2 |
|
|
| - |
|
|
| - |
|
|
| 0.2 |
|
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2.6 | ) |
|
| - |
|
|
| - |
|
|
| (2.6 | ) |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (12.4 | ) |
|
| - |
|
|
| (12.4 | ) |
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2.3 |
|
|
| 2.3 |
|
Balance at June 30, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 47,357,632 |
|
|
| - |
|
|
| 6,511,293 |
|
|
| - |
|
|
| 443.3 |
|
|
| (24.3 | ) |
|
| 2.3 |
|
|
| 421.3 |
|
Issue Director shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,720 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Amortization of restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1.6 |
|
|
| - |
|
|
| - |
|
|
| 1.6 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1.6 | ) |
|
| - |
|
|
| (1.6 | ) |
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (11.1 | ) |
|
| (11.1 | ) |
Balance at September 30, 2019 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 47,361,352 |
|
| $ | - |
|
|
| 6,511,293 |
|
| $ | - |
|
| $ | 444.9 |
|
| $ | (25.9 | ) |
| $ | (8.8 | ) |
| $ | 410.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 64,293,741 |
|
| $ | - |
|
|
| 6,511,293 |
|
| $ | - |
|
| $ | 557.5 |
|
| $ | (29.1 | ) |
| $ | 3.4 |
|
| $ | 531.8 |
|
Stock-based awards vested and distributed |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 51,603 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Issue Director shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,903 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Amortization of restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2.2 |
|
|
| - |
|
|
| - |
|
|
| 2.2 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3.6 | ) |
|
| - |
|
|
| (3.6 | ) |
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (11.8 | ) |
|
| (11.8 | ) |
Balance at March 31, 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 64,352,247 |
|
|
| - |
|
|
| 6,511,293 |
|
|
| - |
|
|
| 559.7 |
|
|
| (32.7 | ) |
|
| (8.4 | ) |
|
| 518.6 |
|
Stock-based awards vested and distributed |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 143,048 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Issue Director shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 61,164 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Amortization of restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2.0 |
|
|
| - |
|
|
| - |
|
|
| 2.0 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8.5 | ) |
|
| - |
|
|
| (8.5 | ) |
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1.8 |
|
|
| 1.8 |
|
Balance at June 30, 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 64,556,459 |
|
|
| - |
|
|
| 6,511,293 |
|
|
| - |
|
|
| 561.7 |
|
|
| (41.2 | ) |
|
| (6.6 | ) |
|
| 513.9 |
|
Warrant exchange |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,422,564 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Stock-based awards vested and distributed |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,048 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issue Director shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,084 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Amortization of restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1.7 |
|
|
| - |
|
|
| - |
|
|
| 1.7 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (6.1 | ) |
|
| - |
|
|
| (6.1 | ) |
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7.8 |
|
|
| 7.8 |
|
Balance at September 30, 2020 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 68,991,155 |
|
| $ | - |
|
|
| 6,511,293 |
|
| $ | - |
|
| $ | 563.4 |
|
| $ | (47.3 | ) |
| $ | 1.2 |
|
| $ | 517.3 |
|
Successor | |||||||||||||||||||||||||||||||
Ordinary Shares | Common Stock | ||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class C | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Shareholders' Equity | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Balance at June 3, 2019 | 2,770,967 | — | 11,250,000 | — | — | — | — | — | $ | 16.9 | $ | (11.9 | ) | $ | — | $ | 5.0 | ||||||||||||||
Forward Purchase Shares | 15,000,000 | — | — | — | — | — | |||||||||||||||||||||||||
Additional Shares Purchased | 16,149,317 | — | — | — | — | — | |||||||||||||||||||||||||
Conversion of Forward Purchase & Additional Shares | (31,149,317 | ) | — | 25,454,282 | — | 5,695,035 | — | 256.0 | — | — | 256.0 | ||||||||||||||||||||
Shares Canceled | (3,854,664 | ) | — | (31.7 | ) | — | — | (31.7 | ) | ||||||||||||||||||||||
Convert Class B | (7,395,336 | ) | — | 547,500 | — | — | — | 4.5 | — | — | 4.5 | ||||||||||||||||||||
Convert Public Shares | 14,581,346 | — | 119.9 | — | — | 119.9 | |||||||||||||||||||||||||
Convert Private Placement Warrants | 658,051 | — | 84,875 | — | 6.1 | — | — | 6.1 | |||||||||||||||||||||||
Shares subject to $15.00 earnout | 2,940,336 | — | 24.2 | — | — | 24.2 | |||||||||||||||||||||||||
Shares subject to $12.50 earnout | 3,018,617 | — | 731,383 | — | 30.8 | — | — | 30.8 | |||||||||||||||||||||||
Shares subject to $12.25 earnout | 157,500 | — | 1.3 | — | — | 1.3 | |||||||||||||||||||||||||
Public Shares Redeemed | (2,770,967 | ) | — | — | — | — | — | ||||||||||||||||||||||||
Issue restricted stock units | 0.2 | — | — | 0.2 | |||||||||||||||||||||||||||
Foreign currency translation | — | — | 4.8 | 4.8 | |||||||||||||||||||||||||||
Net loss | — | (10.4 | ) | — | (10.4 | ) | |||||||||||||||||||||||||
Balance at June 30, 2019 | — | $ | — | — | — | 47,357,632 | — | 6,511,293 | — | $ | 428.2 | $ | (22.3 | ) | $ | 4.8 | $ | 410.7 | |||||||||||||
Issue restricted stock units | 1.6 | — | — | 1.6 | |||||||||||||||||||||||||||
Issue Director Shares | 3,720 | ||||||||||||||||||||||||||||||
Foreign currency translation | — | — | (11.1 | ) | (11.1 | ) | |||||||||||||||||||||||||
Net loss | — | (1.6 | ) | — | (1.6 | ) | |||||||||||||||||||||||||
Balance at September 30, 2019 | — | — | — | — | 47,361,352 | — | 6,511,293 | — | $ | 429.8 | $ | (23.9 | ) | $ | (6.3 | ) | $ | 399.6 |
See notes to unaudited condensed consolidated financial statements.
4
Ranpak Holdings Corp.
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
(in millions, except share data)
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Shares |
|
| Amount |
|
| Additional Paid-In Capital |
|
| Accumulated Earnings (Deficit) |
|
| Treasury Stock |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total |
| |||||||
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018 |
|
| 995 |
|
| $ | 0 |
|
| $ | 291.4 |
|
| $ | (69.9 | ) |
| $ | (1.5 | ) |
| $ | (23.6 | ) |
| $ | 196.4 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3.2 | ) |
|
| - |
|
|
| - |
|
|
| (3.2 | ) |
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3.4 | ) |
|
| (3.4 | ) |
Balance at March 31, 2019 |
|
| 995 |
|
|
| 0 |
|
|
| 291.4 |
|
|
| (73.1 | ) |
|
| (1.5 | ) |
|
| (27.0 | ) |
|
| 189.8 |
|
Purchase of Ranpak Corp. |
|
| (995 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
Issue Director shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Amortization of restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (15.8 | ) |
|
| - |
|
|
| - |
|
|
| (15.8 | ) |
Other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (0.6 | ) |
|
| (0.6 | ) |
Balance at June 2, 2019 |
|
| 0 |
|
| $ | 0 |
|
| $ | 291.4 |
|
| $ | (88.9 | ) |
| $ | (1.5 | ) |
| $ | (27.6 | ) |
| $ | 173.4 |
|
Predecessor | |||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | |||||||||||||||||||
Balance at January 1, 2018 | 995 | $ | — | $ | 291.4 | $ | (61.3 | ) | $ | (1.5 | ) | $ | (16.3 | ) | $ | 212.3 | |||||||||
Net loss | (6.8 | ) | (6.8 | ) | |||||||||||||||||||||
Foreign currency translation | 4.5 | 4.5 | |||||||||||||||||||||||
Balance at March 31, 2018 | 995 | — | 291.4 | (68.1 | ) | (1.5 | ) | (11.8 | ) | 210.0 | |||||||||||||||
Net income | 1.9 | 1.9 | |||||||||||||||||||||||
Foreign currency translation | (8.8 | ) | (8.8 | ) | |||||||||||||||||||||
Balance at June 30, 2018 | 995 | — | 291.4 | (66.2 | ) | (1.5 | ) | (20.6 | ) | 203.1 | |||||||||||||||
Net income | $ | 0.3 | $ | 0.3 | |||||||||||||||||||||
Foreign currency translation | $ | (1.1 | ) | (1.1 | ) | ||||||||||||||||||||
Balance at September 30, 2018 | 995 | $ | — | $ | 291.4 | $ | (65.9 | ) | $ | (1.5 | ) | $ | (21.7 | ) | 202.3 | ||||||||||
Balance at January 1, 2019 | 995 | — | 291.4 | (69.9 | ) | (1.5 | ) | (23.6 | ) | 196.4 | |||||||||||||||
Net loss | (3.2 | ) | (3.2 | ) | |||||||||||||||||||||
Foreign currency translation | (3.4 | ) | (3.4 | ) | |||||||||||||||||||||
Balance at March 31, 2019 | 995 | — | 291.4 | (73.1 | ) | (1.5 | ) | (27.0 | ) | 189.8 | |||||||||||||||
Net loss | (15.8 | ) | (15.8 | ) | |||||||||||||||||||||
Purchase of Ranpak Corp. | (995 | ) | (291.4 | ) | 88.9 | 1.5 | (47.1 | ) | (248.1 | ) | |||||||||||||||
Foreign currency translation | 74.1 | 74.1 | |||||||||||||||||||||||
Balance at June 2, 2019 | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
See notes to unaudited condensed consolidated financial statements.
Ranpak Holdings Corp.
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
|
| Successor |
|
|
| Predecessor |
| ||||||
|
| Nine Months Ended September 30, |
|
| June 3, 2019 |
|
|
| January 1, 2019 |
| |||
|
| 2020 |
|
| – September 30, 2019 |
|
|
| – June 2, 2019 |
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (18.2 | ) |
| $ | (13.9 | ) |
|
| $ | (19.0 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 45.3 |
|
|
| 20.1 |
|
|
|
| 26.6 |
|
Amortization of deferred financing costs |
|
| 1.2 |
|
|
| 0.7 |
|
|
|
| 7.5 |
|
Loss on disposal of fixed assets |
|
| 1.7 |
|
|
| 0.2 |
|
|
|
| 1.0 |
|
Deferred income taxes |
|
| (0.9 | ) |
|
| (1.3 | ) |
|
|
| (7.2 | ) |
Loss on derivative contract |
|
| - |
|
|
| 6.4 |
|
|
|
| - |
|
Amortization of initial value of hedging instrument |
|
| (1.2 | ) |
|
| - |
|
|
|
| - |
|
Currency (gain) loss on foreign denominated debt and notes payable |
|
| 3.2 |
|
|
| (0.8 | ) |
|
|
| (2.4 | ) |
Amortization of restricted stock units |
|
| 5.9 |
|
|
| 1.8 |
|
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in receivables, net |
|
| (4.9 | ) |
|
| (0.8 | ) |
|
|
| 1.8 |
|
(Increase) decrease in income tax receivables, net |
|
| (4.5 | ) |
|
| (5.3 | ) |
|
|
| 1.7 |
|
(Increase) decrease in inventory |
|
| (2.7 | ) |
|
| 2.7 |
|
|
|
| (1.3 | ) |
(Increase) decrease in prepaid expenses and other assets |
|
| (1.0 | ) |
|
| (0.5 | ) |
|
|
| 2.7 |
|
Increase (decrease) in accounts payable |
|
| 8.2 |
|
|
| (14.1 | ) |
|
|
| (2.8 | ) |
Increase (decrease) in accrued liabilities |
|
| 6.5 |
|
|
| 3.1 |
|
|
|
| 7.1 |
|
Change in other assets and liabilities |
|
| (0.8 | ) |
|
| 1.4 |
|
|
|
| 1.0 |
|
Net cash provided by (used in) operating activities |
|
| 37.8 |
|
|
| (0.3 | ) |
|
|
| 16.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Converter equipment |
|
| (21.1 | ) |
|
| (9.7 | ) |
|
|
| (9.9 | ) |
Other capital expenditures |
|
| (3.9 | ) |
|
| (0.8 | ) |
|
|
| (0.6 | ) |
Total capital expenditures |
|
| (25.0 | ) |
|
| (10.5 | ) |
|
|
| (10.5 | ) |
Cash paid for acquisitions |
|
| - |
|
|
| (945.6 | ) |
|
|
| - |
|
Cash withdrawn from trust account |
|
| - |
|
|
| 308.1 |
|
|
|
| - |
|
Patent and trademark expenditures |
|
| (0.5 | ) |
|
| (0.2 | ) |
|
|
| (0.3 | ) |
Net cash used in investing activities |
|
| (25.5 | ) |
|
| (648.2 | ) |
|
|
| (10.8 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of term loans and credit facility |
|
| - |
|
|
| 534.6 |
|
|
|
| - |
|
Proceeds from sale of common stock |
|
| - |
|
|
| 314.7 |
|
|
|
| - |
|
Shares subject to Redemption |
|
| - |
|
|
| (158.3 | ) |
|
|
| - |
|
Financing costs of debt facilities |
|
| - |
|
|
| (12.6 | ) |
|
|
| - |
|
Payments on term loans and credit facility |
|
| (1.2 | ) |
|
| - |
|
|
|
| (14.4 | ) |
Payments of promissory note |
|
| - |
|
|
| (4.0 | ) |
|
|
| - |
|
Payment of deferred registration costs |
|
| - |
|
|
| (11.3 | ) |
|
|
| - |
|
Net cash provided by (used in) financing activities |
|
| (1.2 | ) |
|
| 663.1 |
|
|
|
| (14.4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash |
|
| 0.5 |
|
|
| (2.7 | ) |
|
|
| 1.2 |
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| 11.6 |
|
|
| 11.9 |
|
|
|
| (7.3 | ) |
Cash and Cash Equivalents, beginning of period |
|
| 19.7 |
|
|
| 1.7 |
|
|
|
| 17.5 |
|
Cash and Cash Equivalents, end of period |
| $ | 31.3 |
|
| $ | 13.6 |
|
|
| $ | 10.2 |
|
Successor | Predecessor | ||||||||||||
June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Nine Months Ended September 30, 2018 | |||||||||||
Cash Flows from Operating Activities | |||||||||||||
Net loss | $ | (12.0 | ) | $ | (19.0 | ) | $ | (4.6 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||
Depreciation and amortization | 20.1 | 26.6 | 48.3 | ||||||||||
Amortization of deferred financing costs | 0.7 | 7.5 | 2.0 | ||||||||||
Loss on disposal of fixed assets | 0.2 | 1.0 | 1.4 | ||||||||||
Deferred income taxes | (1.3 | ) | 0.6 | (3.4 | ) | ||||||||
Loss (gain) on derivative contract | 6.4 | — | (0.6 | ) | |||||||||
Currency (gain) on foreign denominated notes payable | (3.3 | ) | (2.4 | ) | (4.1 | ) | |||||||
Restricted stock unit grants | 1.8 | — | — | ||||||||||
Changes in operating assets and liabilities: | |||||||||||||
(Increase) decrease in receivables, net | (5.3 | ) | 3.5 | (10.7 | ) | ||||||||
Decrease (increase) in inventory | 2.7 | (1.3 | ) | (1.0 | ) | ||||||||
(Increase) decrease in prepaid expenses and other assets | (0.3 | ) | 2.7 | 0.1 | |||||||||
Increase in other assets | (0.2 | ) | (1.3 | ) | (1.7 | ) | |||||||
(Decrease) increase in accounts payable | (25.4 | ) | (2.8 | ) | 0.1 | ||||||||
Increase (decrease) in accrued liabilities | 2.9 | 7.1 | (1.2 | ) | |||||||||
Increase in other liabilities | 1.4 | 2.3 | 2.3 | ||||||||||
Net cash (used in) provided by operating activities | (11.6 | ) | 24.5 | 26.9 | |||||||||
Cash Flows from Investing Activities | |||||||||||||
Capital expenditures: | |||||||||||||
Converter equipment | (9.7 | ) | (9.9 | ) | (17.9 | ) | |||||||
Other fixed assets | (0.8 | ) | (0.6 | ) | (2.6 | ) | |||||||
Total capital expenditures | (10.5 | ) | (10.5 | ) | (20.5 | ) | |||||||
Cash paid for acquisitions | (945.6 | ) | — | — | |||||||||
Patent and trademark expenditures | (0.2 | ) | (0.3 | ) | (0.4 | ) | |||||||
Net cash used in investing activities | (956.3 | ) | (10.8 | ) | (20.9 | ) | |||||||
Cash Flows from Financing Activities | |||||||||||||
Proceeds from issuance of term loans and credit facility | 539.0 | — | — | ||||||||||
Proceeds from sale of common stock | 302.4 | — | — | ||||||||||
Redemption of stock | (158.3 | ) | — | — | |||||||||
Financing costs of debt facilities | (12.6 | ) | — | — | |||||||||
Payments on term loans and credit facility | — | (13.3 | ) | (5.4 | ) | ||||||||
Payments of promissory note | (4.0 | ) | — | — | |||||||||
Net cash provided by (used in) financing activities | 666.5 | (13.3 | ) | (5.4 | ) | ||||||||
Effect of Exchange Rate Changes on Cash | 5.2 | (7.7 | ) | 2.0 | |||||||||
Net (Decrease) Increase in Cash and Cash Equivalents | (296.2 | ) | (7.3 | ) | 2.6 | ||||||||
Cash and Cash Equivalents, beginning of period | 309.8 | 17.5 | 8.6 | ||||||||||
Cash and Cash Equivalents, end of period | $ | 13.6 | $ | 10.2 | $ | 11.2 |
See notes to unaudited condensed consolidated financial statements.
6
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Note 1
— Nature of OperationsRanpak Holdings Corp. (formerly known as One Madison Corporation) (the “Company” or “Ranpak”) is a leading provider of environmentally sustainable, systems-based, product protection solutions for e-Commerce and industrial supply chains. Through proprietary protective packaging systems and paper consumables, the Company offers a full suite of protective packaging solutions. The Company’s business is global, with a strong presence in the United States and Europe.
One Madison Corporation ("(“One Madison"Madison”) was originally formed as a blank check company incorporated on July 13, 2017 and was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. One Madison units, Class A ordinary shares originally sold as part of the units, and warrants originally sold as part of the units sold in the Company’s initial public offering on January 22, 2018 were listed in the New York Stock Exchange (the "NYSE"“NYSE”) under the symbols "OMAD.U"“OMAD.U”, "OMAD"“OMAD” and "OMAD.WS"“OMAD.WS”, respectively. The Class A ordinary shares and warrants comprising the units began separately trading on February 26, 2018. Upon the closing of the business combination (the "Closing"“Closing”) as described below, these shares and warrants that were converted as part of the transaction, began trading under the symbols "PACK"“PACK” and "PACK WS",“PACK WS,” respectively.
On June 3, 2019, the Company, consummated a business combination (the “Ranpak Business Combination”) pursuant to the Stock Purchase Agreement dated December 12, 2018 by and among the Company, Rack Holdings L.P., a Delaware limited partnership (“Seller”), and Rack Holdings, Inc., a Delaware corporation and a direct wholly owned subsidiary of Seller (“Rack Holdings”). The Company, through its wholly owned subsidiary, Ranger Packaging LLC (the “Acquiring Entity”), acquired all of the issued and outstanding equity interests of Rack Holdings from Seller, on the terms and subject to the conditions set forth in the Stock Purchase Agreement. Refer to Note 47, “Acquisition” for further discussion of the Ranpak Business Combination. In connection with the Ranpak Business Combination, the Company domesticated to a Delaware corporation on May 31, 2019 and changed its name to Ranpak Holdings Corp.
Note 2
— Basis of Presentation and Summary of Significant Accounting PoliciesUnaudited Interim Financial Statements
— These interim unaudited condensed consolidatedThe accompanying unaudited interim condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with instructions to Form 10-Q and Rule 10-01 of the Securities and Exchange Commission (“SEC”) Regulation S-X as they apply to interim financial information. Accordingly, the unaudited interim condensed consolidated financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements, although the Company believeswe believe that the disclosures made are adequate to make the information not misleading.
The interim condensed consolidated financial statements are unaudited but, in the Company’sour opinion, include all adjustments that are necessary for a fair statement of operations and financial position for the periods presented. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.
Predecessor and Successor Reporting
—On June 3, 2019, the Company consummated the acquisition of all outstanding and issued equity interests of Rack Holdings, pursuant to the Stock Purchase Agreement, and now owns 100% of Rack Holdings Inc. and its wholly owned subsidiaries. The Ranpak Business Combination is accounted for under the scope of the Financial Accounting Standards7
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
The financial statements separate the Company’s presentation into two distinct periods. The period before the Closing of the Ranpak Business Combination (labeled Predecessor Period)“Predecessor” period) depicts the financial statements of Rack Holdings, and the period after the Closing (labeled Successor Period)“Successor” period) depicts the financial statements of the Company, including the consolidation of One Madison with Rack Holdings and application of acquisition method of accounting. Further, the period of June 3, 2019 through September 30, 2019 is defined as the “Successor Period” and the period January 1, 2019 through June 2, 2019 is defined as the “1H 2019 Predecessor Period.” As a result of the application of the acquisition method of accounting as of the Closing, the financial statements for the Predecessor Periodsperiods and for the Successor Periodperiods are presented on a different basis of accounting and are, therefore, not comparable.
Principles of Consolidation—The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries prepared in conformity with U.S. GAAP. All intercompany balances and transactions have been eliminated in consolidation.consolidation and certain immaterial prior year amounts have been reclassified consistent with current year presentation. All amounts are in millions, except share and per share amounts and are approximate due to rounding.
Use of Estimates
—The preparation of condensed consolidated financial statements in conformity withForeign Currency —The Company uses derivatives as partnature of the normal business operations to manage its exposure to fluctuations in interest rates associated with variable interest rate debt. The Company has established policies and procedures that governactivities involves the risk management of these exposures. The primary objective in managing these exposures isvarious financial and market risks, including those related to decrease the volatility of cash flows affected by changes in interestforeign currency exchange rates.
Emerging Growth Company (“EGC”) —Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) exempts emerging growth companiesEGCs from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act of 1933, as amended, registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company hasWe have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,we, as an emerging growth company,EGC, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’sour financial statements with another public company, which is neither an emerging growth companyEGC nor an emerging growth companyEGC which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Recently Adopted Accounting Standards Issued and Not Yet Adopted
Recently Issued Accounting Standards — In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). The amendments in this ASU 2016-02”). ASU 2016-02 increases transparency and comparability among organizations by recognizing lease assetsrequire an entity to recognize a right-of-use asset and lease liabilitiesliability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on the balance sheetclassification as a finance or operating lease. The amendments also require certain quantitative and disclosing key informationqualitative disclosures about leasing arrangements. ASU 2016-02 isASC 842 was originally effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020 with early adoption permitted. OnIn October 16, 2019, the FASB delayed the implementation of ASU 2016-02ASC 842 for private companies until fiscal years beginning after December 15, 2020. The Company is assessingIn June 2020, the potentialFASB further delayed the implementation of ASC 842 for private companies until fiscal years beginning after December 15, 2021. Given our status as an EGC, we will adopt ASC 842 in accordance with the private company guidance. Our implementation team includes personnel from accounting, tax, legal, information technology, and operations departments. We are in the process of analyzing our lease portfolio and business processes to determine the impact of the new standard on the consolidatedour financial statements and disclosures, however, an estimate of the change impact is unavailable at this time.
8
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in adoption.
In August 2018,June 2016, the FASB issued ASU No. 2018-13,2016-13, Fair ValueFinancial Instruments - Credit Losses (Topic 326): Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurementof Credit Losses on Financial Instruments (“ASU 2018-13”2016-13”). The amendments in, which amends the FASB’s guidance on the impairment of financial instruments. ASU 2018-13 modify2016-13 adds to GAAP an impairment model (known as the disclosure requirements“current expected credit loss model”) that is based on fair value measurements in ASC Topic 820, Fair Value Measurement. The amendments inexpected losses rather than incurred losses. ASU 2018-13 are2016-13 was originally effective for all entities for fiscal years, andannual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is assessing the potential impact of the new standard on the consolidated financial statements.
In March 2020, the Company's condensed consolidatedFASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. These expedients and exceptions do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients and that are retained through the end of the hedging relationship. ASU 2020-04 is effective for all entities as of March 12, 2020 (the date of the issuance of ASU 2020-04) through December 31, 2022. An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements.statements are available to be issued. We are evaluating the impact of ASU 2020-04 on our financial statements and disclosures.
Note 3 — Supplemental Balance Sheet Data and Cash Flow Information
Accounts Receivable, net — The components of accounts receivable, net was follows:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Accounts receivable |
| $ | 42.9 |
|
| $ | 36.3 |
|
Allowance for doubtful accounts |
|
| (0.5 | ) |
|
| (0.2 | ) |
Accounts receivable, net |
| $ | 42.4 |
|
| $ | 36.1 |
|
Inventories, net — The components of inventories, net were as follows:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Raw materials |
| $ | 9.1 |
|
| $ | 7.2 |
|
Finished goods |
|
| 5.6 |
|
|
| 4.7 |
|
Total inventories |
|
| 14.7 |
|
|
| 11.9 |
|
Reserve for obsolescence |
|
| (1.2 | ) |
|
| (0.3 | ) |
Inventories, net |
| $ | 13.5 |
|
| $ | 11.6 |
|
Property, Plant and Equipment, net — The following table details our property, plant and equipment, net:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Land |
| $ | 4.1 |
|
| $ | 4.1 |
|
Buildings and improvements |
|
| 8.8 |
|
|
| 8.1 |
|
Machinery and equipment |
|
| 14.3 |
|
|
| 13.0 |
|
Computer and office equipment |
|
| 8.8 |
|
|
| 6.7 |
|
Converting machines |
|
| 129.1 |
|
|
| 105.9 |
|
Total property, plant, and equipment |
|
| 165.1 |
|
|
| 137.8 |
|
Accumulated depreciation |
|
| (39.1 | ) |
|
| (15.3 | ) |
Property, plant, and equipment, net |
| $ | 126.0 |
|
| $ | 122.5 |
|
9
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Successor | Predecessor | ||||||||
September 30, 2019 | December 31, 2018 | ||||||||
Allowance for doubtful accounts | $ | (0.2 | ) | $ | (0.2 | ) |
Successor | Predecessor | ||||||||
September 30, 2019 | December 31, 2018 | ||||||||
Inventories | |||||||||
Raw materials | $ | 7.9 | $ | 4.1 | |||||
Finished goods | 5.0 | 8.0 | |||||||
Total inventories | 12.9 | 12.1 | |||||||
Less reserve for obsolescence | (0.4 | ) | (0.3 | ) | |||||
Total inventories, net | $ | 12.5 | $ | 11.8 |
Depreciation expense is recorded in cost of sales and depreciation and amortization in the unaudited condensed consolidated statements of operations and comprehensive lossincome (loss) was as follows:
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
Depreciation expense included in cost of goods sold |
| $ | 8.0 |
|
| $ | 5.1 |
|
| $ | 22.4 |
|
| $ | 6.9 |
|
|
| $ | 8.9 |
|
Depreciation expense included in depreciation and amortization expense |
|
| 0.6 |
|
|
| 0.4 |
|
|
| 1.6 |
|
|
| 0.5 |
|
|
|
| 0.7 |
|
Total depreciation expense |
| $ | 8.6 |
|
| $ | 5.5 |
|
| $ | 24.0 |
|
| $ | 7.4 |
|
|
| $ | 9.6 |
|
Supplemental Cash Flow Information — Supplemental cash flow information is as follows:
Successor | Predecessor | |||||||||||||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||||||
Depreciation expense included in cost of sales | $ | 5.1 | $ | 6.9 | $ | 8.9 | $ | 5.3 | $ | 15.9 | ||||||||||
Depreciation expense included in depreciation and amortization expense | 0.4 | 0.5 | 0.7 | 0.4 | 1.0 | |||||||||||||||
Total depreciation expense | $ | 5.5 | $ | 7.4 | $ | 9.6 | $ | 5.7 | $ | 16.9 |
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
Interest paid |
| $ | 5.5 |
|
| $ | 7.9 |
|
| $ | 17.0 |
|
| $ | 7.9 |
|
|
| $ | 12.5 |
|
Taxes paid |
|
| 1.2 |
|
|
| 2.2 |
|
|
| 2.7 |
|
|
| 2.4 |
|
|
|
| 4.0 |
|
Capital leases |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0.3 |
|
| $ | 0 |
|
|
| $ | 0 |
|
Note 4 — Segment and Geographic Information
In accordance with ASC 280, Segment Reporting (“ASC 280”), we determined we have 2 operating segments which are aggregated into 1 reportable segment, Ranpak. The chief operating decision maker assesses the Company’s performance and allocates resources based on the Company’s consolidated financial information. The aggregation of the two operating segments is based on the Company’s determination that, per ASC 280, the operating segments have similar economic characteristics, and are similar in all of the following areas: the nature of products and services, the nature of production processes, the type or class of customer for their products or services, and the methods used to distribute their products or provide their services. In addition, the operating segments were aggregated for purposes of determining whether segments meet the quantitative threshold for separate reporting.
We attribute revenue to individual countries based on the selling location. Our products are primarily sold from North America and Europe. The following table presents a summary of total net revenue to external customers by geographic location:
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
North America |
| $ | 33.3 |
|
| $ | 32.9 |
|
| $ | 88.6 |
|
| $ | 42.2 |
|
|
| $ | 50.1 |
|
Europe/Asia |
|
| 43.5 |
|
|
| 36.2 |
|
|
| 117.7 |
|
|
| 43.2 |
|
|
|
| 56.3 |
|
Net revenue |
| $ | 76.8 |
|
| $ | 69.1 |
|
| $ | 206.3 |
|
| $ | 85.4 |
|
|
| $ | 106.4 |
|
Our customers are not concentrated in any specific geographic region. During the nine months ended September 30, 2020 and the 1H 2019 Predecessor Period, no customers exceeded 10% of net revenue. During the Successor Period, one customer accounted for approximately 10.1% of net revenue.
10
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Note 4 5 — Revenue Recognition, Contracts with Customers
Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. Revenue for paper consumables is recognized based on shipping terms, which is the point in time the customer obtains control of the promised goods. Revenue for equipment sales is recognized based on an input method, based on percentage of completion of cost and effort incurred. Maintenance revenue is recognized straight-line on the basis that the level of effort is consistent over the term of the contract. Lease components within contracts with customers are recognized in accordance with ASC Topic 840, Leases (“ASC 840”).
Sales, value-added, and other taxes collected from customers and remitted to governmental authorities are excluded from revenue.
Our paper consumables, automation equipment, and maintenance services are determined to be distinct performance obligations. Free on loan and leased equipment is typically identified as a separate lease component in scope of ASC 840. In association to the sale of automation equipment, we sell other goods and services, such as extended warranties, preventative maintenance services, spare parts and spare part packages, and consulting services. These other goods and services do not represent performance obligations because they are neither separate nor distinct, or they are not material.
We have forms of variable consideration present in our contracts with customers, including rebates and other discounts. We estimate variable consideration using either the expected value method or the most likely amount method. We include in the transaction price some or all of an amount of variable consideration estimated to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The time between when a performance obligation is satisfied and when billing and payment occur is closely aligned and performance obligations do not extend beyond one year. As the transfer of control of our products results in an unconditional right to receive consideration, we did 0t record contract assets as of September 30, 2020 and December 31, 2019.
Deferred revenue represents contractual amounts received from customers that exceed percentage of project completion that is in excess of costs incurred for automation equipment sales, as well as prepayments for machine fees that are amortized over the next quarter. Our enforceable contractual obligations have durations of less than one year and are included in current liabilities on the unaudited condensed consolidated balance sheets. Changes in deferred revenue were as follows:
|
| Nine Months Ended September 30, |
| |
|
| 2020 |
| |
Beginning balance |
| $ | 2.5 |
|
Deferral of revenue |
|
| 1.3 |
|
Recognition of revenue |
|
| (1.9 | ) |
Adjustment for returns |
|
| (1.1 | ) |
Ending balance |
| $ | 0.8 |
|
In addition to the disaggregation of revenue between paper, machine lease, and other revenue, we further disaggregate our revenue by segment geography to assist in evaluating the nature, timing, and uncertainty of revenue and cash flows that may be impacted by economic factors:
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
North America |
| $ | 29.0 |
|
| $ | 29.0 |
|
| $ | 76.6 |
|
| $ | 38.3 |
|
|
| $ | 43.0 |
|
Europe/Asia |
|
| 37.4 |
|
|
| 30.8 |
|
|
| 101.4 |
|
|
| 35.3 |
|
|
|
| 49.0 |
|
Machine lease revenue |
|
| 10.4 |
|
|
| 9.3 |
|
|
| 28.3 |
|
|
| 11.8 |
|
|
|
| 14.4 |
|
Net revenue |
| $ | 76.8 |
|
| $ | 69.1 |
|
| $ | 206.3 |
|
| $ | 85.4 |
|
|
| $ | 106.4 |
|
11
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
North America consists of the United States, Canada and Mexico; Europe/Asia consists of European, Asian (including China), Pacific Rim, South American and African countries.
Note 6 — Goodwill, Long-Lived and Intangible Assets, Net
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of purchase price over the fair value of net assets acquired. Trademarks and trade names are accounted for as indefinite-lived intangible assets and, accordingly, are not subject to amortization. We review goodwill on a reporting unit basis and indefinite-lived assets for impairment annually on October 1st and on an interim basis whenever events or changes in circumstances indicate the carrying value of goodwill or indefinite-lived intangible assets may be impaired.
Due to the COVID-19 outbreak, we assessed whether events or circumstances indicate that it was more likely than not that our goodwill and indefinite-lived intangible assets were impaired as of September 30, 2020. The goodwill and indefinite-lived intangible assets assessments included consideration of key factors such as macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity-and reporting unit-specific events. While the extent and duration of the economic implications from the COVID-19 pandemic remain unclear, we concluded that it is more likely than not that the fair value of our reporting units and indefinite-lived intangible assets exceeded their carrying values at September 30, 2020.
The following table shows our goodwill balances by operating segment that are aggregated into one reportable segment:
|
| North America |
|
| Europe |
|
| Total |
| |||
Balance at December 31, 2019 |
| $ | 343.0 |
|
| $ | 105.8 |
|
| $ | 448.8 |
|
Currency translation |
|
| 0 |
|
|
| 4.3 |
|
|
| 4.3 |
|
Balance at September 30, 2020 |
| $ | 343.0 |
|
| $ | 110.1 |
|
| $ | 453.1 |
|
Finite-Lived Intangible Assets, net
Finite-lived or amortizable intangible assets consist of patented and unpatented technology and customer/distributor relationships. In the second quarter of 2020, certain in-process research & development assets were placed in service and transferred into patented/unpatented technology to be amortized over a five-year life.
Impairment of Long-lived Assets
We review our long-lived assets, including amortizable intangible assets and property, plant and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. For long-lived assets, an impairment loss is indicated when the undiscounted cash flows estimated to be generated by the asset group are not sufficient to recover the unamortized balance of the asset group. If indicators exist, the loss is measured as the excess of carrying value over the asset group’s fair value, as determined based on discounted future cash flows, asset appraisal and market values of similar assets. As of September 30, 2020, there were no indicators of impairment present for property, plant and equipment or amortizable intangible assets that required us to test for recoverability.
The following tables summarize our identifiable intangible assets, net with definite and indefinite useful lives:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
| ||||||
Customer/distributor relationships |
| $ | 204.1 |
|
| $ | (18.3 | ) |
| $ | 185.8 |
|
| $ | 199.5 |
|
| $ | (7.9 | ) |
| $ | 191.6 |
|
Patented/unpatented technology |
|
| 168.3 |
|
|
| (20.0 | ) |
|
| 148.3 |
|
|
| 164.5 |
|
|
| (8.5 | ) |
|
| 156.0 |
|
In-process research and development |
|
| 1.6 |
|
|
| - |
|
|
| 1.6 |
|
|
| 5.0 |
|
|
| - |
|
|
| 5.0 |
|
Total definite-lived intangible assets |
|
| 374.0 |
|
|
| (38.3 | ) |
|
| 335.7 |
|
|
| 369.0 |
|
|
| (16.4 | ) |
|
| 352.6 |
|
Trademarks/tradenames with indefinite lives |
|
| 106.1 |
|
|
| - |
|
|
| 106.1 |
|
|
| 106.0 |
|
|
| - |
|
|
| 106.0 |
|
Identifiable intangible assets, net |
| $ | 480.1 |
|
| $ | (38.3 | ) |
| $ | 441.8 |
|
| $ | 475.0 |
|
| $ | (16.4 | ) |
| $ | 458.6 |
|
12
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
The following table shows the remaining estimated amortization expense for our definite-lived intangible assets at September 30, 2020:
Year |
| Amount |
| |
2020 |
| $ | 7.2 |
|
2021 |
|
| 29.0 |
|
2022 |
|
| 29.0 |
|
2023 |
|
| 29.0 |
|
2024 |
|
| 29.0 |
|
Thereafter |
|
| 210.9 |
|
|
| $ | 334.1 |
|
Amortization expense was $7.1 million and $21.3 million in the three and nine months ended September 30, 2020, respectively. Amortization expense was $9.8 million in the three months ended September 30, 2019, $12.7 million in the Successor Period, and $17.0 million in the 1H 2019 Predecessor Period.
The following table shows the remaining weighted-average useful life of our definite lived intangible assets as of September 30, 2020:
Remaining Weighted-Average Useful Life | ||
Customer/distributor relationships | 14 years | |
Patented/unpatented technology | 10 years | |
Total identifiable assets, net with definite lives | 12 years |
Note 7 — Acquisition
Ranpak Business Combination
—On June 3, 2019, the Company consummated the acquisition of all outstanding and issued equity interests of Rack Holdings, the Ranpak Business Combination, pursuant to the Stock Purchase Agreement for consideration ofThe Ranpak Business Combination is accounted for under ASC 805. Pursuant to ASC 805, the Company has been determined to be the accounting acquirer. Refer to Note 21, Nature of Operations, for more information. Rack Holdings constitutes a business with inputs, processes, and outputs. Accordingly, the acquisition of Rack Holdings constitutes the acquisition of a business for purposes of ASC 805 and, due to the change in control of Rack Holdings, was accounted for using the acquisition method. The Company recorded the fair value of assets acquired and liabilities assumed from Rack Holdings.
The allocation of the consideration to the assets acquired and liabilities assumed is based on various estimates. As of September 30,December 31, 2019, the Company completed its evaluation of net working capital as part of the purchase price paid at Closing and paid additional consideration of $0.7 million. The Company continues to evaluateWe finalized the purchase accounting fair value of the acquired intangible assets and equipment. As such, to the extent of these estimates, the purchase price allocation is preliminary and subject to change within the respective measurement period which will not extend beyond one year from the acquisition date. Any adjustments will be recognizedassessment in the reporting period second quarter of 2020.
13
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in which the adjustment amounts are determined.
The following represents the preliminary purchase price allocation for the Ranpak Business Combination:
|
| Amount |
| |
Total consideration |
| $ | 955.7 |
|
Cash and cash equivalents |
|
| 10.1 |
|
Accounts receivable |
|
| 28.2 |
|
Inventories |
|
| 16.1 |
|
Property, plant and equipment |
|
| 119.5 |
|
Other assets |
|
| 4.8 |
|
Intangible assets |
|
| 473.7 |
|
Total identifiable assets acquired |
|
| 652.4 |
|
Accounts payable |
|
| 8.6 |
|
Accrued expenses |
|
| 7.4 |
|
Other liabilities |
|
| 5.0 |
|
Deferred tax liabilities |
|
| 122.9 |
|
Net identifiable liabilities acquired |
|
| 143.9 |
|
Goodwill |
| $ | 447.2 |
|
Amount | |||
Total Consideration, net of cash | $ | 945.6 | |
Cash and cash equivalents | 10.1 | ||
Accounts receivable | 28.2 | ||
Inventories | 15.5 | ||
Property, plant and equipment | 118.8 | ||
Other assets | 4.7 | ||
Intangible assets | 480.8 | ||
Total identifiable assets acquired | 658.1 | ||
Accounts payable | 8.6 | ||
Accrued expenses | 7.4 | ||
Other liabilities | 4.5 | ||
Deferred tax liabilities | 112.8 | ||
Net identifiable liabilities acquired | 133.3 | ||
Goodwill | $ | 420.8 |
Intangible assets and property, plant and equipment balancebalances comprise the following:
|
| Fair Value |
|
| Remaining Useful Lives | |
Patented/Unpatented Technology |
| $ | 164.1 |
|
| 10 years |
Customer/Distributor Relationships |
|
| 198.6 |
|
| 15 years |
In-Process Research & Development |
|
| 5.0 |
|
| N/A |
Trade Names/Trademarks |
|
| 106.0 |
|
| Indefinite |
Total Fair Value |
| $ | 473.7 |
|
|
|
|
|
|
|
|
|
|
Machinery and Equipment |
| $ | 17.6 |
|
| 5 years |
Converting Machines |
|
| 90.4 |
|
| 3 - 7 years |
Buildings and Improvements |
|
| 7.4 |
|
| 15 years |
Land |
|
| 4.1 |
|
| N/A |
Total Fair Value |
| $ | 119.5 |
|
|
|
Preliminary Fair Value | Remaining Useful Lives | ||||
Trade Names/Trademarks | $ | 106.0 | Indefinite | ||
Customer/Distributor Relationships | 205.7 | 15 years | |||
Patented/Unpatented Technology | 164.1 | 10 years | |||
In-Process Research & Development | 5.0 | 10 years | |||
Total Preliminary Fair Value | 480.8 | ||||
Carrying Value as of 06/2/2019 | 274.6 | ||||
Adjustment amount | $ | 206.2 | |||
Machinery and Equipment | $ | 108.1 | 5 years | ||
Buildings and Improvements | 6.6 | 15 years | |||
Land | 4.1 | N/A | |||
Total Preliminary Fair Value | 118.8 | ||||
Carrying Value as of 06/02/2019 | 71.9 | ||||
Adjustment amount | $ | 46.9 |
The preliminary fair values for the trade names/trademarks, and patented/unpatented technology, and in-process R&D were determined using the Relief-from-Royalty Method, which is a combination of an Income Approach and Market Approach. The preliminary fair value for customer/distributor relationships was determined using the Multi-Period Excess Earnings Method, which is an Income-based Approach.
The preliminary fair value for land was determined using Sales Comparison and Cost Approaches, depending on location. The preliminary fair value for machinery and equipment, and buildings and improvements were determined using a combination of the Cost Approach and Market Approach, considering physical deterioration when determining current reproduction costs.
The preliminary estimates of remaining useful lives for the intangible assets and property, plant, and equipment were determined by assessing the period of economic benefit of the asset.
Goodwill represents the excess of the total purchase consideration over the fair value of the underlying net assets, largely arising from the assembled workforce, new customers and the replacement of customercustomers and technology attrition. Goodwill is not amortized for tax purposes.
14
Ranpak Business Combination totaled $48.0 million. Of this amount, $12.6 million was classified as debt issuance costs, including $1.7 million presented as assets and $10.9 million presented as a reduction to debt within the condensed consolidated balance sheets. Transaction costs of $0.0 million were expensed in the Successor Period from July 1, 2019 through September 30, 2019, $0.3 million was expensed in the Successor Period from June 3, 2019 through September 30, 2019, $7.4 million was expensed in the Predecessor Period from January 1, 2019 through June 2, 2019, and $1.0 million was expensed in the Predecessor Period from July 1, 2018 through September 30, 2018 and $1.2 million was expensed in the Predecessor Period from January 1, 2018 through September 30, 2018 within income from operations in the condensed consolidated statement of operations.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Amount | |||
Deferred financing costs | $ | 12.6 | |
Transaction costs | 25.6 | ||
Payment of accrued transaction costs | 9.8 | ||
Total | $ | 48.0 | |
Debt issuance costs: | |||
Presented as reduction to debt | $ | 10.9 | |
Presented as asset | 1.7 | ||
Total debt issuance costs | $ | 12.6 |
The following unaudited information represents the unaudited supplemental pro forma results of the Company’s condensed consolidated statement of operations as if the Ranpak Business Combination occurred on January 1, 2018,2019, for the three months and nine months ended September 30, 2019, and 2018, after giving effect to certain adjustments, including depreciation and amortization of the assets acquired and liabilities assumed based on their estimated fair values and changes in interest expense resulting from changes in debt (in millions):
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
Net revenue |
| $ | 70.4 |
|
| $ | 198.2 |
|
Net loss |
| $ | 0.8 |
|
| $ | (9.8 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net Sales | $ | 70.4 | $ | 64.7 | $ | 196.9 | $ | 188.3 | ||||||||
Net (loss) income | $ | 0.8 | $ | 0.3 | $ | (8.0 | ) | $ | (2.1 | ) |
These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the Company been a combined company during the periods presented and are not necessarily indicative of consolidated results of operations in future periods. The pro forma results include adjustments primarily related to purchase accounting adjustments. Acquisition costs and other non-recurring charges incurred are included in the earliest period presented.
Neopack Acquisition
—On February 28, 2017, pursuant to the Share Purchase Agreement (“e3NEO Purchase Agreement”) the Predecessor acquired all of the capital stock of Neopack Solutions S.A.S. dba e3NEO.The e3NEO Purchase Agreement contained a contingent consideration arrangement that required the Company to pay e3NEO a “Next Generation Machine Payment”, which was computed by the Company based on certain criteria established in the e3NEO Purchase Agreement. The criteria included, but were not limited to, the design and development by e3NEO of a prototype of the “Next Generation Machine” as defined in the e3NEO Purchase Agreement. The maximum amount payable, $1.1 million, was recorded as contingent consideration, all of which $0.8 million was paid in the nine months ended September 30, 2018, and the remainder of the balance was paid prior to December 31, 2018.
Additionally, the e3NEO Purchase Agreement contains an earn-out provision whereby the seller may be entitled to receive an earn-out payment in an amount up to the greater of (i) $2.6 million (the “Minimum Earn-Out Amount”), and (ii) the trailing twelve (12) month earnings before income taxes, depreciation and amortization of the business calculated as of December 31, 2020 multiplied by forty-eight percent (48%). The earn-out payment, if and to the extent earned, shall be paid in accordance with the terms of the e3NEO Purchase Agreement. In order to be eligible to receive the Minimum Earn-Out Amount pursuant to the e3NEO Purchase Agreement,purchase agreement, e3NEO must have caused the business to receive purchase orders from customers and receive sign-off from such customers upon completion of a successful factory acceptance test for at least twenty (20) Next Generation Machinesrelated to certain next generation machines on or before December 31, 2019 subject to the reasonable approval of the Company. AtThe conditions of the earn-out were not achieved and the Company agreed to a settlement arrangement with the former majority owner of e3NEO, which was approved by French authorities and finalized on April 21, 2020. The arrangement provides for a payment to the earn-out counterparties in the amount of approximately$1.6 million and also provides the former majority owner of e3NEO severance from the Company, including non-compete and consulting amounts under French law. Approximately $0.2 million was expensed in the second quarter of 2020 after certain approvals were obtained by French authorities. Approximately $0.8 million was paid in the second quarter of 2020. Approximately $0.6 million was accrued for at September 30, 2019 and December 31, 2018, the Company determined the seller would likely be entitled to receive the Minimum Earn-Out Amount of $2.6 million payable in 2020 and as a result, has included the amount payable in other non-current liabilities onin the unaudited condensed consolidated balance sheet at September 30, 2019 and December 31, 2018.
Note 5
In connection with the Closing of the Ranpak Business Combination, Ranger Pledgor LLC ("Holdings"(“Holdings”), Ranger Packaging LLC (the "US Borrower"“U.S. Borrower”), and Ranpak B.VB.V. (the "Dutch“Dutch Borrower" and together with the US Borrower, the "Borrowers"“Borrowers”), entered into a First Lien Credit Agreement that provided for senior secured credit facilities to, in part, (i) fund the business combination, (ii) repay and terminate the existing indebtedness of Rack Holdings, and (iii) pay all fees, premiums, expenses and other transaction costs incurred in connection with the foregoing. The aggregate principal amount of the senior secured credit facilities consists of a $378.2 million dollar-denominated first lien term facility (the “First Lien Dollar Term Facility”), a €140.0 million ($152.6 million equivalent) euro-denominated first lien term facility (the “First Lien Euro Term Facility” and, together with the First Lien Dollar Term Facility, the “First Lien Term Facility”) and a $45.0 million revolving facility (the “Revolving Facility” and together with the First Lien Term Facility, the “Facilities”). The First Lien Term Facility matures seven years after the closing date and the Revolving Facility matures five years after the Closing Date.closing date. In December 2019, the Company closed on a public offering of its Class A common stock generating net proceeds of approximately $107.7 million that was used to pay down the First Lien Dollar Term Facility. As of September 30, 2020 and December 31, 2019, 0 amounts arewere outstanding under the Revolving Facility.
15
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Long-term debt consisted of the following:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
First Lien Dollar Term Facility |
| $ | 270.9 |
|
| $ | 270.9 |
|
First Lien Euro Term Facility |
|
| 162.5 |
|
|
| 157.3 |
|
Deferred financing costs, net |
|
| (7.0 | ) |
|
| (7.8 | ) |
Total debt |
|
| 426.4 |
|
|
| 420.4 |
|
Less: current portion |
|
| (1.6 | ) |
|
| (1.6 | ) |
Long-term debt |
| $ | 424.8 |
|
| $ | 418.8 |
|
First Lien Dollar Term Facility | $ | 378.2 | |
First Lien Euro Term Facility (140.0 million Euro) | 152.6 | ||
Revolving Facility | — | ||
Total Debt | $ | 530.8 | |
Less deferred financing costs, net | (10.2 | ) | |
Less current portion | (5.4 | ) | |
Long-term Debt | $ | 515.2 |
Borrowings under the Facilities, at the Borrowers'Borrowers’ option, bear interest at either (1) an adjusted eurocurrency rate or (2) a base rate, in each case plus an applicable margin. The applicable margin is 4.00%3.75% with respect to eurocurrency borrowings and 3.00% with respect to base rate borrowings as of September 30, 2020 and December 31, 2019, (in each case, assuming a first lien net leverage ratio of greaterless than or equal to 5.00:1.00), subject to a leverage-based stepdown.
The Revolving Facility includes borrowing capacity available for standby letters of credit of up to $5$5.0 million. Any issuance of letters of credit will reduce the amount available under the Revolving Facility.
The Facilities will provide the Borrowers with the option to increase commitments under the Facilities in an aggregate amount not to exceed the greater of $95.0 million and 100% of trailing-twelve months Consolidated EBITDA (as defined in the definitive documentation with respect to the Facilities), plus any voluntary prepayments of the debt financing (and, in the case of the Revolving Facility, to the extent such voluntary prepayments are accompanied by permanent commitment reductions under the Revolving Facility), plus unlimited amounts subject to the relevant net leverage ratio tests and certain other conditions.
The obligations of (i) the US Borrower under the Facilities and certain of its obligations under hedging arrangements and cash management arrangements are unconditionally guaranteed by Holdings and each existing and subsequently acquired or organized
The Facilities imposedimpose restrictions that require the Company to comply with or maintain certain financial tests and ratios. Such agreements restrict our ability to, among other things: (i) declare dividends or redeem or repurchase capital stock, including with respect to Class A common stockstock; (ii) prepay, redeem or purchase other debtdebt; (iii) incur liensliens; (iv) make loans, guarantees, acquisitions and other investmentsinvestments; (v) incur additional indebtednessindebtedness; (vi) engage in sale and leaseback transactionstransactions; (vii) amend or otherwise alter debt and other material agreementsagreements; (viii) engage in mergers, acquisitions and asset salessales; (ix) engage in transactions with affiliatesaffiliates; and (x) enter into arrangements that would prohibit us from granting liens or restrict our ability to pay dividends, make loans or transfer assets among our subsidiaries. The Company wasWe were in compliance with all of its financial covenants as of September 30, 2019.
On February 14, 2020, Ranger Packaging LLC, a Delaware limited liability company (“U.S. Borrower”), Ranpak B.V., (the “Dutch Borrower”; the U.S. Borrower and the Dutch Borrower, the “Borrowers”), Ranger Pledgor LLC, a Delaware limited liability company (“Holdings”), certain other subsidiaries of Holdings, certain lenders party to Amendment No. 1 (as defined below) and Goldman Sachs Lending Partners LLC (the “Administrative Agent”) entered into the following:
First Lien Term Loan B - United States Dollar based facility with interest based on one month adjusted Eurodollar plus margin. Interest rate was 5.77% at December 31, 2018 | $ | 253.6 | |
First Lien Term Loan B - Euro based facility with interest based on one month adjusted EURIBOR plus margin. Interest rate was 4.25% at December 31, 2018 | 172.4 | ||
Second Lien US$ Tranche with interest based on one month adjusted Eurodollar plus margin. Interest rate was 9.71% at December 31, 2018 | 80.5 | ||
Total Debt | $ | 506.5 | |
Less deferred financing costs | (7.2 | ) | |
Less current portion (First Lien) | (4.4 | ) | |
Long-term debt | $ | 494.9 |
16
Ranpak Business Combination, Rack Holdings' existing debt, which amounted to approximately $495.0 million, was repaid in full. At the date of the transaction, the remaining $6.3 million of deferred finance costs were written-off.
Successor | Predecessor | |||||||||||||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||||||
Amortization of deferred financing costs | $ | 0.6 | $ | 0.7 | $ | 7.5 | $ | 0.6 | $ | 2.0 |
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Successor | Predecessor | |||||||||
September 30, 2019 | December 30, 2018 | |||||||||
Accumulated amortization of deferred financing costs | $ | 0.7 | $ | 15.5 |
Among other things, the Company makes an estimateAmendment No. 1 amends the Credit Agreement such that (i) the requirement of the effective tax rate it expectsBorrowers to be applicableapply excess cash flow to mandatorily prepay term loans under the Credit Agreement commences with the fiscal year ending December 31, 2021 (instead of the fiscal year ending December 31, 2020) and (ii) the aggregate amount per fiscal year of capital stock of any parent company of the U.S. Borrower that is held by directors, officers, management, employees, independent contractors or consultants of the U.S. Borrower (or any parent company or subsidiary thereof) that the U.S. Borrower may repurchase, redeem, retire or otherwise acquire or retire for value has been increased to the full year for its operations. This estimated effective tax rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate was as following:
Successor | Predecessor | |||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||
Effective tax rate | 69.8% | 31.4% | 20.5% | 105.8% | 56.2% |
On July 1, 2020, we entered into a borrower assumption agreement (“Borrower Assumption Agreement”), which provided that, in the U.S.following order, (i) Rack Holdings Inc. merged with and into Ranger Packaging LLC, with Ranger Packaging LLC as the surviving entity of such merger and (ii) Ranger Packaging LLC merged with and into Ranpak Corp., with Ranpak Corp. as the surviving entity of such merger (clauses (i) and income in foreign jurisdictions that are taxed at different rates than(ii) collectively, the U.S. statutory tax rate.
Note 7
We use derivatives as part of the normal business operations to manage itsour exposure to fluctuations in interest rates associated with variable interest rate debt. The Company has established policiesdebt and procedures that govern the risk management of these exposures. The primary objective in managing these exposures is to decrease the volatility of cash flows affected by changes in interest rates.
On January 31, 2019, the Company entered into a business combination contingent interest rate swap in a notional amount of $200.0 million (the “January 2019 Swap”) to hedge part of the floating interest rate exposure under the First Lien Dollar Term Facility. The interest rate swapJanuary 2019 Swap became effective on the Closing of the Ranpak Business Combination and will terminate on the third anniversary of the Closing.Closing on June 3, 2022. The interest rate swapJanuary 2019 Swap economically converts a portion of the variable rate debt to fixed rate debt. The Company receives floating interest payments monthly based on one-month LIBOR and paidpays a fixed rate of 2.5634%2.56% to the counterparty. On September 25, 2019, the Company entered into 2 new interest rate swaps, one that lowered the rate on the $200.0 million notional amount to 2.3109% and extended the maturity for one year and the second on a new $50.0 million notional amount. Both interest rate swaps have matching maturities of June 1, 2023. The Company was able to apply hedge accounting to both of these swap arrangements.
On September 25, 2019, the Company amended the existing interest rate swap for the notional amount of $200.0 millionJanuary 2019 Swap to extend its term to mature on June 1, 2023 and lower the rate to 2.31% (the “Amended January 2019 Swap”). We concurrently entered into an incremental $50.0 million notional swap with similar terms. As of September 30, 2019, our interest rate swap contracts have a combined notional of $250.0 millionat 1.5% and terminatematuring on June 1, 2023. The risk management objective in using interest rate swaps is to add stability to interest expense and to manage our exposure to interest rate movements. Beginning in2023 (the “September 2019 Swap”).
Additionally, on September 25, 2019, our interest rate swaps werewe designated as cash flow hedges.hedges the Amended January 2019 Swap and the September 2019 Swap and applied hedge accounting. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Realized gains or losses fromChanges in fair value are recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.
On March 27, 2020, we entered into an interest rate swap that amended the Amended January 2019 Swap to a lower rate of 2.1% and extended the maturity to June 3, 2024 (the “Second Amended January 2019 Swap”). We designated the Second Amended January 2019 Swap as a cash flow hedge and applied hedge accounting.
A summary of our interest rate swaps are recorded is as follows:
Interest Rate Swap Agreements |
| Designation |
| Maturity Date |
| Rate |
|
| Notional Value |
|
| Debt Instrument Hedged |
| Percentage of Debt Instrument Outstanding |
| |||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2019 Swap |
| Cash flow hedge |
| June 1, 2023 |
| 1.50% |
|
| $ | 50.0 |
|
| First Lien Dollar Term Facility |
| 18% |
| ||
Second Amended January 2019 Swap |
| Cash flow hedge |
| June 3, 2024 |
| 2.10% |
|
|
| 200.0 |
|
| First Lien Dollar Term Facility |
| 74% |
| ||
|
|
|
|
|
|
|
|
|
| $ | 250.0 |
|
|
|
| 92% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2019 Swap |
| Cash flow hedge |
| June 1, 2023 |
| 1.50% |
|
| $ | 50.0 |
|
| First Lien Dollar Term Facility |
| 18% |
| ||
Amended January 2019 Swap |
| Cash flow hedge |
| June 1, 2023 |
| 2.31% |
|
|
| 200.0 |
|
| First Lien Dollar Term Facility |
| 74% |
| ||
|
|
|
|
|
|
|
|
|
| $ | 250.0 |
|
|
|
| 92% |
|
17
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in earnings, asmillions, except share and per share data)
The Second Amended January 2019 Swap contains an insignificant financing element that is amortized over the term of the hedging relationship. We recognized a componentloss on the interest rate swaps of $1.2 million and $1.6 million in interest expense net.
As of September 30, 2019, the Company does not2020, we anticipate having to reclassify any of the net hedging losses$4.6 million from accumulated other comprehensive lossincome (loss) into earnings during the next 12twelve months to offset the variability of the hedged items during this period.
The following table summarizes the total fair valuevalues of derivative assets and liabilities and the respective classification in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019. The Company had no derivative positions asnet amount of December 31, 2018:
Interest Rate Swap Agreements |
| Balance Sheet Classification |
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Designated as cash flow hedges |
| Accrued liabilities and other |
| $ | 4.6 |
|
| $ | 0.4 |
|
Designated as cash flow hedges |
| Other liabilities |
|
| 11.2 |
|
|
| 4.6 |
|
|
|
|
| $ | 15.8 |
|
| $ | 5.0 |
|
Fair Value as of September 30, 2019 | ||||||||||||
Other Assets | Current Liabilities | Non-current Liabilities | ||||||||||
Interest rate swaps not designated as accounting hedge | $ | — | $ | — | $ | — | ||||||
Interest rate swaps designated as accounting hedge | — | 0.4 | 6.0 | |||||||||
Total derivatives | $ | — | $ | 0.4 | $ | 6.0 |
The following table presents the effect of our derivative financial instruments on our unaudited condensed consolidated statement of financial performance.operations. The income effects of our derivative activities are reflected in Interestinterest expense. There were 0no gains or losses recorded prior to June 3, 2019:
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
Total interest expense presented in the statement of operations |
| $ | 4.9 |
|
| $ | 9.5 |
|
| $ | 16.6 |
|
| $ | 17.5 |
|
|
| $ | 20.2 |
|
Interest rate swap agreements designated as cash flow hedges |
|
| 1.2 |
|
|
| 0 |
|
|
| 1.6 |
|
|
| 0 |
|
|
|
| 0 |
|
Interest rate swap agreements not designated as cash flow hedges |
| $ | 0 |
|
| $ | 1.0 |
|
| $ | 0 |
|
| $ | 6.4 |
|
|
| $ | 0 |
|
Note 10 — Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is a separate line within the unaudited condensed consolidated statements of equity that reports our cumulative income (loss) that has not been reported as part of net income (loss). The components of accumulated other comprehensive income (loss) at September 30, 2020 and December 31, 2019 (the Predecessor Period):were as follows:
|
| September 30, 2020 |
| |||||||||
|
| Gross Balance |
|
| Tax Effect |
|
| Net Balance |
| |||
Foreign currency translation |
| $ | 9.4 |
|
| $ | 0 |
|
| $ | 9.4 |
|
Unrealized gain (loss) on interest rate swaps |
|
| (10.6 | ) |
|
| 2.4 |
|
|
| (8.2 | ) |
Total |
| $ | (1.2 | ) |
| $ | 2.4 |
|
| $ | 1.2 |
|
|
| December 31, 2019 |
| |||||||||
|
| Gross Balance |
|
| Tax Effect |
|
| Net Balance |
| |||
Foreign currency translation |
| $ | 1.7 |
|
| $ | 0 |
|
| $ | 1.7 |
|
Unrealized gain (loss) on interest rate swaps |
|
| 1.4 |
|
|
| 0.3 |
|
|
| 1.7 |
|
Total |
| $ | 3.1 |
|
| $ | 0.3 |
|
| $ | 3.4 |
|
Millions | Three Months Ended September 30, 2019 | June 3 to September 30, 2019 | |||||||
Total interest expense presented in the statement of operations | $ | 9.5 | $ | 17.5 | |||||
Derivatives designated as hedging instruments: | |||||||||
Cash flow hedges- interest rate swaps | $ | — | $ | — | |||||
Derivatives not designated as hedging instruments: | |||||||||
Interest rate Swap | $ | (1.1 | ) | $ | (6.4 | ) |
18
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
The following table presents the changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2020:
|
| Nine Months Ended September 30, 2020 |
| |||||||||
|
| Foreign currency translation |
|
| Unrealized gain (loss) on interest rate swaps |
|
| Total |
| |||
Beginning balance |
| $ | 1.7 |
|
| $ | 1.7 |
|
| $ | 3.4 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
before reclassifications |
|
| 7.7 |
|
|
| (9.9 | ) |
|
| (2.2 | ) |
Ending balance |
| $ | 9.4 |
|
| $ | (8.2 | ) |
| $ | 1.2 |
|
Note 9
Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:
▪ | Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
▪ | Level 2 — Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. |
▪ | Level 3 — Unobservable inputs that are supported by little or no market activities. |
The carrying values of cash and cash equivalents (primarily consisting of bank deposits), accounts receivable and accounts payable approximate their fair values due to the short-term nature of these instruments as of September 30, 20192020 and December 31, 2018.2019. The carrying value of borrowings under the credit facilities approximates fair value due to the variable interest rates associated with those borrowings.
The following table provides the carrying amounts, estimated fair values and the respective fair value measurements of the Company'sour financial instruments as of September 30, 20192020 and December 31, 2018:2019:
|
|
|
|
|
| Fair Value Measurements |
| |||||||||
|
| Carrying Amount |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current and long-term debt |
| $ | 433.4 |
|
| $ | - |
|
| $ | 433.4 |
|
| $ | - |
|
Interest rate swap agreements liability |
| $ | 15.8 |
|
| $ | - |
|
| $ | 15.8 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current and long-term debt |
| $ | 428.2 |
|
| $ | - |
|
| $ | 428.2 |
|
| $ | - |
|
Interest rate swap agreements liability |
| $ | 5.0 |
|
| $ | - |
|
| $ | 5.0 |
|
| $ | - |
|
Successor | ||||||||||||||||||||
Carrying Amount | Fair Value | Fair Value Measurements | ||||||||||||||||||
September 30, 2019 | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Current and Long-term debt | $ | 530.8 | $ | 530.8 | $ | — | $ | 530.8 | $ | — | ||||||||||
Derivative liability | $ | 6.4 | $ | 6.4 | $ | — | $ | 6.4 | $ | — | ||||||||||
Earn-out contingent liability | $ | 2.6 | $ | 2.6 | $ | — | $ | — | $ | 2.6 |
Predecessor | ||||||||||||||||||||
Carrying Amount | Fair Value | Fair Value Measurements | ||||||||||||||||||
December 31, 2018 | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Long-term debt | $ | 494.9 | $ | 494.9 | $ | — | $ | 494.9 | $ | — | ||||||||||
Derivative liability | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Earn-out contingent liability | $ | 2.6 | $ | 2.6 | $ | — | $ | — | $ | 2.6 |
The valuation techniques and inputs used for fair value measurements categorized within Level 2 and Level 3 include quoted comparable prices from market inputs and significant unobservable inputs that are not corroborated by market data.inputs. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows or option pricing models using the Company’sour own estimates and assumptions or those expected to be used by market participants. The Company determines itsWe determine our valuation policies and procedures and analyzesanalyze changes in fair value measurements from period to period by using an industry standard market approach, in which prices and other relevant information isare generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were measured using unobservable inputs.
The fair value of outstanding long-term debt is estimated at $530.8 million as of September 30, 2019 based on prices and other relevant information generated by market transactions involving identical or comparable debt instruments, which represents a Level 2 measurement. Derivative positions are classified within levelLevel 2 of the valuation hierarchy as they are valued using quoted market prices for similar assets and liabilities in active markets. These levelLevel 2 derivatives are valued utilizing an income approach, which discounts future cash flow based upon current market expectations and adjusts for credit risk. The fair value of the earn-out contingent liability is estimated at $2.6 million as of September 30, 2019 based on contractual terms, which
19
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Note 12 represents— Income Taxes
For each interim reporting period, we make an estimate of the effective tax rate we expect to be applicable for the full year for our operations. This estimated effective tax rate is used in providing for income taxes on a Level 3 measurement. Foryear-to-date basis. Our effective tax rate was as follows:
|
| Successor |
|
|
| Predecessor |
| ||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||
|
| 2020 |
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
|
Effective tax rate |
| (15.7)% |
| 69.8% |
|
| 7.1% |
|
| 31.4% |
|
|
| 20.5% |
|
The fluctuation in the effective tax rate over the periods presented above was primarily attributable to a jurisdictional mix of income between periods and discrete tax expense of $1.3 million recorded through the nine months ended September 30, 2020.The effective tax rate differs from the U.S. federal statutory rate due primarily to benefits derived from the U.S. foreign derived intangible income deduction, tax credits available in the U.S., and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.
Pursuant to the Ranpak Business Combination discussed in detail in Note 7, “Acquisition,” to the notes to the unaudited condensed consolidated financial statements, the Company has calculated the fair market value measurements categorizedof assets and liabilities, including the impact on the deferred tax assets and liabilities in accordance with the guidance under ASC 805.The deferred tax assets and liabilities are final as the valuation analysis has been completed.The deferred tax assets and liabilities resulted in a net deferred tax liability of $122.9 million.
We are subject to taxation in the United States (federal, state, local) and foreign jurisdictions. As of September 30, 2020, tax years 2017 through 2020 are subject to examination by the tax authorities.
Pursuant to ASC 740, as of each balance sheet date, the Company assesses its uncertain tax positions to determine whether factors underlying the sustainability assertion have changed. During the three months ended September 30, 2020, based on new information in an ongoing examination over the 2017-2019 tax years by the tax authorities in the Netherlands, the Company has recognized discrete tax expense for an additional uncertain tax position of $1.3 million relating to positions which are no longer more-likely-than-not sustainable. The Company anticipates to resolve this matter within Level 3the next twelve months.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) into law. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOL”) and allow businesses and individuals to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years; suspend the excess business loss rules under section 461(l); accelerate refunds of previously generated corporate AMT credits; generally loosen the business interest limitation under section 163(j) from 30 percent to 50 percent (special partnership rules apply); and fix the “retail glitch” for qualified improvement property in the 2017 tax code overhaul known informally as the Tax Cuts and Jobs Act (the “TCJA”) (TCJA, Public Law 115-97). ASC 740, Income Taxes, requires that the tax effects of changes in tax laws or rates be recorded discretely as a component of the income tax provision related to continuing operations in the period of enactment. We recorded any applicable impact from the CARES Act in the first quarter of 2020.
Note 13 — Commitments and Contingencies
Litigation
We are subject to legal proceedings and claims that arise in the ordinary course of our business. Management evaluates each claim and provides for potential loss when the claim is probable to be paid and reasonably estimable. While adverse decisions in certain of these litigation matters, claims and administrative proceedings could have a material effect on a particular period’s results of operations, subject to the uncertainties inherent in estimating future costs for contingent liabilities, management believes that any future accruals with respect to these currently known contingencies would not have a material effect on the financial condition, liquidity or cash flows of the Company. There are no amounts required to be reflected in these unaudited interim condensed consolidated financial statements related to contingencies for the nine months ended September 30, 2020.
20
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Leases
Certain office and warehouse facilities, transportation vehicles and data processing equipment are leased. Total rental expense for these leases was $0.6 million and $1.6 million in the three and nine months ended September 30, 2020, respectively. Total rental expense for these leases was $0.4 million in the three months ended September 30, 2019, $0.5 million in the Successor Period, and $0.9 million in the 1H 2019 Predecessor Period.
Environmental Matters
Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations, as well as the laws of other countries that establish health and environmental quality standards. These standards, among others, relate to air and water pollutants and the management and disposal of hazardous substances and wastes. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes. There are no amounts required to be reflected in these unaudited interim consolidated financial statements related to environmental contingencies.
Management believes the Company is in compliance, in all material respects, with environmental laws and regulations and maintains insurance coverage to mitigate exposure to environmental liabilities. Management does not believe any environmental matters will have a material adverse effect on the Company’s future consolidated results of operations, financial position or cash flows.
Guarantees
We issue bank guarantees from time to time for various purposes that arise out of the normal course of business. These amounts are immaterial for all periods presented.
Note 14 — Stock-Based Compensation
We expense the fair value hierarchy,of grants of various stock-based compensation programs over the amountvesting period of the total gainsawards. Stock compensation expense is recorded in selling, general, and administrative expenses in the condensed consolidated statements of operations. Awards granted are recognized as compensation expense based on the grant date fair value, estimated in accordance with ASC 718, Compensation - Stock Compensation. The grant date fair value is the closing price of our stock on the grant date. Failure to satisfy the threshold service or lossesperformance conditions results in the forfeiture of shares. Forfeiture of share awards with service conditions or performance-based restrictions results in a reversal of previously recognized share-based compensation expense so long as the awards were probable of vesting.
The table below summarizes certain data for our stock-based compensation plans:
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
Stock-based compensation expense |
| $ | 1.7 |
|
| $ | 1.6 |
|
| $ | 5.9 |
|
| $ | 1.8 |
|
|
| $ | 0 |
|
Tax (expense) benefit for stock-based compensation |
|
| 0.4 |
|
|
| 0.4 |
|
|
| 1.1 |
|
|
| 0.4 |
|
|
|
| 0 |
|
Fair value of vested awards |
| $ | 2.1 |
|
| $ | 2.0 |
|
| $ | 7.0 |
|
| $ | 2.2 |
|
|
| $ | 0 |
|
Our shareholders approved the period included Ranpak Holdings Corp. 2019 Omnibus Incentive Plan (the “2019 Plan”) at the Annual Meeting of Shareholders on February 20, 2019. The purpose of the 2019 Plan is to motivate and reward employees and other individuals to perform at their highest level and contribute significantly to the success of the Company. The 2019 Plan is an omnibus plan that may provide these incentives through grants of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSU” or “RSUs”), performance awards, other cash-based awards and other stock-based awards to employees, directors, or consultants of the Company.
21
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in earnings (or changesmillions, except share and per share data)
As of September 30, 2020, the pool of shares in net assets)the 2019 Plan is summarized as follows:
2019 Plan | Quantity | |||
Maximum allowed for issuance | 4,118,055 | |||
Awards granted | (2,331,736 | ) | ||
Awards forfeited | 734,913 | |||
Available for future awards | 2,521,232 | |||
Awards vested | 288,394 |
Restricted Stock Units — RSUs represent a right to receive one share of our common stock that is attributableboth nontransferable and forfeitable unless and until certain conditions are satisfied. Certain RSUs vest ratably over a two-year period while others vest over a one-year period. The fair value of RSUs is determined on the grant date and is amortized over the vesting period on a ratable basis.
Performance-Based Restricted Stock Units — Performance-based restricted stock units (“PRSU”) vest over a three-year period. However, the level of the awards to the change in unrealized gains or losses relating to those assets and liabilities heldbe earned is determined at the end of the reportinginitial one-year performance period, based upon attainment of specific business performance goals during such initial one-year performance period. If certain minimum performance levels are not attained in the initial one-year performance period, the awards will be automatically forfeited before vesting. The awards are variable in that compensation could range from 0 to 150% of the award agreement’s target contingent on the performance level attained. The fair value of performance-based restricted stock units is $0.0 million.determined on the grant date. Compensation cost for these awards is recognized based on the probability of achievement of the performance-based conditions.
Activity of our RSUs and PRSUs is as follows:
|
| RSUs |
|
| PRSUs |
| ||||||||||
|
| Quantity |
|
| Weighted Average Grant Date Fair Value |
|
| Quantity |
|
| Weighted Average Grant Date Fair Value |
| ||||
Restricted at December 31, 2019 |
|
| 483,299 |
|
| $ | 9.30 |
|
|
| 0 |
|
| $ | 0 |
|
Granted |
|
| 501,141 |
|
|
| 8.08 |
|
|
| 667,196 |
|
|
| 8.09 |
|
Vested |
|
| (248,392 | ) |
|
| 8.61 |
|
|
| 0 |
|
|
| 0 |
|
Forfeited |
|
| (58,329 | ) |
|
| 9.04 |
|
|
| (116,700 | ) |
|
| 8.07 |
|
Outstanding at September 30, 2020 |
|
| 677,719 |
|
| $ | 8.67 |
|
|
| 550,496 |
|
| $ | 8.09 |
|
Director Stock Units — Members of the Company’s Board of Directors (“Director(s)”) may elect to receive their quarterly retainer fees in the form of Class A common shares that are covered by an active shelf registration statement. The retainers are paid quarterly, in arrears, and vest upon issuance. These shares are priced at the closing price of the last business day of the calendar quarter. Additionally, Directors are granted an annual award of RSUs of $0.1 million, paid or granted quarterly in arrears in the form of cash or stock at the Director’s election, on the date of the annual shareholder meeting. The number of RSUs is determined by the closing price of Ranpak stock on that date. These RSUs vest at the earlier of the (i) anniversary of the grant date or (ii) the following annual shareholder meeting. The following table includes the number of shares granted and vested for Directors electing to receive retainer payments in shares:
Director Stock Units |
| Quantity |
|
| Weighted Average Grant Date Fair Value |
| ||
Balance at December 31, 2019 |
|
| 0 |
|
| $ | 0 |
|
Granted |
|
| 107,184 |
|
|
| 7.41 |
|
Vested |
|
| (26,970 | ) |
|
| 7.18 |
|
Balance at September 30, 2020 |
|
| 80,214 |
|
| $ | 7.49 |
|
Note 15 — Shareholders’ Equity
Capital Stock—
22
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
and (iii) 200,000,000 shares of Class C common stock, par value $0.0001 per share and (iv) 1,000,000 shares of preferred stock, par value $0.0001 per share.
Common Shares
—Each holder of Class A Common StockUpon the closing of the Ranpak Business Combination, 3,854,664 of Class B shares were canceled and 7,395,336 of Class B shares were converted to 6,663,953 of Class A shares and 731,383 of Class C shares. Certain of the Class B shares were subject to forfeiture conditions that carried over to the Class A shares. At December 31, 2019, Ranpak had 6,847,836 Class A and Class C shares outstanding subject to forfeiture unless certain provisions are met as described below. These shares will not participate in cash dividends or other cash distributions payable prior to the date the conditions have been satisfied. Upon satisfaction, shareholders will be entitled to all cash dividends and other cash distributions from the closing of the Ranpak Business Combination. As of December 31, 2019, there were no such cash dividends or other cash distributions potentially payable upon these conditions.
157,500 shares of Class A common stock will be surrendered for no consideration unless, prior to the fifth anniversary of the Ranpak Business Combination, either (i) the closing price of our Class A common stock equals or exceeds $12.25 per share (in each case as adjusted for share splits, dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period or (ii) the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all ordinary shareholders having the right to exchange their common stock for consideration in cash, securities or other property which equals or exceeds $12.25 per share (in each case as adjusted for share splits, dividends, reorganizations, recapitalizations and the like).
2,940,336 shares of Class A common stock will be surrendered for no consideration unless, prior to the tenth anniversary of the Ranpak Business Combination, (i) the closing price of the Company’s Class A common stock equals or exceeds $15.00 per share (in each case as adjusted for share splits, dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period or (ii) the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all or substantially all of its shareholders having the right to exchange their shares or the Company otherwise undergoes a change of control.
A total of 3,750,000 shares of Class A and Class C common stock will be surrendered for no consideration unless, prior to the tenth anniversary of the closing of the Ranpak Business Combination, (i) the closing price of the Company’s Class A shares equals or exceeds $12.50 per share (in each case as adjusted for share splits, dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period or (ii) the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all or substantially all of its shareholders having the right to exchange their shares or the Company otherwise undergoes a change of control.
Preferred Shares
—TheWarrants — On January 22, 2018, the Company consummated its IPOAugust 6, 2020, we commenced (i) an offer to each holder of 30,000,000 units, each consisting of one Class A ordinary shareour outstanding public warrants, forward purchase warrants, and one half of one warrant to purchase one Class A ordinary share, i.e., 15,000,000 warrants in total (the “public warrants”).
23
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
60,493 Warrants were exchanged at the public warrants and forward purchase warrants are exercisable, the Company may call such warrants0.198 ratio for redemption in whole and not in part;
Registration Rights—Rights — Certain investors were entitled to registration rights pursuant to the forward purchase agreements, subscription agreements, private placement warrant agreements, and the registration rights agreement entered into concurrently with the closing of the IPO. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a business combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company bore the expenses incurred in connection with the filing of any such registration statements.
Follow-On Offering — On December 13, 2019, the Company closed on a public offering of 16,923,077 shares of its Class A common stock at an offering price of $6.50 per share, generating gross proceeds of approximately $110.0 million ($107.7 million net of expenses). These shares were registered pursuant to the Form S-3 declared effective on July 31, 2019. The proceeds from this offering were used to pay down outstanding debt.
Outstanding Shares—At September 30, 20192020 and December 31, 2018,2019, the Company had the following shares of common stock outstanding:
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||
|
| Class A |
|
| Class C |
|
| Total Common |
|
| Class A |
|
| Class C |
|
| Total Common |
| ||||||
Shares outstanding not subject to an earn-out agreement |
|
| 62,874,702 |
|
|
| 5,779,910 |
|
|
| 68,654,612 |
|
|
| 58,177,288 |
|
|
| 5,779,910 |
|
|
| 63,957,198 |
|
Shares subject to $15.00 earn-out |
|
| 2,940,336 |
|
|
| - |
|
|
| 2,940,336 |
|
|
| 2,940,336 |
|
|
| - |
|
|
| 2,940,336 |
|
Shares subject to $12.50 earn-out |
|
| 3,018,617 |
|
|
| 731,383 |
|
|
| 3,750,000 |
|
|
| 3,018,617 |
|
|
| 731,383 |
|
|
| 3,750,000 |
|
Shares subject to $12.25 earn-out |
|
| 157,500 |
|
|
| - |
|
|
| 157,500 |
|
|
| 157,500 |
|
|
| - |
|
|
| 157,500 |
|
Total |
|
| 68,991,155 |
|
|
| 6,511,293 |
|
|
| 75,502,448 |
|
|
| 64,293,741 |
|
|
| 6,511,293 |
|
|
| 70,805,034 |
|
Successor | Predecessor | ||||
September 30, 2019 | December 31, 2018 | ||||
Class A | Class C | Total Common | Common | ||
Shares outstanding not subject to an earn-out agreement | 41,244,899 | 5,779,910 | 47,024,809 | 995 | |
Shares subject to a $15.00 earn-out | 2,940,336 | 0 | 2,940,336 | 0 | |
Shares subject to a $12.50 earn-out | 3,018,617 | 731,383 | 3,750,000 | 0 | |
Shares subject to a $12.25 earn-out | 157,500 | 0 | 157,500 | 0 | |
Total | 47,361,352 | 6,511,293 | 53,872,645 | 995 |
Translation adjustment—
Translation adjustments recorded areSuccessor | Predecessor | |||||||||||||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | ||||||||||||||||
Translation adjustment | $ | (11.1 | ) | $ | (6.3 | ) | $ | 23.6 | $ | (1.1 | ) | $ | (5.4 | ) |
Note 16 — Earnings (Loss) per share data)
June 3, 2019 through September 30, 2019 | |||
Compensation expense for all stock based compensation plans | $ | 1.8 | |
Tax (expense) benefits for stock-based compensation | 0.4 | ||
Fair value of vested awards | $ | 2.2 |
Restricted Stock Units | Shares | Weighted Average Grant Date Fair Value | ||||
Restricted at June 3, 2019 | — | $ | — | |||
Granted | 388,527 | 9.66 | ||||
Vested | — | — | ||||
Forfeited | (8,704 | ) | 9.77 | |||
Outstanding at September 30, 2019 | 379,823 | $ | 9.66 |
Performance-Based Restricted Stock Units | Shares | Weighted Average Grant Date Fair Value | ||||
Restricted at June 3, 2019 | — | $ | — | |||
Granted | 562,948 | 9.77 | ||||
Forfeited | (30,706 | ) | 9.77 | |||
Outstanding at September 30, 2019 | 532,242 | $ | 9.77 |
Director Stock Units | Shares | Weighted Average Grant Date Fair Value | ||||
Balance at June 3, 2019 | — | $ | — | |||
Granted | 3,720 | 5.04 | ||||
Vested | (3,720) | 5.04 | ||||
Balance at September 30, 2019 | — | $ | — |
Basic earnings (loss) per share ("EPS"(“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to the potential dilution, if any, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, using the more dilutive of the two-class method or if-converted method. Diluted EPS excludes potential shares of common stock if their effect is anti-dilutive. If there is a net loss in any period, basic and diluted EPS are computed in the same manner.
The two-class method determines net income (loss) per common share for each class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common shareholders for the period to be allocated between different classes of common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company appliedWe apply the two-class method for EPS when computing net income (loss) per Class A and Class C common shares.
The Predecessor had one class of shares outstanding. As of September 30, 2019, the Company has2020, we have not issued any instruments that were considered to be participating securities. The Successor’s weighted average shares of Class A and Class C common stock have been combined in the denominator of basic and diluted earnings (loss) per share because they have equivalent economic rights. The following tables set forth the computation of the Company's (loss) earningsour loss per share:
Successor | Predecessor | |||||||||||||||||||
(Expressed in $000,000's except per share amounts) | Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | |||||||||||||||
Net income (loss) | $ | (1.6 | ) | $ | (12.0 | ) | $ | (19.0 | ) | $ | 0.3 | $ | (4.6 | ) | ||||||
Income allocated to participating preferred shares | — | — | — | — | — | |||||||||||||||
Net income (loss) attributable to common stockholders for basic and diluted EPS | ||||||||||||||||||||
$ | (1.6 | ) | $ | (12.0 | ) | $ | (19.0 | ) | $ | 0.3 | $ | (4.6 | ) | |||||||
Basic weighted average common shares outstanding | ||||||||||||||||||||
53,871,068 | 53,870,568 | 995 | 995 | 995 | ||||||||||||||||
Denominator adjustments for diluted EPS: | ||||||||||||||||||||
Assumed exercise of warrants | — | — | — | — | — | |||||||||||||||
Assumed vesting of RSUs | — | — | — | — | — | |||||||||||||||
Dilutive weighted average common shares outstanding | ||||||||||||||||||||
53,871,068 | 53,870,568 | 995 | 995 | 995 | ||||||||||||||||
Earnings (loss) per share attributable to common stockholders: | ||||||||||||||||||||
Basic | $ | (0.03 | ) | $ | (0.22 | ) | $ | (19,195.40 | ) | $ | 279.43 | $ | (4,660.08 | ) | ||||||
Diluted | $ | (0.03 | ) | $ | (0.22 | ) | $ | (19,195.40 | ) | $ | 279.43 | $ | (4,660.08 | ) |
24
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
|
|
| January 1, 2019 |
| ||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
|
|
| – June 2, 2019 |
| |||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (6.1 | ) |
| $ | (1.6 | ) |
| $ | (18.2 | ) |
| $ | (13.9 | ) |
|
| $ | (19.0 | ) |
Net loss attributable to common stockholders for basic and diluted EPS |
| $ | (6.1 | ) |
| $ | (1.6 | ) |
| $ | (18.2 | ) |
| $ | (13.9 | ) |
|
| $ | (19.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
| 72,396,183 |
|
|
| 53,871,068 |
|
|
| 71,401,580 |
|
|
| 53,870,568 |
|
|
|
| 995 |
|
Dilutive effect of assumed vesting of RSUs and PRSUs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
| - |
|
Diluted weighted average common shares outstanding |
|
| 72,396,183 |
|
|
| 53,871,068 |
|
|
| 71,401,580 |
|
|
| 53,870,568 |
|
|
|
| 995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share attributable to common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.08 | ) |
| $ | (0.03 | ) |
| $ | (0.25 | ) |
| $ | (0.26 | ) |
|
| $ | (19,195.40 | ) |
Diluted |
| $ | (0.08 | ) |
| $ | (0.03 | ) |
| $ | (0.25 | ) |
| $ | (0.26 | ) |
|
| $ | (19,195.40 | ) |
The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive or because milestones were not yet achieved for awards contingent on the achievement of performance milestones:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| June 3, 2019 – |
| |||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| September 30, 2019 |
| ||||
Warrants on common stock |
|
| - |
|
|
| 20,108,744 |
|
|
| - |
|
|
| 20,108,744 |
|
RSUs and PRSUs |
|
| 1,230,024 |
|
|
| 951,475 |
|
|
| 982,473 |
|
|
| 951,475 |
|
Total antidilutive securities |
|
| 1,230,024 |
|
|
| 21,060,219 |
|
|
| 982,473 |
|
|
| 21,060,219 |
|
Successor | Predecessor | |||||||||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||
Warrants on Common Stock | 20,108,744 | 20,108,744 | — | — | — | |||||||||||
(Note 10) | ||||||||||||||||
Restricted Stock Units | ||||||||||||||||
and Performance-based | ||||||||||||||||
Restricted Stock Units (Note 11) | 951,475 | 951,475 | — | — | — | |||||||||||
21,060,219 | 21,060,219 | — | — | — |
Note 17 —
Shared Services Agreement
On June 3, 2019, upon the closing of Ranpak’s business combination with One Madison Corporation, Ranpak entered into a shared services agreement (the “Shared Services Agreement”) with One Madison Group LLC (the “Sponsor”), pursuant to which the Sponsor may provide, or cause to be provided, certain services to Ranpak. The Shared Services Agreement provides for a broad array of potential services, including administrative and “back office” or corporate-type services and requires Ranpak to indemnify the Sponsor in connection with the services provided by the Sponsor to Ranpak. Total fees under the agreement amounted to approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2020, respectively. Totals under the agreements were $0.2 million in the three months ended September 30, 2019 and $0.3 million in the Successor Period.
Advisory Relationship
A director of the Company, prior to being elected as a director, served in an advisory role to Rhône Capital IV L.P., the former majority shareholder of Rack Holdings, Inc., on the sale of Rack Holdings, Inc. The director was compensated for the advisory role through an increase to his indirect equity interest in Rack Holdings, Inc., and reported to Ranpak that the compensation was not significant (less than $50 thousand).
Registration Rights Agreement
As a result of the Ranpak Business Combination, Ranpak is a party to a registration rights agreement with certain security holders. The agreement requires Ranpak to maintain an effective resale shelf registration statement for the benefit of such security holders until they are permitted by law to freely sell their securities without registration or no longer hold Ranpak securities.
Subscription Agreements and Reallocation Agreement
One Madison Corporation entered into a subscription agreement, pursuant to which, as amended, certain shareholders, including our Chairman & CEO, another of our directors, our chief financial officer and one of our significant shareholders may be required to surrender to Ranpak certain of their shares (referred to as founder shares) if the closing price of the Class A common stock (or any successor class of listed common shares) equals or exceeds $12.50 per share (as adjusted for share splits, dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 consecutive trading day period or Ranpak completes a liquidation,
25
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
Note 13 merger, share exchange or other similar transaction that results in all of its common shareholders having the right to exchange their common equity for consideration in cash, securities or other property which equals or exceeds $12.50 per share (as adjusted for share splits, dividends, reorganizations, recapitalizations and the like) in the five year period following the consummation of the Ranpak Business Combination (the “Earnout”).— Related Party
One Madison Corporation also entered into a reallocation agreement with certain investors, including our Chairman & CEO, another of our directors and one of our significant shareholders, who provided equity financing for the Ranpak Business Combination under the forward purchase agreements and the subscription agreements, pursuant to which the shares subject to the Earnout and the rights to acquire 5,000,000 warrants to purchase Class A shares arising under the forward purchase agreements were reallocated among all equity financing investors pro rata based on the aggregate amount of equity financing provided by such equity financing investors under the forward purchase agreements and the subscription agreements. The Class B ordinary shares owned by each party to the reallocation agreement following the reallocation are subject to the provisions in the forward purchase agreement relating to Class B ordinary shares, including with respect to the voting of, transfer and forfeiture and waiver of redemption rights with respect to such Class B ordinary shares, or, for the parties to the reallocation agreement that are not party to a forward purchase agreement, the provisions substantially similar to such forward purchase agreement provisions that are set forth on an exhibit to the reallocation agreement.
Stock Purchase Agreement
Ranpak is subject to certain continuing obligations to indemnify the former directors and officers of Rack Holdings Inc. for certain costs, damages and liabilities pursuant to the Stock Purchase Agreement dated December 12, 2018, pursuant to which One Madison Corporation purchased Rack Holdings Inc.
Monitoring Fee Arrangement
Rack Holdings had a monitoring fee agreement, with RhoneRhône Capital IV L.P., a related party, which required Rack Holdings to pay 1% of projected annual earnings before interest, taxes and depreciation and amortization in advance of each semi-annual period, adjusted retroactively up or down, plus reimbursement of other expenses. As of June 3, 2019, upon the Closing of the Ranpak Business Combination and change in control, this monitoring fee was eliminated. Monitoring fee and reimbursement expenses are immaterial but are included in selling, general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the 1H 2019 Predecessor Period.
Note 18 — Restatement of Previously Issued Unaudited Condensed Consolidated Interim Financial Statements
As disclosed in Note 21 in our Annual Report on Form 10-K for the year ended December 31, 2019, subsequent to the issuance of Operationsour unaudited condensed consolidated interim financial statements as of June 30, 2019 (Successor) and Comprehensive Loss for all predecessor periods presented,the Predecessor Period January 1, 2019 through June 2, 2019 and were as follows:
Successor | Predecessor | |||||||||||||||||||
Three Months Ended September 30, 2019 | June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | ||||||||||||||||
Monitoring fee | $ | — | $ | — | $ | 0.6 | $ | 0.4 | $ | 0.8 |
Successor | ||||||||||||
As of September 30, 2019 and for the three months ended September 30, 2019 | United States | Netherlands | Total | |||||||||
Net revenues | $ | 32.9 | $ | 36.2 | $ | 69.1 | ||||||
Long-lived assets | $ | 63.1 | $ | 58.1 | $ | 121.2 | ||||||
For the period from June 3, 2019 through September 30, 2019 | ||||||||||||
Net revenues | $ | 42.2 | $ | 43.2 | $ | 85.4 |
Predecessor | ||||||||||||
For the period from January 1, 2019 through June 2, 2019 | United States | Netherlands | Total | |||||||||
Net revenues | $ | 50.1 | $ | 56.3 | $ | 106.4 | ||||||
As of September 30, 2018 and for the three months ended September 30, 2018 | ||||||||||||
Net revenues | $ | 32.5 | $ | 32.6 | $ | 65.1 | ||||||
Long-lived assets | $ | 35.8 | $ | 39.6 | $ | 75.4 | ||||||
For the nine month ended September 30, 2018 | ||||||||||||
Net revenues | $ | 94.6 | $ | 97.3 | $ | 191.9 | ||||||
As of December 31, 2018 and for the year ended December 31, 2019 | ||||||||||||
Net revenues | $ | 131.4 | $ | 136.5 | $ | 267.9 | ||||||
Long-lived assets | $ | 34.0 | $ | 39.0 | $ | 73.0 |
In addition, management also identified several errors in the unaudited condensed consolidated interim financial statements for the Successor Period (June 3, 2019 through June 30, 2019 for Q2 2019 and June 3, 2019 through September 30, 2019 for Q3 2019) resulting from incorrect accounting and reporting related to the Ranpak Business Combination. These Successor Period errors resulted in multiple misstatements in the Unaudited Condensed Consolidated Statement of Cash Flows including $3.4 million of net cash provided by financing activities and $7.9 million of effects of exchange rate changes on cash. We also misclassified (1) $308.1 million, relating to the cash withdrawn from trust account, between net cash used in investing activities and beginning cash and (2) $11.3 million, relating to One Madison Corporation’s deferred initial public offering underwriting fees, between net cash used in operating activities and net cash from financing activities. Ending cash balance for both the second and third quarter remain
26
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
unchanged. Goodwill was also misstated by $10.0 million. The foreign currency gain line item in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) was misstated by $2.5 million and the Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity was also misstated as a result of the errors identified as noted in the below table. The Company has corrected the errors in the comparable Q3 2019 unaudited condensed consolidated interim financial statements that are presented in the Q3 2020 unaudited condensed consolidated interim Form 10-Q filing.
Management has evaluated the materiality of these misstatements and concluded that the Predecessor Period and Successor Period misstatements were not material to the unaudited condensed consolidated interim financial statements as of June 30, 2019 (Successor) and for the Predecessor Period January 1, 2019 through June 2, 2019 and April 1, 2019 through June 2, 2019 and the Successor Period June 3, 2019 through June 30, 2019 and September 30, 2019 (Successor) and for the Predecessor Period January 1, 2019 through June 2, 2019 and the Successor period for the three months ended September 30, 2019 and the period June 3, 2019 through September 30, 2019, respectively.
The impact of the necessary adjustments on the total amounts previously reported for the Predecessor Period in our unaudited condensed consolidated interim financial statements (included in our quarterly report on Form 10-Q for the three and nine months ended September 30, 2019) is summarized in the following tables:
|
| Predecessor Period (January 1, 2019 – June 2, 2019) |
| |||||||||
|
| As previously reported |
|
| Adjustment |
|
| As restated |
| |||
Unaudited Condensed Consolidated Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
| $ | 0.6 |
|
| $ | (7.8 | ) |
| $ | (7.2 | ) |
Net cash provided by (used in) operating activities |
|
| 24.5 |
|
|
| (7.8 | ) |
|
| 16.7 |
|
Payments on term loans and credit facility |
|
| (13.3 | ) |
|
| (1.1 | ) |
|
| (14.4 | ) |
Net cash provided by (used in) financing activities |
|
| (13.3 | ) |
|
| (1.1 | ) |
|
| (14.4 | ) |
Effect of exchange rate changes on cash |
| $ | (7.7 | ) |
| $ | 8.9 |
|
| $ | 1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
| $ | 23.6 |
|
| $ | (27.6 | ) |
| $ | (4.0 | ) |
Comprehensive income (loss) |
| $ | 4.6 |
|
| $ | (27.6 | ) |
| $ | (23.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
| $ | 0 |
|
| $ | 291.4 |
|
| $ | 291.4 |
|
Accumulated deficit |
|
| 0 |
|
|
| (88.9 | ) |
|
| (88.9 | ) |
Treasury stock |
|
| 0 |
|
|
| (1.5 | ) |
|
| (1.5 | ) |
Accumulated other comprehensive loss |
|
| 0 |
|
|
| (27.6 | ) |
|
| (27.6 | ) |
Total shareholders' equity |
| $ | 0 |
|
| $ | 173.4 |
|
| $ | 173.4 |
|
27
Ranpak Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
(in millions, except share and per share data)
The impact of the necessary adjustments on the total amounts previously reported for the Successor Period from June 3, 2019 through September 30, 2019 one customer accountedin our unaudited condensed consolidated interim financial statements (included in our quarterly report on Form 10-Q for approximately 9.5% and 10.1% of total revenues, respectively. For the period from January 1, 2019 through June 2, 2019, one customer accounted for 8.5% of total revenues, respectively. During the three and nine months ended September 30, 2018, one customer accounted for approximately 10.5% and 10.8% of total revenues, respectively.2019) is summarized in the following table:
|
| Successor Period (June 3, 2019 – September 30, 2019) |
| |||||||||
|
| As previously reported |
|
| Adjustment |
|
| As restated |
| |||
Unaudited Condensed Consolidated Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (12.0 | ) |
| $ | (1.9 | ) |
| $ | (13.9 | ) |
Increase (decrease) in accounts payable |
|
| (25.4 | ) |
|
| 11.3 |
|
|
| (14.1 | ) |
Increase (decrease) in accrued liabilities |
|
| 2.9 |
|
|
| (0.6 | ) |
|
| 2.3 |
|
Currency gain on foreign denominated notes payable |
|
| (3.3 | ) |
|
| 2.5 |
|
|
| (0.8 | ) |
Net cash provided by (used in) operating activities |
|
| (11.6 | ) |
|
| 11.3 |
|
|
| (0.3 | ) |
Cash withdrawn from trust account |
|
| 0 |
|
|
| 308.1 |
|
|
| 308.1 |
|
Net cash provided by (used in) investing activities |
|
| (956.3 | ) |
|
| 308.1 |
|
|
| (648.2 | ) |
Proceeds from issuance of term loans and credit facility |
|
| 539.0 |
|
|
| (4.4 | ) |
|
| 534.6 |
|
Proceeds from sale of common stock |
|
| 302.4 |
|
|
| 12.3 |
|
|
| 314.7 |
|
Payments of deferred registration costs |
|
| 0 |
|
|
| (11.3 | ) |
|
| (11.3 | ) |
Net cash provided by (used in) financing activities |
|
| 666.5 |
|
|
| (3.4 | ) |
|
| 663.1 |
|
Effect of exchange rate changes on cash |
|
| 5.2 |
|
|
| (7.9 | ) |
|
| (2.7 | ) |
Net increase (decrease) in cash and cash equivalents |
|
| (296.2 | ) |
|
| 308.1 |
|
|
| 11.9 |
|
Cash and cash equivalents, beginning of period |
| $ | 309.8 |
|
| $ | (308.1 | ) |
| $ | 1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency (gain) loss |
| $ | (4.1 | ) |
| $ | 2.5 |
|
| $ | (1.6 | ) |
Loss before income tax benefit |
|
| (17.5 | ) |
|
| (2.5 | ) |
|
| (20.0 | ) |
Income tax benefit |
|
| (5.5 | ) |
|
| (0.6 | ) |
|
| (6.1 | ) |
Net income (loss) |
|
| (12.0 | ) |
|
| (1.9 | ) |
|
| (13.9 | ) |
Comprehensive income (loss) |
| $ | (18.3 | ) |
| $ | (1.9 | ) |
| $ | (20.2 | ) |
Net income (loss) per share |
| $ | (0.22 | ) |
| $ | (0.04 | ) |
| $ | (0.26 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
| $ | 429.8 |
|
| $ | 15.1 |
|
| $ | 444.9 |
|
Accumulated other comprehensive loss |
|
| (6.3 | ) |
|
| (2.5 | ) |
|
| (8.8 | ) |
Accumulated deficit |
|
| (23.9 | ) |
|
| (2.0 | ) |
|
| (25.9 | ) |
Total shareholders' equity |
| $ | 399.6 |
|
| $ | 10.6 |
|
| $ | 410.2 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other thancharacterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of historical fact includedthese words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q including, without limitation,may include, for example, statements under “Management’s Discussionabout: our expectations around the performance of the business; our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; our officers and Analysisdirectors allocating their time to other businesses and potentially having conflicts of Financial Conditioninterest with our business; our public securities’ potential liquidity and Resultstrading; the lack of Operations” regardinga market for our financial position, business strategy and the plans and objectives of management for future operations, aresecurities.
The forward-looking statements. When usedstatements contained in this Quarterly Report on Form 10-Q words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negativeare based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of such termsrisks, uncertainties (some of which are beyond our control) or other similar expressions, as they relateassumptions that may cause actual results or performance to usbe materially different from those expressed or our management, identifyimplied by these forward-looking statements. Factors that might cause or contribute to such a discrepancyThese risks include, but are not limited to: (1) our inability to those describedsecure a sufficient supply of paper to meet our production requirements; (2) the impact of the price of kraft paper on our results of operations; (3) our reliance on third party suppliers; (4) the COVID-19 pandemic and associated response; (5) the high degree of competition in the markets in which we operate; (6) consumer sensitivity to increases in the prices of our products; (7) changes in consumer preferences with respect to paper products generally; (8) continued consolidation in the markets in which we operate; (9) the loss of significant end-users of our products or a large group of such end-users; (10) our failure to develop new products that meet our sales or margin expectations; (11) our future operating results fluctuating, failing to match performance or to meet expectations; (12) our ability to fulfill our public company obligations; and (13) other SEC filings. Such forward-looking statements are based onrisks and uncertainties indicated from time to time in filings made with the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected bySEC.
Should one or more factors, whichof these risks or uncertainties materialize, they could cause themour actual results to differ materially. The cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward-looking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of certain factors detailednew information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons actingfuture. Accordingly, you should not put undue reliance on our behalf are qualified in their entirety by this paragraph.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with the sections entitled “Risk Factors” and “Forward-Looking Statements,” and our financial statements and related notes included in this Quarterly Report on Form 10-Q and our Proxy Statement/Prospectus on Schedule 14A, date
The following discussion and analysis has been revised for the effects of certain restatements, as detailed in Note 18 to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of the Company's control. The Company'sCompany’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q.
Overview
Ranpak is a leading provider of environmentally sustainable, systems-based, product protection solutions for e-commerce and industrial supply chains. Since its inception in 1972, Ranpak has delivered high quality protective packaging solutions, while maintaining its commitment to environmental sustainability. Ranpak assembles its protective packaging systems and provides the systems and paper consumables to customers, which include direct end-users and its network of exclusive paper packaging solution distributors, who in turn place the systems with and sell paper to commercial and industrial users for the conversion of paper into packaging materials. Ranpak operates manufacturing facilities in Concord Township, Ohio; Kansas City, Missouri,Missouri; Raleigh, North Carolina,Carolina; and Reno, Nevada in the United States, and in Heerlen, the Netherlands and Nyrany, Czech Republic,Republic. In the second quarter of 2020, we opened a new production facility for our automation business in Europe.Kerkrade, the Netherlands, located approximately three miles from our Heerlen location, to enhance our production capacity in our automation business. Ranpak also maintains sales and administrative offices in Dijon, France; Paris, France; Shanghai, China; Tokyo, Japan; and Singapore. Ranpak is a global business that generatesgenerated approximately 51.0%54.8% of its net salesrevenue for the fiscal year 20182019 outside of the United States.
As of September 30, 2019,2020, Ranpak had an installed base of over 102,000approximately 113.1 thousand protective packaging systems serving a diverse set of distributors and end-users. Ranpak generated net salesrevenue of $69.1 million, and $65.1$206.3 million in the three months ended September
The Ranpak Business Combination
On June 3, 2019, we consummated the acquisition of all outstanding and issued equity interests of Rack Holdings, Inc. (“Rack Holdings”) pursuant to a stock purchase agreement for consideration of $799.6$794.9 million, which reflects a post-closing adjustment of $0.7 million for net working capital and additional consideration, and €140.0 million ($160.0160.8 million) in cash, (A) $341.5 million and €140.0 million of which, respectively, was used by the Seller to repay outstanding indebtedness and unpaid transaction expenses as contemplated by the stock purchase agreement and (B) the remainder of which was paid to Rack Holdings L.P. ("Seller"(“Seller”) The purchase price paid at the closing was estimated and will be subject to a customary post-closing adjustments which the Company anticipates completing in the third quarter of this year.
The Company (then One Madison Corporation) was deemed to be the accounting acquirer in the Ranpak Business Combination, as a result of which the Company allocated its purchase price to Rack Holdings'Holdings’ assets and liabilities at fair value, which created a new basis of accounting. Until the consummation of the Ranpak Business Combination, Rack Holdings operated as a separate business holding all of the historical assets and liabilities related to our business.
The Ranpak Business Combination was financed, in part, with debt of approximately $539.0$534.6 million, which became Ranpak’s direct obligation upon the consummation of the Ranpak Business Combination. Upon the consummation of the Ranpak Business Combination on June 3, 2019, Rack Holdings' then-existing debt, which amounted to approximately $495.0$487.6 million as of such date, was repaid in full.
Following the Ranpak Business Combination, we have hired, and expect to hire additional staff and implement procedures and processes to address regulatory and other customary requirements applicable to operating public companies. We expect to incurhave incurred additional annual expenses for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. We estimateestimated that these incremental costs willon an annual basis would amount to approximately $2.0 million or more per year, resulting in higher operating expenses in future periods. The closing of the Ranpak Business Combination also resulted in the elimination of certain non-recurring expenses incurred prior to the Ranpak Business Combination, which amounted to $35.4 million for the nine monthsyear ended September 30,December 31, 2019.
The following factors may have affected the comparability of Ranpak’s results of operations between the periods presented in this Quarterly Report on Form 10-Q and may affect the comparability of its results of operations in future periods.
Effect of Currency Fluctuations—
In addition, Ranpak is subject to currency translation exposure because the operations of its subsidiaries are measured in their functional currency which is the currency of the primary economic environment in which the subsidiary operates. Any currency balances that are denominated in currencies other than the functional currency of the subsidiary are remeasuredre-measured into the functional currency, with the resulting gain or loss recorded in the foreign currency (gains) losses line-item in Ranpak’s income statement. In turn, subsidiary income statement balances that are denominated in currencies other than the U.S. dollar are translated into U.S.
dollars, Ranpak’s functional currency, in consolidation using the average exchange rate in effect during each fiscal month during the period, with any related gain or loss recorded as foreign currency translation adjustments in other comprehensive income (loss). The assets and liabilities of subsidiaries that use functional currencies other than the U.S. dollar are translated into U.S. dollars in consolidation using period end exchange rates, with the effects of foreign currency translation adjustments included in accumulated other comprehensive income (loss).
Ranpak does not currently hedge its foreign currency transaction or translation exposure. As a result, significant currency fluctuations could impact the comparability of its results between periods, while such fluctuations coupled with material mismatches in net salesrevenues and expenses could also adversely impact its cash flows. See “Qualitative“Qualitative and Quantitative Disclosures About Market Risk.”
AcquisitionsAcquisitions—. On February 28, 2017, Ranpak acquired e3neoe3NEO for total consideration of $3.3 million, including contingent consideration of $1.1 million which was paid in full in 2018, plus an earn-out opportunity, which remains pending, wherebywas not earned and, in April 2020, we entered into a settlement arrangement with the seller may be entitledformer majority owner of e3NEO to receive an earn-outprovide, among other things, for a payment in an amount up to the greaterearn-out counterparties in the amount of (i) $2.6approximately$1.6 million. Approximately $0.2 million and (ii) 48%was expensed in the second quarter of 2020 after certain approvals were obtained by French authorities. Approximately $0.8 million was paid in the trailing twelve (12) month EBITDAsecond quarter of e3neo calculated as of December 31, 2020, which remains pending.2020. Approximately $0.6 million was accrued for at September 30, 2020. See Note 47, “Acquisition” to the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. While recent acquisitions, such as e3neo,e3NEO, have been relatively small, any significant future business acquisitions may impact the comparability of Ranpak’s results in future periods with those for prior periods.
SeasonalitySeasonality—. Ranpak estimates that approximately one-third of its net sales,revenue, either directly or to distributors, are destined for end-users in the e-commerce sectors, whose businesses frequently follow traditional retail seasonal trends, including a concentration of sales in the holiday period in the fourth quarter. Ranpak’s results tend to follow similar patterns, with the highest net salesrevenue typically recorded in its fourth fiscal quarter and the slowest sales in its first fiscal quarter of each fiscal year. Ranpak expects this seasonality to continue in the future, as a result of which its results of operations between fiscal quarters in a given year may not be directly comparable.
Impact of the COVID-19 Pandemic. The COVID-19 pandemic has resulted in rapid changes in market and economic conditions around the world as COVID-19 continues to spread. We derive a significant portion of our revenue from sales of Void-fill, Cushioning and Wrapping products to e-commerce end-users and demand from these end-users has been strong, offsetting reductions in demand for these products from customers in other industries. However, social distancing and similar measures adopted in many jurisdictions around the world have impacted our ability to demonstrate and install our protective packaging systems and Automation products and, as a result, such demonstrations and installations have been delayed. If social distancing measures continue for an extended period of time, growth in our protective packaging system base, acquisition of new customers and sales of Automation products may be adversely affected. We believe that these impacts are not unique to us and that our industry competitors have been impacted in a similar fashion. We are deemed an essential business under the Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response issued by the United States Cybersecurity and Infrastructure Security Agency and pursuant to state decisions in states where our domestic production and distribution facilities are located. We continue to operate our production and distribution facilities, both domestically and internationally, albeit subject to social distancing and other measures to promote a safe operating environment. While we have experienced limited delays in receiving certain supplies we use to assemble our packaging systems, to date, these measures have not materially impacted the cost of producing and distributing our products, the cost and availability of raw materials and components, and we have encountered minimal disruption in our ability to fulfill customer orders. We continue to monitor our liquidity position closely and have extended payment terms to certain of our customers when necessary, while correspondingly seeking extended terms from our key suppliers. While we do not currently expect COVID-19 to have a material impact on our business, results of operations, financial condition or liquidity, at the time of this filing, we cannot predict the extent to which we will ultimately be impacted due to the evolving and highly uncertain nature and duration of the COVID-19 pandemic. We will continue to evaluate the nature and extent of the impact to our business, results of operations, financial condition, and cash flows.
Key Performance Indicators and Other Factors Affecting Performance
Ranpak uses the following key performance indicators and monitors the following other factors to analyze its business performance, determine financial forecasts, and help develop long-term strategic plans:
Protective Packaging Systems Base—Base — Ranpak closely tracks the number of protective packaging systems installed with end-users as it is a leading indicator of underlying business trends and near-term and ongoing net sales expectations. Ranpak’s installed base of protective packaging systems also drives its capital expenditure budgets. Ranpak's installed base of protective packaging systems was 102.3 thousand units as of September 30, 2019 an increase of 7.1 thousand units, or 7.5% from 95.2 thousand units as of September 30, 2018. The following table presents Ranpak’s installed base of protective packaging systems by product line as of September 30, 20192020 and 2018:2019:
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| Change |
|
| % Change |
| ||||
Protective Packaging Systems |
| (in thousands) |
|
|
|
|
| |||||||||
Cushioning machines |
|
| 33.2 |
|
|
| 32.1 |
|
|
| 1.1 |
|
|
| 3.4 |
|
Void-fill machines |
|
| 65.5 |
|
|
| 59.5 |
|
|
| 6.0 |
|
|
| 10.1 |
|
Wrapping machines |
|
| 14.4 |
|
|
| 10.7 |
|
|
| 3.7 |
|
|
| 34.6 |
|
Total |
|
| 113.1 |
|
|
| 102.3 |
|
|
| 10.8 |
|
|
| 10.6 |
|
(in thousands) | September 30, | 9/30/2019 vs. 9/30/2018 | |||||||||
Protective Packaging Systems | 2019 | 2018 | Change | % Change | |||||||
Cushioning machines | 32.1 | 31.0 | 1.1 | 3.6 | |||||||
Void-fill machines | 59.5 | 55.7 | 3.8 | 6.7 | |||||||
Wrapping machines | 10.7 | 8.5 | 2.2 | 26.5 | |||||||
Total | 102.3 | 95.2 | 7.1 | 7.5 |
Paper Costs—Costs.Paper is a key component of Ranpak’s cost of sales and paper costs can fluctuate significantly between periods. Ranpak purchases both 100% virgin and 100% recycled paper, as well as blends, from various suppliers for conversion into the paper consumables it sells. The cost of paper supplies is Ranpak’s largest input cost, and it negotiates supply and pricing arrangements with most of its paper suppliers annually, with a view towards mitigating fluctuations in paper cost. Nevertheless, as paper is a commodity, its price on the open market, and in turn the prices Ranpak negotiates with suppliers at a given point in time, can fluctuate significantly, and is affected by several factors outside of Ranpak’s control, including supply and demand and the cost of other commodities that are used in the manufacture of paper, including wood, energy and chemicals. The market for Ranpak’s solutions is competitive and it may be difficult for Ranpak to pass on increases in paper prices to its customers immediately, or at all, which has in the past and could in the future adversely affect its operating results.
Results of Operations
The following tables setsset forth Ranpak’s results of operations for the Successor Periods, Predecessor Periods, three and nine month periods ended September 30, 2019 on a Predecessor/Successor combined basis,2020, the three and nine month pro forma periodsmonths ended September 30, 2019, the Successor Period, and three and nine month periods ended September 30, 2018,the 1H 2019 Predecessor Period, with line items presented in millions of dollars.
The Ranpak Business Combination is accounted for under the scope of Financial Accounting Standards Board's Accounting Standards Codification ("ASC") Topicbusiness combination guidance in ASC 805
The financial statements separate the Company'sCompany’s presentation into two distinct periods. The periodperiods before the Closing of the Ranpak Business Combination (labeled Predecessor Period) depictsPredecessor) depict the financial statements of Rack Holdings, and the period after the Closing (labeled Successor Period)Successor) depicts the financial statements of the Company, including the consolidation of One Madison Corporation with Rack Holdings and application of acquisition method of accounting. As a result of the application of the acquisition method of accounting as of the Closing, the financial statements for the Predecessor Periodsperiods and for the Successor Periodsperiods are presented on a different basis of accounting and are, therefore not comparable.
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). However, weGAAP. We have, however, also disclosed below EBITDAEarnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and adjusted EBITDA, which are non-GAAP financial measures. We have included EBITDA and adjusted EBITDA because they are key measures used by our management and boardBoard of directorsDirectors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating EBITDA and adjusted EBITDA can provide a useful measure for period-to-period comparisons of our primary business operations. Accordingly, we believe that EBITDA and adjusted EBITDA provide useful information to investors and others in understanding and evaluating the Company'sCompany’s operating results in the same manner as our management and boardBoard of directors.
EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, EBITDA and adjusted EBITDA should not be viewed as substitutes for, or superior to, net income (loss) prepared in accordance with GAAP as a measure of profitability or liquidity. Some of these limitations are:
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA and adjusted EBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements; |
• | EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; |
• | adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; |
• | EBITDA and adjusted EBITDA do not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us; |
• | adjusted EBITDA does not take into account any restructuring and integration costs; and |
• | other companies, including companies in our industry, may calculate EBITDA and adjusted EBITDA differently, which reduces their usefulness as comparative measures. |
EBITDA and adjusted EBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
Adjusted EBITDA—
We also believe that adjusting these non-GAAP measures for comparability between the Predecessor, Successor and Pro Forma periods is useful to the user of our financial statements.
In addition, in our discussion below, we include certain unaudited, non-GAAP pro forma results of operationsdata for the three and nine month periods ended September 30, 2020, the three months ended September 30, 2019, included in the discussion below areSuccessor Period, and the 1H 2019 Predecessor Period. This data is based on our historical financial statements included elsewhere in this Quarterly Report on Form 10-Q, adjusted (where applicable) to remove the effect of costs incurred to consummate the Ranpak Business Combination, other one-time costs incurred due to the Company entering into the Ranpak Business Combination and for purchase accounting adjustments related to the business combinationRanpak Business Combination as well as to reflect a constant currency presentation between periods for the convenience of readers. The non-GAAP measureWe refer to these data as pro forma ("pro forma") results discussed herein are derived from the combineddata in our discussion. However, such pro forma financial information presented below under “
Comparison of Successor Period Three Months Ended September 30, 2019, Q3 Predecessor Period2020 to Three Months Ended September 30, 2018 and Pro Forma Three Months Ended September 30, 2019
Successor | Predecessor | Pro Forma | ||||||||||||||||||
Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | Change to September 30, | |||||||||||||||||
2019 ($) | % Net sales | 2018 ($) | % Net sales | 2019 ($) | % Net sales | 2018 ($) | % | |||||||||||||
Net sales | 69.1 | 65.1 | 70.4 | 5.3 | 8.1 | |||||||||||||||
Cost of sales | 39.6 | 57.3 | 37.7 | 58.0 | 39.3 | 55.8 | 1.6 | 4.1 | ||||||||||||
Gross Profit | 29.5 | 42.7 | 27.4 | 42.0 | 31.1 | 44.2 | 3.7 | 13.6 | ||||||||||||
Selling, general and administrative | 17.7 | 25.6 | 12.6 | 19.3 | 15.8 | 22.4 | 3.2 | 25.5 | ||||||||||||
Transaction costs | — | — | 1.0 | 1.6 | — | — | (1.0 | ) | (100.0 | ) | ||||||||||
Depreciation and amortization | 10.3 | 14.9 | 10.7 | 16.5 | 10.5 | 14.9 | (0.2 | ) | (1.9 | ) | ||||||||||
Other operating expense, net | 0.5 | 0.7 | 1.2 | 1.9 | 0.7 | 1.0 | (0.5 | ) | (41.9 | ) | ||||||||||
Income (loss) from operations | 1.0 | 1.5 | 1.9 | 2.9 | 4.1 | 5.8 | 2.2 | 116.5 | ||||||||||||
Interest expense | 9.5 | 13.8 | 8.0 | 12.3 | 9.6 | 13.7 | 1.6 | 20.2 | ||||||||||||
Foreign currency (gain) loss | (3.2 | ) | (4.7 | ) | (0.9 | ) | (1.4 | ) | (3.2 | ) | (4.6 | ) | (2.3 | ) | 255.6 | |||||
Loss before income taxes | (5.3 | ) | (7.6 | ) | (5.2 | ) | (8.0 | ) | (2.3 | ) | (3.3 | ) | 2.9 | (55.7 | ) | |||||
Income tax benefit | (3.7 | ) | (5.4 | ) | (5.5 | ) | (8.5 | ) | (3.1 | ) | (4.5 | ) | 2.4 | (43.1 | ) | |||||
Net (loss) income | (1.6 | ) | (2.3 | ) | 0.3 | 0.5 | 0.8 | 1.2 | 0.5 | 166.7 | ||||||||||
Non-GAAP: | ||||||||||||||||||||
EBITDA | 19.6 | 18.8 | 19.5 | 0.7 | 3.9 | |||||||||||||||
Adjusted EBITDA | 20.6 | 22.0 | 1.4 | 6.9 |
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
| ||||
Net revenue |
| $ | 76.8 |
|
| ― |
|
| $ | 69.1 |
|
| ― |
| ||
Cost of goods sold |
|
| 46.6 |
|
|
| 60.7 |
|
|
| 39.6 |
|
|
| 57.3 |
|
Gross profit |
|
| 30.2 |
|
|
| 39.3 |
|
|
| 29.5 |
|
|
| 42.7 |
|
Selling, general and administrative expenses |
|
| 17.8 |
|
|
| 23.2 |
|
|
| 17.7 |
|
|
| 25.6 |
|
Depreciation and amortization expense |
|
| 7.7 |
|
|
| 10.0 |
|
|
| 10.3 |
|
|
| 14.9 |
|
Other operating expense, net |
|
| 1.9 |
|
|
| 2.5 |
|
|
| 0.5 |
|
|
| 0.7 |
|
Income (loss) from operations |
|
| 2.8 |
|
|
| 3.6 |
|
|
| 1.0 |
|
|
| 1.4 |
|
Interest expense |
|
| 4.9 |
|
|
| 6.4 |
|
|
| 9.5 |
|
|
| 13.7 |
|
Foreign currency (gain) loss |
|
| 3.2 |
|
|
| 4.2 |
|
|
| (3.2 | ) |
|
| (4.6 | ) |
Loss before income tax expense |
|
| (5.3 | ) |
|
| (6.9 | ) |
|
| (5.3 | ) |
|
| (7.7 | ) |
Income tax expense (benefit) |
|
| 0.8 |
|
|
| 1.0 |
|
|
| (3.7 | ) |
|
| (5.4 | ) |
Net loss |
| $ | (6.1 | ) |
|
| (7.9 | ) |
| $ | (1.6 | ) |
|
| (2.3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
| $ | 15.2 |
|
|
|
|
|
| $ | 22.9 |
|
|
|
|
|
Adjusted EBITDA |
| $ | 23.7 |
|
|
|
|
|
| $ | 22.0 |
|
|
|
|
|
|
| Pro Forma |
| |||||||||||||||||||||
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
|
| $ Change |
|
| % Change |
| ||||||
Net revenue |
| $ | 76.1 |
|
| ― |
|
| $ | 70.4 |
|
| ― |
|
| $ | 5.7 |
|
|
| 8.1 |
| ||
Cost of goods sold |
|
| 46.2 |
|
|
| 60.7 |
|
|
| 39.3 |
|
|
| 55.8 |
|
|
| 6.9 |
|
|
| 17.6 |
|
Gross profit |
|
| 29.9 |
|
|
| 39.3 |
|
|
| 31.1 |
|
|
| 44.2 |
|
|
| (1.2 | ) |
|
| (3.9 | ) |
Selling, general and administrative expenses |
|
| 17.7 |
|
|
| 23.3 |
|
|
| 15.8 |
|
|
| 22.4 |
|
|
| 1.9 |
|
|
| 12.0 |
|
Depreciation and amortization expense |
|
| 7.7 |
|
|
| 10.1 |
|
|
| 10.5 |
|
|
| 14.9 |
|
|
| (2.8 | ) |
|
| (26.7 | ) |
Other operating expense, net |
|
| 1.8 |
|
|
| 2.4 |
|
|
| 0.7 |
|
|
| 1.0 |
|
|
| 1.1 |
|
|
| 157.1 |
|
Income (loss) from operations |
|
| 2.7 |
|
|
| 3.5 |
|
|
| 4.1 |
|
|
| 5.8 |
|
|
| (1.4 | ) |
|
| (34.1 | ) |
Interest expense |
|
| 4.9 |
|
|
| 6.4 |
|
|
| 9.6 |
|
|
| 13.6 |
|
|
| (4.7 | ) |
|
| (49.0 | ) |
Foreign currency (gain) loss |
|
| 3.2 |
|
|
| 4.2 |
|
|
| (3.2 | ) |
|
| (4.5 | ) |
|
| 6.4 |
|
|
| (200.0 | ) |
Loss before income tax expense |
|
| (5.4 | ) |
|
| (7.1 | ) |
|
| (2.3 | ) |
|
| (3.3 | ) |
|
| (3.1 | ) |
|
| 134.8 |
|
Income tax expense (benefit) |
|
| 0.8 |
|
|
| 1.1 |
|
|
| (3.1 | ) |
|
| (4.4 | ) |
|
| 3.9 |
|
|
| (125.8 | ) |
Net loss |
| $ | (6.2 | ) |
|
| (8.1 | ) |
| $ | 0.8 |
|
|
| 1.1 |
|
| $ | (7.0 | ) |
|
| (875.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
| $ | 15.2 |
|
|
|
|
|
| $ | 22.9 |
|
|
|
|
|
| $ | (7.7 | ) |
|
| (33.6 | ) |
Adjusted EBITDA |
| $ | 23.7 |
|
|
|
|
|
| $ | 22.0 |
|
|
|
|
|
| $ | 1.7 |
|
|
| 7.7 |
|
Net sales
The following tabletables and the discussion that follows comparescompare Ranpak’s net salesrevenue by geographic region and by product line for the three months ended September 30, 2020 and 2019 on a GAAP basis and 2018:on a non-GAAP, pro forma basis as described above and in the discussion below. See also “Presentation and Reconciliation of GAAP to Non-GAAP Measures” for further:
|
| Three Months Ended September 30, |
| |||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
| ||||
North America |
| $ | 33.3 |
|
|
| 43.4 |
|
| $ | 32.9 |
|
|
| 47.6 |
|
Europe/Asia |
|
| 43.5 |
|
|
| 56.6 |
|
|
| 36.2 |
|
|
| 52.4 |
|
Net revenue |
| $ | 76.8 |
|
|
| 100.0 |
|
| $ | 69.1 |
|
|
| 100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cushioning machines |
| $ | 31.8 |
|
|
| 41.4 |
|
| $ | 31.3 |
|
|
| 45.3 |
|
Void-fill machines |
|
| 33.3 |
|
|
| 43.4 |
|
|
| 28.4 |
|
|
| 41.1 |
|
Wrapping machines |
|
| 10.1 |
|
|
| 13.2 |
|
|
| 6.6 |
|
|
| 9.6 |
|
Other |
|
| 1.6 |
|
|
| 2.0 |
|
|
| 2.8 |
|
|
| 4.0 |
|
Net revenue |
| $ | 76.8 |
|
|
| 100.0 |
|
| $ | 69.1 |
|
|
| 100.0 |
|
|
| Pro Forma |
| |||||||||||||||||||||
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
|
| $ Change |
|
| % Change |
| ||||||
North America |
| $ | 33.3 |
|
|
| 43.8 |
|
| $ | 33.0 |
|
|
| 46.9 |
|
| $ | 0.3 |
|
|
| 0.9 |
|
Europe/Asia |
|
| 42.8 |
|
|
| 56.2 |
|
|
| 37.4 |
|
|
| 53.1 |
|
|
| 5.4 |
|
|
| 14.4 |
|
Net revenue |
| $ | 76.1 |
|
|
| 100.0 |
|
| $ | 70.4 |
|
|
| 100.0 |
|
| $ | 5.7 |
|
|
| 8.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cushioning machines |
| $ | 31.4 |
|
|
| 41.3 |
|
| $ | 31.9 |
|
|
| 45.3 |
|
| $ | (0.5 | ) |
|
| (1.6 | ) |
Void-fill machines |
|
| 33.0 |
|
|
| 43.4 |
|
|
| 28.8 |
|
|
| 40.9 |
|
|
| 4.2 |
|
|
| 14.6 |
|
Wrapping machines |
|
| 10.1 |
|
|
| 13.3 |
|
|
| 6.8 |
|
|
| 9.7 |
|
|
| 3.3 |
|
|
| 48.5 |
|
Other |
|
| 1.6 |
|
|
| 2.0 |
|
|
| 2.9 |
|
|
| 4.1 |
|
|
| (1.3 | ) |
|
| (44.8 | ) |
Net revenue |
| $ | 76.1 |
|
|
| 100.0 |
|
| $ | 70.4 |
|
|
| 100.0 |
|
| $ | 5.7 |
|
|
| 8.1 |
|
Successor | Predecessor | Pro Forma | |||||||||||||||
Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | Change to September 30, | ||||||||||||||
2019 ($) | % Net sales | 2018 ($) | % Net sales | 2019 ($) | % Net sales | 2018 ($) | % | ||||||||||
North America | 32.9 | 47.6 | 32.5 | 49.9 | 33.0 | 46.8 | 0.5 | 1.5 | |||||||||
Europe/Asia | 36.2 | 52.4 | 32.6 | 50.1 | 37.4 | 53.2 | 4.8 | 14.7 | |||||||||
Total | 69.1 | 100.0 | 65.1 | 100.0 | 70.4 | 100.0 | 5.3 | 8.1 | |||||||||
Cushioning machines | 28.6 | 41.4 | 27.3 | 41.9 | 29.2 | 41.5 | 1.9 | 7.0 | |||||||||
Void-Fill machines | 27.9 | 40.4 | 29.3 | 45.1 | 28.3 | 40.2 | (1.0 | ) | (3.4 | ) | |||||||
Wrapping machines | 6.4 | 9.3 | 4.2 | 6.5 | 6.5 | 9.2 | 2.3 | 54.8 | |||||||||
Other | 6.2 | 8.9 | 4.3 | 6.5 | 6.4 | 9.1 | 2.1 | 49.0 | |||||||||
Total | 69.1 | 100.0 | 65.1 | 100.0 | 70.4 | 100.0 | 5.3 | 8.1 |
Net salesrevenue for the three months ended September 30, 2019 and 2018 totaled2020 was $76.8 million. Net revenue was $69.1 million and $65.1 million, respectively.in the three months ended September 30, 2019. Net salesrevenue increased $4.0$7.7 million or 6.1%11.1% as a result of an increase in the volume of Ranpak’s paper consumable products of approximately 0.515.1 pp, andpartially offset by a 3.0decrease of approximately 1.8 pp increase in sales of automated box sizing equipment in addition to an increaseand a 5.6 pp decrease in the price of Ranpak'sRanpak’s paper consumable products which contributed a 5.4 pp increase in sales.products. Net sales wererevenue was positively impacted by increases in automation, cushioning, void-fill, and wrapping, net sales, which were partially offset by a $0.1 million fair-value purchase accounting adjustment related to deferred revenue for user fees and packaging systems as well as a decreasedecreases in void-fill net sales.automation. Cushioning increased $1.9$0.5 million, or 7.0%1.6%, to $29.2$31.8 million from $27.3$31.3 million, void-fill decreased $(1.0)increased $4.9 million, or (3.4)%17.3%, to $28.3$33.3 million from $29.3$28.4 million, wrapping increased $2.3$3.5 million, or 54.8%53.0%, to $6.5$10.1 million from $4.2$6.6 million, while other sales increased $2.1decreased $1.2 million, or 49.0%42.9%, to $6.4$1.6 million from $4.3$2.8 million, in each case for the three months ended September 30, 20192020 compared to the three months ended September 30, 2018.2019. Other net salesrevenue includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field. Ranpak’s proPro forma consolidated net sales increasedrevenue was $76.1 million for the three months ended September 30, 2020, a $5.7 million, or 8.8%8.1%, increase on a constant currency basis from pro forma net revenue of $70.4 million for the three months ended September 30, 20192019. to $70.4 million from $64.7 million in the three month period ended September 30, 2018, after removing the effect of the fair value adjustment and adjusting to a constant currency in both periods.
Net salesrevenue in North America for the three months ended September 30, 2019 and 20182020 totaled $32.9 million and $32.5 million, respectively, an increase of $0.4 million or 1.3%. Pro forma net sales$33.3 million. Net revenue in North America were $33.0was $32.9 million in the three months ended September 30, 2019, an increase of $0.52019. Net revenue in North America increased $0.4 million, or 1.5%, from $32.5 million for the three month period ended September 30, 2018. The change was1.2% attributable to an increase in cushioning and wrapping volumes and prices,sales, partially offset by a decreasedecline in cushioning and void-fill sales.
Net salesrevenue in Europe/Asia for the three months ended September 30, 2019 and 2018,2020 totaled $36.2 million and $32.6 million, respectively, an increase of $3.6 million or 10.9%. Pro forma net sales$43.5 million. Net revenue in Europe/Asia were $37.4was $36.2 million in the three months ended September 30, 2019, an increase of $5.22019. Net revenue in Europe/Asia increased $7.3 million or 16.1%, from $32.220.2% driven primarily by increases in void-fill and wrapping product categories, partially offset by a decline in automation revenue. Pro forma net revenue in Europe/Asia was $42.8 million for the three month periodmonths ended September 30, 2018, on2020, a $5.4 million, or 14.4%, increase from pro forma net revenue of $37.4 million for the three months ended September 30, 2019 after adjusting for constant currency basis, driven primarily by an increase in cushioning, automation and wrapping sales.
Cost of Sales
Cost of sales for the three months ended September 30, 2019 and 20182020 totaled $46.6 million. Cost of sales was $39.6 million and $37.7 million, respectively.in the three months ended September 30, 2019. Cost of sales increased $1.9$7.0 million or 4.9%17.7% due to higher sales of consumables, an increase in depreciation of $2.9 million over the prior year due to the Ranpak Business Combination fair value adjustments, increased converter placement, increases in volume,labor and freight costs, and an increase in non-recurring operating costs in automation, offset by a fair value purchase accounting adjustment of $1.0 million related to a step-up in inventory costs and a decrease in thelower price of paper. Pro forma cost of sales increased by $1.8$6.9 million, or 4.7%17.6%, to $39.3$46.2 million in the three months ended September 30, 20192020 from $37.5$39.3 million for the three month periodmonths ended September 30, 20182019 after removing the effect of the fair value adjustment and adjusting to a constant currency in both periods. As a result, on a pro forma basis, net sales minus cost of sales as a percentage of net sales increaseddecreased by 2.2 percentage point (pp)4.9 pp to 44.2%39.3% in the three months ended September 30, 20192020 from 42.0%44.2% for the comparable period in 2018.
Selling, General and Administrative Expenses (SG&A)
SG&A expenses for the three months ended September 30, 2019 and 2018 totaled $17.72020 was $17.8 million and $12.6 million, respectively.nearly flat to SG&A expenses increased $5.1 million or 40.7% due to severance costs, non-cash equity compensation costs, increased support of growth initiatives and increased costs associated with being a public company. Pro forma SG&A expenses increased by $2.3 million, or 16.8%, to $15.8$17.7 million in the three months ended September 30, 20192019. Pro forma SG&A expenses increased by $1.9 million, or 12.0%, to $17.7 million in the three months ended September 30, 2020 from $13.5$15.8 million for the comparable period in 20182019 after adjusting to a constant currency in both periods.periods, largely due to support of growth initiatives and $1.2 million in costs associated with the Warrant Exchange. As a percentage of pro forma net sales, pro forma SG&A increased to 23.2% in the three months ended September 30, 2020 from 22.4% in the three months ended September 30, 2019 from 20.8% in the three months ended September 30, 2018 on a constant currency basis.
Depreciation and Amortization
Depreciation and amortization expenses for the three months ended September 30, 20192020 were $7.7 million. Depreciation and 2018 totaledamortization expenses were $10.3 million and $10.7 million, respectively.in the three months ended September 30, 2019. Depreciation and amortization expenses decreased $(0.5)$2.6 million, or (4.2)%25.2% due to the Ranpak Business Combination fair value adjustments, their related amortizable lives and changes in currency rates. Pro forma depreciation and amortization expenses decreased by $(0.2)$2.8 million, or (1.4)%26.7%, to $10.5$7.7 million in the three months ended September 30, 20192020 from $10.7$10.5 million for the three months ended September 30, 20182019 on a constant currency basis. As a percentage of pro forma net sales, pro forma depreciation and amortization expenses decreased to 10.1% in the three months ended September 30, 2020 from 14.9% on a pro forma basis in the three months ended September 30, 2019 from 16.4% in the three months ended September 30, 2018 on a constant currency basis.
Other Operating Expense, (Income), Net
Other operating expenses (income),expense, net, for the three months ended September 30, 2019 and 2018 totaled $0.5 million and $1.2 million, respectively.2020 was $1.9 million. Other operating expenses (income), net, decreased $(0.7) million or (58.4)% due to loss on sale of machines in the prior year period and increased research and development expense, in the current year period. Pro forma other operating expenses (income), net was $0.7$0.5 million in the three months ended September 30, 20192019. Other operating expense increased $1.4 million. Pro forma other operating expense, net was $1.8 million in the three months ended September 30, 2020 compared to $1.2$0.7 million for the three months ended September 30, 20182019 on a constant currency basis, largely driven by increases in research and development. As a percentage of pro
forma net sales, pro forma other operating expense, net, increased to 2.4% in the three months ended September 30, 2020 from 1.0% in the three months ended September 30, 2019 on a constant currency basis.
Interest Expense
Interest expense for the three months ended September 30, 2020 was $4.9 million. Interest expense was $9.5 million in the three months ended September 30, 2019. Interest expense decreased $4.6 million, or 48.4%. Interest expense decreased due to decreased debt levels and deferred financing costs, as well as lower interest rates. Pro forma interest expense decreased by $4.7 million, or 49.0%, to $4.9 million in the three months ended September 30, 2020 compared to $9.6 million for the three months ended September 30, 2019 on a constant currency basis due to decreased debt levels and deferred financing costs, as well as lower interest rates. As a percentage of pro forma net sales, pro forma interest expense decreased to 6.4% in the three months ended September 30, 2020 from 13.6% in the three months ended September 30, 2019.
Foreign Currency (Gain) Loss
Foreign currency loss for the three months ended September 30, 2020 was $3.2 million. Foreign currency gain was $3.2 million in the three months ended September 30, 2019. Foreign currency loss increased $6.4 million due to favorable movements in Euro exchange rates. Pro forma foreign currency loss was $3.2 million in the three months ended September 30, 2020 compared to gain of $3.2 million for the three months ended September 30, 2019 on a constant currency basis. As a percentage of pro forma net sales, pro forma other operating expenses (income), net,foreign currency loss decreased to 1.0% on a pro forma basis4.2% in the three months ended September 30, 2020 from 4.5% in the three months ended September 30, 2019 from 1.8% inon a constant currency basis.
Income Tax Expense (Benefit)
Income tax expense for the three months ended September 30, 2018 on a constant currency basis.
Net (Loss) Income
Net (loss) incomeloss for the three months ended September 30, 2019 and 2018 totaled $(1.6)2020 increased $4.5 million and $0.3to $6.1 million respectively,from a decreasenet loss of $(1.9) million or (683.7)%. Pro forma net income was $0.8$1.6 million in the three months ended September 30, 20192019. Pro forma net loss was $6.2 million in the three months ended September 30, 2020 compared to pro forma net income of $0.3$0.8 million for the three month periodmonths ended September 30, 20182019 on a constant currency basis. The change was due to the reasons discussed above.
EBITDA and Adjusted EBITDA
EBITDA for the three months ended September 30, 2019 and 2018 totaled $19.62020 was $15.2 million. EBITDA was $22.9 million and $18.8 million, respectively, an increase of $0.8 million or 4.4%.in the three months ended September 30, 2019. Adjusting for transaction costs associated with the Ranpak Business Combination, constant currency and other one-time costs, pro forma Adjusted EBITDA for the pro forma three months ended September 30, 2020 and 2019 and 2018 totaled $22.0$23.7 million and $20.6$22.0 million, respectively, an increase of $1.4$1.7 million, or 6.9%.
Comparison of Nine Months Ended September 30, 2020 to the Successor Period (June 3,and 1H 2019 to September 30, 2019), 2019 1H Predecessor Period (January 1, 2019 to June 2, 2019), Nine months ended September 30, 2018 and Pro Forma Nine months ended September 30, 2019
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||||||
|
| Nine Months Ended September 30, | June 3, 2019 – September 30, 2019 |
|
|
| January 1, 2019 – June 2, 2019 |
| |||||||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
|
|
| 2019 |
|
| % Net revenue |
| ||||||
Net revenue |
| $ | 206.3 |
|
| ― |
|
| $ | 85.4 |
|
| ― |
|
|
| $ | 106.4 |
|
| ― |
| |||
Cost of goods sold |
|
| 122.3 |
|
|
| 59.3 |
|
|
| 52.6 |
|
|
| 61.6 |
|
|
|
| 61.2 |
|
|
| 57.5 |
|
Gross profit |
|
| 84.0 |
|
|
| 40.7 |
|
|
| 32.8 |
|
|
| 38.4 |
|
|
|
| 45.2 |
|
|
| 42.5 |
|
Selling, general and administrative expenses |
|
| 58.1 |
|
|
| 28.2 |
|
|
| 22.5 |
|
|
| 26.3 |
|
|
|
| 23.8 |
|
|
| 22.4 |
|
Transaction costs |
|
| - |
|
|
| - |
|
|
| 0.3 |
|
|
| 0.4 |
|
|
|
| 7.4 |
|
|
| 7.0 |
|
Depreciation and amortization expense |
|
| 22.9 |
|
|
| 11.1 |
|
|
| 13.3 |
|
|
| 15.6 |
|
|
|
| 17.7 |
|
|
| 16.6 |
|
Other operating expense, net |
|
| 2.9 |
|
|
| 1.4 |
|
|
| 0.8 |
|
|
| 0.9 |
|
|
|
| 2.2 |
|
|
| 2.1 |
|
Income (loss) from operations |
|
| 0.1 |
|
|
| 0.0 |
|
|
| (4.1 | ) |
|
| (4.8 | ) |
|
|
| (5.9 | ) |
|
| (5.5 | ) |
Interest expense |
|
| 16.6 |
|
|
| 8.0 |
|
|
| 17.5 |
|
|
| 20.5 |
|
|
|
| 20.2 |
|
|
| 19.0 |
|
Foreign currency (gain) loss |
|
| 3.1 |
|
|
| 1.5 |
|
|
| (1.6 | ) |
|
| (1.9 | ) |
|
|
| (2.2 | ) |
|
| (2.1 | ) |
Loss before income tax expense |
|
| (19.6 | ) |
|
| (9.5 | ) |
|
| (20.0 | ) |
|
| (23.4 | ) |
|
|
| (23.9 | ) |
|
| (22.5 | ) |
Income tax benefit |
|
| (1.4 | ) |
|
| (0.7 | ) |
|
| (6.1 | ) |
|
| (7.1 | ) |
|
|
| (4.9 | ) |
|
| (4.6 | ) |
Net loss |
| $ | (18.2 | ) |
|
| (8.8 | ) |
| $ | (13.9 | ) |
|
| (16.3 | ) |
|
| $ | (19.0 | ) |
|
| (17.9 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
| $ | 42.2 |
|
|
|
|
|
| $ | 20.1 |
|
|
|
|
|
|
| $ | 22.9 |
|
|
|
|
|
Adjusted EBITDA |
| $ | 60.8 |
|
|
|
|
|
| $ | - |
|
|
|
|
|
|
| $ | - |
|
|
|
|
|
|
| Pro Forma |
| |||||||||||||||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
|
| $ Change |
|
| % Change |
| ||||||
Net revenue |
| $ | 208.7 |
|
| ― |
|
| $ | 198.2 |
|
| ― |
|
| $ | 10.5 |
|
|
| 5.3 |
| ||
Cost of goods sold |
|
| 123.7 |
|
|
| 59.3 |
|
|
| 113.0 |
|
|
| 57.0 |
|
|
| 10.7 |
|
|
| 9.5 |
|
Gross profit |
|
| 85.0 |
|
|
| 40.7 |
|
|
| 85.2 |
|
|
| 43.0 |
|
|
| (0.2 | ) |
|
| (0.2 | ) |
Selling, general and administrative expenses |
|
| 58.7 |
|
|
| 28.1 |
|
|
| 43.1 |
|
|
| 21.7 |
|
|
| 15.6 |
|
|
| 36.2 |
|
Depreciation and amortization expense |
|
| 23.1 |
|
|
| 11.1 |
|
|
| 30.8 |
|
|
| 15.5 |
|
|
| (7.7 | ) |
|
| (25.0 | ) |
Other operating expense, net |
|
| 3.2 |
|
|
| 1.5 |
|
|
| 3.6 |
|
|
| 1.8 |
|
|
| (0.4 | ) |
|
| (11.1 | ) |
Income (loss) from operations |
|
| - |
|
|
| - |
|
|
| 7.7 |
|
|
| 3.9 |
|
|
| (7.7 | ) |
|
| (100.0 | ) |
Interest expense |
|
| 16.6 |
|
|
| 8.0 |
|
|
| 26.1 |
|
|
| 13.2 |
|
|
| (9.5 | ) |
|
| (36.4 | ) |
Foreign currency (gain) loss |
|
| 3.1 |
|
|
| 1.5 |
|
|
| (3.8 | ) |
|
| (1.9 | ) |
|
| 6.9 |
|
|
| (181.6 | ) |
Loss before income tax expense |
|
| (19.7 | ) |
|
| (9.4 | ) |
|
| (14.6 | ) |
|
| (7.4 | ) |
|
| (5.1 | ) |
|
| 34.9 |
|
Income tax benefit |
|
| (1.3 | ) |
|
| (0.6 | ) |
|
| (4.8 | ) |
|
| (2.4 | ) |
|
| 3.5 |
|
|
| (72.9 | ) |
Net loss |
| $ | (18.4 | ) |
|
| (8.8 | ) |
| $ | (9.8 | ) |
|
| (4.9 | ) |
| $ | (8.6 | ) |
|
| 87.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
| $ | 42.2 |
|
|
|
|
|
| $ | 58.1 |
|
|
|
|
|
| $ | (15.9 | ) |
|
| (27.4 | ) |
Adjusted EBITDA |
| $ | 60.8 |
|
|
|
|
|
| $ | 58.4 |
|
|
|
|
|
| $ | 2.4 |
|
|
| 4.1 |
|
Successor | Predecessor | Pro Forma | ||||||||||||||||||||||||||||
June 3, through September 30, | January 1, through June 2, | Nine Months Ended September 30, | Nine Months Ended September 30, | Change to September 30, | ||||||||||||||||||||||||||
2019 ($) | % Net sales | 2019 ($) | % Net sales | 2018 ($) | % Net sales | 2019 ($) | % Net sales | 2018 ($) | % | |||||||||||||||||||||
Net sales | 85.4 | 106.4 | 191.9 | 196.9 | 5.0 | 2.6 | ||||||||||||||||||||||||
Cost of sales | 52.6 | 57.3 | 61.2 | 57.5 | 109.7 | 57.1 | 112.0 | 56.9 | 2.3 | 2.1 | ||||||||||||||||||||
Gross Profit | 32.8 | 42.7 | 45.2 | 42.5 | 82.2 | 42.8 | 84.9 | 43.1 | 2.7 | 3.3 | ||||||||||||||||||||
Selling, general and administrative | 22.5 | 25.6 | 23.8 | 22.4 | 37.8 | 19.7 | 43.1 | 21.9 | 5.3 | 13.9 | ||||||||||||||||||||
Transaction costs | 0.3 | — | 7.4 | 7.0 | 1.2 | 0.6 | — | — | (1.2 | ) | (99.0 | ) | ||||||||||||||||||
Depreciation and amortization | 13.3 | 14.9 | 17.7 | 16.7 | 32.3 | 16.8 | 30.8 | 15.7 | (1.5 | ) | (4.7 | ) | ||||||||||||||||||
Other operating expense, net | 0.8 | 0.7 | 2.2 | 2.0 | 2.7 | 1.4 | 3.3 | 1.7 | 0.6 | 23.7 | ||||||||||||||||||||
Income from operations | (4.1 | ) | 1.5 | (5.9 | ) | (5.6 | ) | 8.2 | 4.3 | 7.7 | 3.9 | (0.5 | ) | (5.6 | ) | |||||||||||||||
Interest expense | 17.5 | 13.8 | 20.2 | 19.0 | 22.9 | 11.9 | 26.1 | 13.2 | 3.2 | 13.9 | ||||||||||||||||||||
Foreign currency (gain) loss | (4.1 | ) | (4.7 | ) | (2.2 | ) | (2.0 | ) | (4.2 | ) | (2.2 | ) | (6.3 | ) | (3.2 | ) | (2.1 | ) | 49.6 | |||||||||||
Loss before income taxes | (17.5 | ) | (7.6 | ) | (23.9 | ) | (22.5 | ) | (10.5 | ) | (5.5 | ) | (12.1 | ) | (6.2 | ) | (1.6 | ) | 14.9 | |||||||||||
Income tax benefit | (5.5 | ) | (5.4 | ) | (4.9 | ) | (4.6 | ) | (5.9 | ) | (3.1 | ) | (4.2 | ) | (2.1 | ) | 1.7 | (28.8 | ) | |||||||||||
Net loss | $ | (12.0 | ) | (2.3 | ) | $ | (19.0 | ) | (17.9 | ) | $ | (4.6 | ) | (2.4 | ) | $ | (8.0 | ) | (4.0 | ) | $ | (3.3 | ) | 70.6 | ||||||
Non-GAAP: | ||||||||||||||||||||||||||||||
EBITDA | 20.1 | 22.9 | 60.6 | 60.5 | (0.1 | ) | (0.2 | ) | ||||||||||||||||||||||
Adjusted EBITDA | 59.8 | 58.3 | (1.5 | ) | (2.6 | ) |
Net sales
The following table and the discussion that follows compares Ranpak’s net salesrevenue by geographic region and by product line for the nine months ended September 30, 2020 and 2019 on a GAAP basis and 2018:on a non-GAAP, pro forma basis as described above and in the discussion below. See also “Presentation and Reconciliation of GAAP to Non-GAAP Measures” for further:
|
| Successor |
|
|
| Predecessor |
| ||||||||||||||||||
|
| Nine Months Ended September 30, | June 3, 2019 – September 30, 2019 |
|
|
| January 1, 2019 – June 2, 2019 |
| |||||||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
|
|
| 2019 |
|
| % Net revenue |
| ||||||
North America |
| $ | 88.6 |
|
|
| 42.9 |
|
| $ | 42.2 |
|
|
| 49.4 |
|
|
| $ | 50.1 |
|
|
| 47.1 |
|
Europe/Asia |
|
| 117.7 |
|
|
| 57.1 |
|
|
| 43.2 |
|
|
| 50.6 |
|
|
|
| 56.3 |
|
|
| 52.9 |
|
Net revenue |
| $ | 206.3 |
|
|
| 100.0 |
|
| $ | 85.4 |
|
|
| 100.0 |
|
|
| $ | 106.4 |
|
|
| 100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cushioning machines |
| $ | 86.1 |
|
|
| 41.7 |
|
| $ | 39.3 |
|
|
| 46.0 |
|
|
| $ | 46.4 |
|
|
| 43.6 |
|
Void-fill machines |
|
| 86.8 |
|
|
| 42.1 |
|
|
| 36.4 |
|
|
| 42.6 |
|
|
|
| 42.7 |
|
|
| 40.1 |
|
Wrapping machines |
|
| 25.9 |
|
|
| 12.6 |
|
|
| 8.0 |
|
|
| 9.4 |
|
|
|
| 8.8 |
|
|
| 8.3 |
|
Other |
|
| 7.5 |
|
|
| 3.6 |
|
|
| 1.7 |
|
|
| 2.0 |
|
|
|
| 8.5 |
|
|
| 8.0 |
|
Net revenue |
| $ | 206.3 |
|
|
| 100.0 |
|
| $ | 85.4 |
|
|
| 100.0 |
|
|
| $ | 106.4 |
|
|
| 100.0 |
|
|
| Pro Forma |
| |||||||||||||||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2020 |
|
| % Net revenue |
|
| 2019 |
|
| % Net revenue |
|
| $ Change |
|
| % Change |
| ||||||
North America |
| $ | 88.6 |
|
|
| 42.5 |
|
| $ | 92.7 |
|
|
| 46.8 |
|
| $ | (4.1 | ) |
|
| (4.4 | ) |
Europe/Asia |
|
| 120.1 |
|
|
| 57.5 |
|
|
| 105.5 |
|
|
| 53.2 |
|
|
| 14.6 |
|
|
| 13.8 |
|
Net revenue |
| $ | 208.7 |
|
|
| 100.0 |
|
| $ | 198.2 |
|
|
| 100.0 |
|
| $ | 10.5 |
|
|
| 5.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cushioning machines |
| $ | 87.3 |
|
|
| 41.8 |
|
| $ | 93.6 |
|
|
| 47.2 |
|
| $ | (6.3 | ) |
|
| (6.7 | ) |
Void-fill machines |
|
| 87.5 |
|
|
| 41.9 |
|
|
| 81.9 |
|
|
| 41.3 |
|
|
| 5.6 |
|
|
| 6.8 |
|
Wrapping machines |
|
| 26.1 |
|
|
| 12.5 |
|
|
| 17.7 |
|
|
| 8.9 |
|
|
| 8.4 |
|
|
| 47.5 |
|
Other |
|
| 7.8 |
|
|
| 3.8 |
|
|
| 5.0 |
|
|
| 2.6 |
|
|
| 2.8 |
|
|
| 56.0 |
|
Net revenue |
| $ | 208.7 |
|
|
| 100.0 |
|
| $ | 198.2 |
|
|
| 100.0 |
|
| $ | 10.5 |
|
|
| 5.3 |
|
Successor | Predecessor | Pro Forma | |||||||||||||||||||
June 3, through September 30, | January 1, through June 2, | Nine Months Ended September 30, | Nine Months Ended September 30, | Change to September 30, | |||||||||||||||||
2019 ($) | % Net sales | 2019 ($) | % Net sales | 2018 ($) | % Net sales | 2019 ($) | % Net sales | 2018 ($) | % | ||||||||||||
North America | 42.2 | 49.4 | 50.1 | 47.1 | 94.6 | 49.3 | 92.7 | 47.1 | (1.9 | ) | (2.0 | ) | |||||||||
Europe/Asia | 43.2 | 50.6 | 56.3 | 52.9 | 97.3 | 50.7 | 104.2 | 52.9 | 6.9 | 7.1 | |||||||||||
Total | 85.4 | 100.0 | 106.4 | 100.0 | 191.9 | 100.0 | 196.9 | 100.0 | 5.0 | 2.6 | |||||||||||
Cushioning machines | 36.6 | 42.9 | 46.4 | 43.6 | 81.0 | 42.2 | 84.3 | 42.8 | 3.3 | 4.1 | |||||||||||
Void-Fill machines | 35.8 | 41.9 | 42.7 | 40.1 | 83.1 | 43.3 | 79.2 | 40.2 | (3.9 | ) | (4.7 | ) | |||||||||
Wrapping machines | 7.8 | 9.1 | 8.8 | 8.3 | 12.3 | 6.4 | 16.7 | 8.5 | 4.4 | 35.8 | |||||||||||
Other | 5.2 | 6.1 | 8.5 | 8.0 | 15.5 | 8.1 | 16.7 | 8.5 | 1.2 | 7.7 | |||||||||||
Total | 85.4 | 100.0 | 106.4 | 100.0 | 191.9 | 100.0 | 196.9 | 100.0 | 5.0 | 2.6 |
Net sales totaled $85.4 millionrevenue for the nine months ended September 30, 2020 was $206.3 million. Net revenue for the Successor Period was $85.4 million, and $106.4 million in the 1H 2019 1H Predecessor Period, and $191.9for a combined $191.8 million in the nine month periodmonths ended September 30, 2018.2019. Net sales for the combined nine month period totaled $191.8, a decrease of $(0.1)revenue increased $14.5 million or 0.0% from $191.9 million for the nine month period ended September 30, 2018. The decrease in our combined net sales was7.6% as a result of a $2.7 million fair-value purchase accounting adjustment related to deferred revenue for user fees and packaging systems, as well as a decrease in void-fill net sales, partially offset by cushioning, wrapping and automation net sales. The decrease in our combined net sales was a result of a decreasean increase in the volume of Ranpak’s paper consumable products of approximately 0.29.6 pp and a 0.6an increase of approximately 0.1 pp decrease in sales of automated box sizing equipment, partially offset by an increasea decrease in the price of Ranpak'sRanpak’s paper consumable products which contributed a
Net revenue in North America for the nine months ended September 30, 2020 totaled $88.6 million. Net revenue in North America was $42.2 million in the Successor Period and $50.1 million in the 1H 2019 Predecessor Period for a combined $92.3 million in the nine months ended September 30, 2019, an $8.6 million, or 4.6% increase from $188.3 million in the nine month period ended September 30, 2018 on a constant currency basis.
Net salesrevenue in Europe/Asia werefor the nine months ended September 30, 2020 totaled $117.7 million. Net revenue in Europe/Asia was $43.2 million in the Successor Period and $56.3 million in the 1H 2019 1H Predecessor Period, and $97.3 million in the nine month period ended September 30, 2018. Net sales in Europe/Asia werefor a combined $99.5 million for the combined nine month period ended September 30, 2019, an increase of $2.2 million or 2.2% from $97.3 million for the nine month period ended September 30, 2018. Pro forma net sales in Europe/Asia were $104.2 million in the nine months ended
Cost of Sales
Cost of sales for the nine months ended September 30, 2020 totaled $122.3 million. Cost of sales was $52.6 million in the Successor Period and $61.2 million in the 1H 2019 1H Predecessor Period, and $109.7for a combined $113.8 million in the nine months ended September 30, 2018.2019. Cost of sales forincreased $8.5 million or 7.5% due to increases in sales year over year and higher depreciation expense of $6.6 million due to the combined nine month period ended September 30, 2019 was $113.8 million,Ranpak Business Combination fair value adjustments, an increase of $4.1 million or 3.7% from $109.7 million, onin non-recurring operating costs in automation, offset by a constant currency basis, for the nine month period ended September 30, 2018 due to a fair value purchase accounting adjustment of
Selling, General, and Administrative Expenses
SG&A expenses for the nine months ended September 30, 2020 was $58.1 million. SG&A was $22.5 million in the Successor Period and $23.8 million in the 1H 2019 Predecessor Period, for a combined $46.3 million in the nine months ended September 30, 2019. SG&A expenses increased $11.8 million or 25.5% due to $1.2 million of costs associated with the Warrant Exchange, severance costs, non-cash equity compensation costs, increased support of growth initiatives, and increased costs associated with being a public
company. Pro forma SG&A expenses increased by 0.3 pp$15.6 million, or 36.2%, to 43.1%$58.7 million in the nine months ended September 30, 2020 from $43.1 million for the nine months ended September 30, 2019 after adjusting to a constant currency in both periods. As a percentage of pro forma net sales, pro forma SG&A increased to 28.1% in the nine months ended September 30, 2020 from 21.7% in the nine months ended September 30, 2019 from 42.8% for the nine month period ended September 30, 2018 on a constant currency basis.
Transaction Costs
We incurred transaction costs related to the Ranpak Business Combination of approximately $0.3 million in the Successor Period and $7.4 million in the 1H 2019 1H Predecessor Period for a combined $7.7 million. All of these costs were related to the Ranpak Business Combination.
Depreciation and $1.2 million inAmortization
Depreciation and amortization expenses for the nine months ended September 30, 2018. All of these costs are related to the Ranpak Business Combination and we have added them back to EBITDA in arriving at Adjusted EBITDA.
Other Operating Expense, Net
Other operating expense, net for the nine months ended September 30, 2020 was $2.9 million. Other operating expense, net was $0.8 million in the Successor Period and $2.2 million in the 1H 2019 Predecessor Period, for a combined $3.0 million in the nine months ended September 30, 2019, from $31.8nearly flat to the current year. Pro forma other operating expense, net, was $3.2 million in the nine months ended September 30, 2020 compared to $3.6 million for the nine month periodmonths ended September 30, 20182019 on a constant currency basis. As a percentage of pro forma net sales, pro forma depreciation and amortizationother operating expense, net, decreased to 15.7% in the nine month period ended September 30, 2019 from 16.9%1.5% in the nine months ended September 30, 20182020 from 1.8% in the nine months ended September 30, 2019 on a constant currency basis.
Interest Expense (Income), Net
Interest expense (income), net, were $0.8for the nine months ended September 30, 2020 was $16.6 million. Interest expense was $17.5 million in the Successor Period $2.2and $20.2 million in the 1H 2019 1H Predecessor Period, and $2.7for a combined $37.7 million in the nine months ended September 30, 2018. Other operating expenses (income), net, for the combined nine months ended September 30, 2019 was $3.0 million, an increase of $0.32019. Interest expense decreased $21.1 million, or 14.8% from $2.7 million for56.0%. Interest expense decreased due to decreased debt levels and lower interest rates, as well as transaction-related expenses in June 2019, which included a write-off of deferred financing fees and the nine month period ended September 30, 2018, mainly reflecting a loss on the saletermination of equipment in the prior year period offset by an increased research and development expense.interest rate swap. Pro forma other operatinginterest expense (income), net, increased $3.3decreased by $9.5 million, or 100.0%36.4%, to $3.3$16.6 million in the nine months ended September 30, 20192020 compared to zero other operating expense (income), net,$26.1 million for the nine month periodmonths ended September 30, 20182019 on a constant currency basis. As a percentage of pro forma net sales, pro forma other operating expenses (income), net, increasedinterest expense decreased to 1.7% on a pro forma basis8.0% in the nine months ended September 30, 20192020 from 0.0%13.2% in the nine months ended September 30, 2018 on a constant2019.
Foreign Currency (Gain) Loss
Foreign currency basis.
Income Tax Benefit
Income tax provision/(benefit) forbenefit for the combined nine months ended September 30, 20192020 was $(10.4) million, an increase of $(4.5) million or 76.0% from $(5.9) million for the nine month period ended September 30, 2018. Pro forma income tax benefit was $(4.2)$1.4 million, or an effective tax rate of 34.4%7.1%. Income tax benefit was $6.1 million in the Successor Period and $4.9 million in the 1H 2019 Predecessor Period, for a combined benefit of $11.0 million in the nine months ended September 30, 2019 compared to a tax benefit of $(5.9) million or an effective tax rate of 73.4% for the nine month period ended September 30, 2018 on a constant currency basis.
Net (Loss) Income
Net (loss) incomeloss for the nine months ended September 30, 2020 was $(12.0)$18.2 million. Net loss was $13.9 million in the Successor Period $(19.0)and $19.0 million in the 1H 2019 1H Predecessor Period, and $(4.6)for a combined net loss of $32.9 million in the nine months ended September 30, 2018.2019. Net (loss) income for the combined nine months ended September 30, 2019 was $(31.0) million, a increase in loss of $(26.4)decreased $14.7 million, or 573.9% from $(4.6) million for the nine month period ended September 30, 2018.44.7%. Pro forma net (loss)loss was $(8.0)$18.4 million in the nine months ended September 30, 20192020 compared to pro forma net loss of $(2.1)$9.8 million for the nine month periodmonths ended September 30, 20182019 on a constant currency basis. The change was primarily due to the reasons discussed above.
EBITDA and Adjusted EBITDA
EBITDA for the nine months ended September 30, 2020 was $20.1$42.2 million in the Successor Period, $22.9 million in the 2019 1H Predecessor Period and $60.6
Presentation and Reconciliation of US GAAP to Non-GAAP Measures
As noted above, we believe that in order to better understand the performance of the Company, providing non-GAAP financial measures to users of our financial information is helpful. Ranpak believes presentation of these non-GAAP measures is useful because they are many of the key measures that allow management to evaluate more effectively its operating performance and compare the results of its operations from period to period and against its peers without regard to financing methods or capital structure. Management does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. Additionally, as a result of the Ranpak Business Combination, we believe that users of our financial information will find that non-GAAP, pro forma disclosure ofdata for the most recent three-three and six-month periodsnine months ended September 30, 2020 is useful when comparing those periods between the current and prior fiscal years.periods. The computations of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other companies. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, measures of financial performance as determined in accordance with GAAP or as indicators of operating performance.
The following tables and related notes reconcile these Non-GAAPcertain non-GAAP measures andincluding the Pro Forma Measuresnon-GAAP pro forma measures, to GAAP information presented in this Quarterly Report on Form 10-Q for the three and nine month periodsmonths ended September 30, 20192020 and 2018:2019:
|
| Successor |
| |||||||||
|
| Three Months Ended September 30, 2020 |
| |||||||||
|
| As reported |
|
| Adjustments(6) |
|
| Pro Forma |
| |||
Net revenue |
| $ | 76.8 |
|
| $ | (0.7 | ) |
| $ | 76.1 |
|
Cost of goods sold |
|
| 46.6 |
|
|
| (0.4 | ) |
|
| 46.2 |
|
Gross profit |
|
| 30.2 |
|
|
| (0.3 | ) |
|
| 29.9 |
|
Selling, general and administrative expenses |
|
| 17.8 |
|
|
| (0.1 | ) |
|
| 17.7 |
|
Depreciation and amortization expense |
|
| 7.7 |
|
|
| - |
|
|
| 7.7 |
|
Other operating expense, net |
|
| 1.9 |
|
|
| (0.1 | ) |
|
| 1.8 |
|
Income (loss) from operations |
|
| 2.8 |
|
|
| (0.1 | ) |
|
| 2.7 |
|
Interest expense |
|
| 4.9 |
|
|
| - |
|
|
| 4.9 |
|
Foreign currency (gain) loss |
|
| 3.2 |
|
|
| - |
|
|
| 3.2 |
|
Loss before income tax expense |
|
| (5.3 | ) |
|
| (0.1 | ) |
|
| (5.4 | ) |
Income tax benefit |
|
| 0.8 |
|
|
| - |
|
|
| 0.8 |
|
Net loss |
| $ | (6.1 | ) |
| $ | (0.1 | ) |
|
| (6.2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Add(4): |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense - COS |
|
|
|
|
|
|
|
|
|
| 8.0 |
|
Depreciation and amortization expense - SG&A |
|
|
|
|
|
|
|
|
|
| 7.7 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
| 4.9 |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
| 0.8 |
|
EBITDA |
|
|
|
|
|
|
|
|
|
| 15.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments(5): |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss translation |
|
|
|
|
|
|
|
|
|
| 3.3 |
|
Constant currency |
|
|
|
|
|
|
|
|
|
| (0.2 | ) |
Non-cash impairment losses |
|
|
|
|
|
|
|
|
|
| 0.7 |
|
M&A, restructuring, severance |
|
|
|
|
|
|
|
|
|
| 1.2 |
|
Amortization of restricted stock units |
|
|
|
|
|
|
|
|
|
| 1.7 |
|
Warrant Exchange costs |
|
|
|
|
|
|
|
|
|
| 1.2 |
|
Other non-core and non-cash adjustments |
|
|
|
|
|
|
|
|
|
| 0.6 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
| $ | 23.7 |
|
Successor | Pro Forma | Predecessor | Pro Forma | |||||||||||||||||||
Three Months Ended September 30, 2019 | Adj. (8) | Three Months Ended September 30, 2019 | % of net sales | Three Months Ended September 30, 2018 | % of net sales | Better/(Worse) to Predecessor Three Months Ended September 30, 2018 | ||||||||||||||||
Net sales | $ | 69.1 | $ | 1.3 | (1) | $ | 70.4 | $ | 65.1 | $ | 5.3 | 8.1 | % | |||||||||
Cost of sales (COS) | 39.6 | (0.3 | ) | (2) | 39.3 | 55.8 | % | 37.7 | 58.0 | % | 1.6 | 4.1 | ||||||||||
Gross Profit | 29.5 | 1.6 | 31.1 | 44.2 | 27.4 | 42.0 | 3.7 | 13.6 | ||||||||||||||
Selling, general and administrative (SGA) | 17.7 | (1.9 | ) | (3) | 15.8 | 22.4 | 12.6 | 19.3 | 3.2 | 25.5 | ||||||||||||
Transaction costs | — | — | (3) | — | — | 1.0 | 1.6 | (1.0 | ) | (100.0 | ) | |||||||||||
Depreciation and amortization | 10.3 | 0.2 | (4) | 10.5 | 14.9 | 10.7 | 16.5 | (0.2 | ) | (1.9 | ) | |||||||||||
Other operating expense, net | 0.5 | 0.2 | 0.7 | 1.0 | 1.2 | 1.9 | (0.5 | ) | (41.9 | ) | ||||||||||||
Income (loss) from operations | 1.0 | 3.1 | 4.1 | 5.8 | 1.9 | 3.0 | 2.2 | 116.1 | ||||||||||||||
Interest expense | 9.5 | 0.1 | 9.6 | 13.7 | 8.0 | 12.3 | 1.6 | 19.6 | ||||||||||||||
Foreign currency (gain) loss | (3.2 | ) | — | (3.2 | ) | (4.6 | ) | (0.9 | ) | (1.4 | ) | (2.3 | ) | 261.9 | ||||||||
(Loss) Income before income taxes | (5.3 | ) | 3.0 | (2.3 | ) | (3.3 | ) | (5.2 | ) | (7.9 | ) | 2.9 | (56.8 | ) | ||||||||
Income tax (benefit) expense | (3.7 | ) | 0.6 | (6) | (3.1 | ) | (4.5 | ) | (5.5 | ) | (8.5 | ) | 2.4 | (43.1 | ) | |||||||
Net (loss) income | $ | (1.6 | ) | $ | 2.4 | 0.8 | 1.2 | % | 0.3 | 0.4 | % | 0.5 | 196.8 | |||||||||
Add(9): | ||||||||||||||||||||||
COS Depreciation & amortization | 5.1 | 5.3 | (0.2 | ) | (3.2 | ) | ||||||||||||||||
SG&A Depreciation & amortization | 10.5 | 10.7 | (0.2 | ) | (1.9 | ) | ||||||||||||||||
Interest expense | 9.6 | 8.0 | 1.6 | 20.3 | ||||||||||||||||||
Income tax (benefit) expense | (3.1 | ) | (5.5 | ) | 2.4 | (43.1 | ) | |||||||||||||||
EBITDA | 22.9 | 18.8 | 4.1 | 22.0 | ||||||||||||||||||
Adjustment (7) | ||||||||||||||||||||||
Unrealized (gain) loss translation | (3.2 | ) | (0.9 | ) | (2.3 | ) | 261.9 | |||||||||||||||
Constant currency adjustment at 1.15 | — | (0.1 | ) | 0.1 | (100.0 | ) | ||||||||||||||||
Non-cash impairment losses | 0.4 | 0.6 | (0.2 | ) | (32.7 | ) | ||||||||||||||||
M&A, restructuring and severance | — | 2.0 | (2.0 | ) | (100.0 | ) | ||||||||||||||||
PE sponsor costs | — | 0.4 | (0.4 | ) | (100.0 | ) | ||||||||||||||||
Restricted stock unit expense | 1.6 | — | 1.6 | n/a | ||||||||||||||||||
Other non-core and non-cash adjustments | 0.3 | (0.2 | ) | 0.5 | (236.4 | ) | ||||||||||||||||
Adjusted EBITDA | $ | 22.0 | $ | 20.6 | $ | 1.4 | 6.9 | % |
|
| Successor |
| |||||||||
|
| Three Months Ended September 30, 2019 |
| |||||||||
|
| As reported |
|
| Adjustments(6) |
|
| Pro Forma |
| |||
Net revenue |
| $ | 69.1 |
|
| $ | 1.3 |
| (1) | $ | 70.4 |
|
Cost of goods sold |
|
| 39.6 |
|
|
| (0.3 | ) | (2) |
| 39.3 |
|
Gross profit |
|
| 29.5 |
|
|
| 1.6 |
|
|
| 31.1 |
|
Selling, general and administrative expenses |
|
| 17.7 |
|
|
| (1.9 | ) |
|
| 15.8 |
|
Depreciation and amortization expense |
|
| 10.3 |
|
|
| 0.2 |
|
|
| 10.5 |
|
Other operating expense, net |
|
| 0.5 |
|
|
| 0.2 |
|
|
| 0.7 |
|
Income (loss) from operations |
|
| 1.0 |
|
|
| 3.1 |
|
|
| 4.1 |
|
Interest expense |
|
| 9.5 |
|
|
| 0.1 |
|
|
| 9.6 |
|
Foreign currency (gain) loss |
|
| (3.2 | ) |
|
| - |
|
|
| (3.2 | ) |
Loss before income tax expense |
|
| (5.3 | ) |
|
| 3.0 |
|
|
| (2.3 | ) |
Income tax benefit |
|
| (3.7 | ) |
|
| 0.6 |
| (3) |
| (3.1 | ) |
Net loss |
| $ | (1.6 | ) |
| $ | 2.4 |
|
|
| 0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add(4): |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense - COS |
|
|
|
|
|
|
|
|
|
| 5.1 |
|
Depreciation and amortization expense - SG&A |
|
|
|
|
|
|
|
|
|
| 10.5 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
| 9.6 |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
| (3.1 | ) |
EBITDA |
|
|
|
|
|
|
|
|
|
| 22.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments(5): |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss translation |
|
|
|
|
|
|
|
|
|
| (3.2 | ) |
Non-cash impairment losses |
|
|
|
|
|
|
|
|
|
| 0.4 |
|
Amortization of restricted stock units |
|
|
|
|
|
|
|
|
|
| 1.6 |
|
Other non-core and non-cash adjustments |
|
|
|
|
|
|
|
|
|
| 0.3 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
| $ | 22.0 |
|
Successor | Predecessor | Combined | Pro Forma | Predecessor | Pro Forma | |||||||||||||||||||||||
June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Nine Months Ended September 30, 2019 | Adj. (8) | Nine Months Ended September 30, 2019 | % of net sales | Nine Months Ended September 30, 2018 | % of net sales | Better/(Worse) to Predecessor Nine Months Ended September 30, 2018 | ||||||||||||||||||||
Net sales | $ | 85.4 | $ | 106.4 | $ | 191.8 | $ | 5.1 | (1) | $ | 196.9 | $ | 191.9 | $ | 5.0 | 2.6 | % | |||||||||||
Cost of sales | 52.6 | 61.2 | 113.8 | (1.8 | ) | (2) | 112.0 | 56.9 | % | 109.7 | 57.1 | % | 2.3 | 2.1 | ||||||||||||||
Gross Profit | 32.8 | 45.2 | 78.0 | 6.9 | 84.9 | 43.1 | 82.2 | 42.8 | 2.7 | 3.2 | ||||||||||||||||||
Selling, general and administrative | 22.5 | 23.8 | 46.3 | (3.2 | ) | (3) | 43.1 | 21.9 | 37.8 | 19.7 | 5.3 | 14.1 | ||||||||||||||||
Transaction costs | 0.3 | 7.4 | 7.7 | (7.7 | ) | (3) | — | — | 1.2 | 0.6 | (1.2 | ) | (99.0 | ) | ||||||||||||||
Depreciation and amortization | 13.3 | 17.7 | 31.0 | (0.2 | ) | (4) | 30.8 | 15.7 | 32.3 | 16.8 | (1.5 | ) | (4.7 | ) | ||||||||||||||
Other operating expense, net | 0.8 | 2.2 | 3.0 | 0.3 | 3.3 | 1.7 | 2.7 | 1.4 | 0.6 | 21.8 | ||||||||||||||||||
Income (loss) from operations | (4.1 | ) | (5.9 | ) | (10.0 | ) | 17.7 | 7.7 | 3.9 | 8.2 | 4.3 | (0.5 | ) | (6.2 | ) | |||||||||||||
Interest expense | 17.5 | 20.2 | 37.7 | (11.6 | ) | (5) | 26.1 | 13.2 | 22.9 | 11.9 | 3.2 | 14.1 | ||||||||||||||||
Foreign currency (gain) loss | (4.1 | ) | (2.2 | ) | (6.3 | ) | — | (6.3 | ) | (3.2 | ) | (4.2 | ) | (2.2 | ) | (2.1 | ) | 49.6 | ||||||||||
Loss before income taxes | (17.5 | ) | (23.9 | ) | (41.4 | ) | 29.3 | (12.1 | ) | (6.2 | ) | (10.5 | ) | (5.5 | ) | (1.6 | ) | 14.9 | ||||||||||
Income tax (benefit) expense | (5.5 | ) | (4.9 | ) | (10.4 | ) | 6.2 | (6) | (4.2 | ) | (2.1 | ) | (5.9 | ) | (3.1 | ) | 1.7 | (28.0 | ) | |||||||||
Net (loss) income | $ | (12.0 | ) | $ | (19.0 | ) | $ | (31.0 | ) | $ | 23.1 | (8.0 | ) | (4.0 | )% | (4.6 | ) | (2.4 | )% | (3.4 | ) | 73.8 | ||||||
Add(9): | ||||||||||||||||||||||||||||
COS Depreciation & amortization | 15.8 | 15.9 | (0.1 | ) | (0.5 | ) | ||||||||||||||||||||||
SG&A Depreciation & amortization | 30.8 | 32.3 | (1.5 | ) | (4.7 | ) | ||||||||||||||||||||||
Interest expense | 26.1 | 22.9 | 3.2 | 14.1 | ||||||||||||||||||||||||
Income tax (benefit) expense | (4.2 | ) | (5.9 | ) | 1.7 | (28.0 | ) | |||||||||||||||||||||
EBITDA | 60.5 | 60.6 | (0.1 | ) | (0.2 | ) | ||||||||||||||||||||||
Adjustment (7) | ||||||||||||||||||||||||||||
Unrealized (gain) loss translation | (6.3 | ) | (4.2 | ) | (2.1 | ) | 49.6 | |||||||||||||||||||||
Constant currency adjustment at 1.15 | — | (1.2 | ) | 1.2 | (100.0 | ) | ||||||||||||||||||||||
Non-cash impairment losses | 1.2 | 1.4 | (0.2 | ) | (13.6 | ) | ||||||||||||||||||||||
M&A, restructuring and severance | — | 2.5 | (2.5 | ) | (100.0 | ) | ||||||||||||||||||||||
PE sponsor costs | 0.6 | 1.3 | (0.7 | ) | (55.4 | ) | ||||||||||||||||||||||
Restricted stock unit expense | 1.8 | — | 1.8 | n/a | ||||||||||||||||||||||||
Other non-core and non-cash adjustments | 0.5 | (0.6 | ) | 1.1 | (178.6 | ) | ||||||||||||||||||||||
Adjusted EBITDA | $ | 58.3 | $ | 59.8 | $ | (1.5 | ) | (2.6 | )% |
|
| Pro Forma |
| |||||||||||||
|
| Three Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||
|
| 2020 |
|
| 2019 |
|
| $ Change |
|
| % Change |
| ||||
Net revenue |
| $ | 76.1 |
|
| $ | 70.4 |
|
| $ | 5.7 |
|
|
| 8.1 |
|
Cost of goods sold |
|
| 46.2 |
|
|
| 39.3 |
|
|
| 6.9 |
|
|
| 17.6 |
|
Gross profit |
|
| 29.9 |
|
|
| 31.1 |
|
|
| (1.2 | ) |
|
| (3.9 | ) |
Selling, general and administrative expenses |
|
| 17.7 |
|
|
| 15.8 |
|
|
| 1.9 |
|
|
| 12.0 |
|
Depreciation and amortization expense |
|
| 7.7 |
|
|
| 10.5 |
|
|
| (2.8 | ) |
|
| (26.7 | ) |
Other operating expense, net |
|
| 1.8 |
|
|
| 0.7 |
|
|
| 1.1 |
|
|
| 157.1 |
|
Income (loss) from operations |
|
| 2.7 |
|
|
| 4.1 |
|
|
| (1.4 | ) |
|
| (34.1 | ) |
Interest expense |
|
| 4.9 |
|
|
| 9.6 |
|
|
| (4.7 | ) |
|
| (49.0 | ) |
Foreign currency (gain) loss |
|
| 3.2 |
|
|
| (3.2 | ) |
|
| 6.4 |
|
|
| (200.0 | ) |
Loss before income tax expense |
|
| (5.4 | ) |
|
| (2.3 | ) |
|
| (3.1 | ) |
|
| 134.8 |
|
Income tax benefit |
|
| 0.8 |
|
|
| (3.1 | ) |
|
| 3.9 |
|
|
| (125.8 | ) |
Net loss |
|
| (6.2 | ) |
|
| 0.8 |
|
|
| (7.0 | ) |
|
| (875.0 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add(4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense - COS |
|
| 8.0 |
|
|
| 5.1 |
|
|
| 2.9 |
|
|
| 56.9 |
|
Depreciation and amortization expense - SG&A |
|
| 7.7 |
|
|
| 10.5 |
|
|
| (2.8 | ) |
|
| (26.7 | ) |
Interest expense |
|
| 4.9 |
|
|
| 9.6 |
|
|
| (4.7 | ) |
|
| (49.0 | ) |
Income tax benefit |
|
| 0.8 |
|
|
| (3.1 | ) |
|
| 3.9 |
|
|
| (125.8 | ) |
EBITDA |
|
| 15.2 |
|
|
| 22.9 |
|
|
| (7.7 | ) |
|
| (33.6 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments(5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss translation |
|
| 3.3 |
|
|
| (3.2 | ) |
|
| 6.5 |
|
|
| (203.1 | ) |
Constant currency |
|
| (0.2 | ) |
|
| - |
|
|
| (0.2 | ) |
| ― |
| |
Non-cash impairment losses |
|
| 0.7 |
|
|
| 0.4 |
|
|
| 0.3 |
|
|
| 75.0 |
|
M&A, restructuring, severance |
|
| 1.2 |
|
|
| - |
|
|
| 1.2 |
|
| ― |
| |
Amortization of restricted stock units |
|
| 1.7 |
|
|
| 1.6 |
|
|
| 0.1 |
|
|
| 6.2 |
|
Warrant Exchange costs |
|
| 1.2 |
|
|
| - |
|
|
| 1.2 |
|
| ― |
| |
Other non-core and non-cash adjustments |
|
| 0.6 |
|
|
| 0.3 |
|
|
| 0.3 |
|
|
| 100.0 |
|
Adjusted EBITDA |
| $ | 23.7 |
|
| $ | 22.0 |
|
| $ | 1.7 |
|
|
| 7.7 |
|
|
| Successor |
| |||||||||
|
| Nine Months Ended September 30, 2020 |
| |||||||||
|
| As reported |
|
| Adjustments(6) |
|
| Pro Forma |
| |||
Net revenue |
| $ | 206.3 |
|
| $ | 2.4 |
|
| $ | 208.7 |
|
Cost of goods sold |
|
| 122.3 |
|
|
| 1.4 |
|
|
| 123.7 |
|
Gross profit |
|
| 84.0 |
|
|
| 1.0 |
|
|
| 85.0 |
|
Selling, general and administrative expenses |
|
| 58.1 |
|
|
| 0.6 |
|
|
| 58.7 |
|
Depreciation and amortization expense |
|
| 22.9 |
|
|
| 0.2 |
|
|
| 23.1 |
|
Other operating expense, net |
|
| 2.9 |
|
|
| 0.3 |
|
|
| 3.2 |
|
Income (loss) from operations |
|
| 0.1 |
|
|
| (0.1 | ) |
|
| - |
|
Interest expense |
|
| 16.6 |
|
|
| - |
|
|
| 16.6 |
|
Foreign currency (gain) loss |
|
| 3.1 |
|
|
| - |
|
|
| 3.1 |
|
Loss before income tax expense |
|
| (19.6 | ) |
|
| (0.1 | ) |
|
| (19.7 | ) |
Income tax benefit |
|
| (1.4 | ) |
|
| 0.1 |
|
|
| (1.3 | ) |
Net loss |
| $ | (18.2 | ) |
| $ | (0.2 | ) |
|
| (18.4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Add(4): |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense - COS |
|
|
|
|
|
|
|
|
|
| 22.4 |
|
Depreciation and amortization expense - SG&A |
|
|
|
|
|
|
|
|
|
| 23.0 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
| 16.6 |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
| (1.4 | ) |
EBITDA |
|
|
|
|
|
|
|
|
|
| 42.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments(5): |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss translation |
|
|
|
|
|
|
|
|
|
| 3.1 |
|
Constant currency |
|
|
|
|
|
|
|
|
|
| 0.4 |
|
Non-cash impairment losses |
|
|
|
|
|
|
|
|
|
| 1.5 |
|
M&A, restructuring, severance |
|
|
|
|
|
|
|
|
|
| 4.8 |
|
Amortization of restricted stock units |
|
|
|
|
|
|
|
|
|
| 5.9 |
|
Warrant Exchange costs |
|
|
|
|
|
|
|
|
|
| 1.2 |
|
Other non-core and non-cash adjustments |
|
|
|
|
|
|
|
|
|
| 1.7 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
| $ | 60.8 |
|
|
| Successor |
|
| Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| June 3, 2019 – |
|
| January 1, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| September 30, 2019 |
|
| – June 2, 2019 |
|
| Nine Months Ended September 30, 2019 |
| |||||||||||
|
| As reported |
|
| As reported |
|
| Combined |
|
| Adjustments(6) |
|
| Pro Forma |
| |||||
Net revenue |
| $ | 85.4 |
|
| $ | 106.4 |
|
| $ | 191.8 |
|
| $ | 6.4 |
| (1) | $ | 198.2 |
|
Cost of goods sold |
|
| 52.6 |
|
|
| 61.2 |
|
|
| 113.8 |
|
|
| (0.8 | ) | (2) |
| 113.0 |
|
Gross profit |
|
| 32.8 |
|
|
| 45.2 |
|
|
| 78.0 |
|
|
| 7.2 |
|
|
| 85.2 |
|
Selling, general and administrative expenses |
|
| 22.5 |
|
|
| 23.8 |
|
|
| 46.3 |
|
|
| (3.2 | ) |
|
| 43.1 |
|
Transaction costs |
|
| 0.3 |
|
|
| 7.4 |
|
|
| 7.7 |
|
|
| (7.7 | ) |
|
| - |
|
Depreciation and amortization expense |
|
| 13.3 |
|
|
| 17.7 |
|
|
| 31.0 |
|
|
| (0.2 | ) |
|
| 30.8 |
|
Other operating expense, net |
|
| 0.8 |
|
|
| 2.2 |
|
|
| 3.0 |
|
|
| 0.6 |
|
|
| 3.6 |
|
Income (loss) from operations |
|
| (4.1 | ) |
|
| (5.9 | ) |
|
| (10.0 | ) |
|
| 17.7 |
|
|
| 7.7 |
|
Interest expense |
|
| 17.5 |
|
|
| 20.2 |
|
|
| 37.7 |
|
|
| (11.6 | ) |
|
| 26.1 |
|
Foreign currency (gain) loss |
|
| (1.6 | ) |
|
| (2.2 | ) |
|
| (3.8 | ) |
|
| - |
|
|
| (3.8 | ) |
Loss before income tax expense |
|
| (20.0 | ) |
|
| (23.9 | ) |
|
| (43.9 | ) |
|
| 29.3 |
|
|
| (14.6 | ) |
Income tax benefit |
|
| (6.1 | ) |
|
| (4.9 | ) |
|
| (11.0 | ) |
|
| 6.2 |
| (3) |
| (4.8 | ) |
Net loss |
| $ | (13.9 | ) |
| $ | (19.0 | ) |
| $ | (32.9 | ) |
| $ | 23.1 |
|
|
| (9.8 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add(4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense - COS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15.8 |
|
Depreciation and amortization expense - SG&A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30.8 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 26.1 |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4.8 | ) |
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 58.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments(5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3.8 | ) |
Non-cash impairment losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1.2 |
|
Amortization of restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1.8 |
|
PE monitoring fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0.6 |
|
Other non-core and non-cash adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0.5 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 58.4 |
|
|
| Pro Forma |
| |||||||||||||
|
| Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
| |||||
|
| 2020 |
|
| 2019 |
|
| $ Change |
|
| % Change |
| ||||
Net revenue |
| $ | 208.7 |
|
| $ | 198.2 |
|
| $ | 10.5 |
|
|
| 5.3 |
|
Cost of goods sold |
|
| 123.7 |
|
|
| 113.0 |
|
|
| 10.7 |
|
|
| 9.5 |
|
Gross profit |
|
| 85.0 |
|
|
| 85.2 |
|
|
| (0.2 | ) |
|
| (0.2 | ) |
Selling, general and administrative expenses |
|
| 58.7 |
|
|
| 43.1 |
|
|
| 15.6 |
|
|
| 36.2 |
|
Depreciation and amortization expense |
|
| 23.1 |
|
|
| 30.8 |
|
|
| (7.7 | ) |
|
| (25.0 | ) |
Other operating expense, net |
|
| 3.2 |
|
|
| 3.6 |
|
|
| (0.4 | ) |
|
| (11.1 | ) |
Income (loss) from operations |
|
| - |
|
|
| 7.7 |
|
|
| (7.7 | ) |
|
| (100.0 | ) |
Interest expense |
|
| 16.6 |
|
|
| 26.1 |
|
|
| (9.5 | ) |
|
| (36.4 | ) |
Foreign currency (gain) loss |
|
| 3.1 |
|
|
| (3.8 | ) |
|
| 6.9 |
|
|
| (181.6 | ) |
Loss before income tax expense |
|
| (19.7 | ) |
|
| (14.6 | ) |
|
| (5.1 | ) |
|
| 34.9 |
|
Income tax benefit |
|
| (1.3 | ) |
|
| (4.8 | ) |
|
| 3.5 |
|
|
| (72.9 | ) |
Net loss |
|
| (18.4 | ) |
|
| (9.8 | ) |
|
| (8.6 | ) |
|
| 87.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add(4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense - COS |
|
| 22.4 |
|
|
| 15.8 |
|
|
| 6.6 |
|
|
| 41.8 |
|
Depreciation and amortization expense - SG&A |
|
| 23.0 |
|
|
| 30.8 |
|
|
| (7.8 | ) |
|
| (25.3 | ) |
Interest expense |
|
| 16.6 |
|
|
| 26.1 |
|
|
| (9.5 | ) |
|
| (36.4 | ) |
Income tax benefit |
|
| (1.4 | ) |
|
| (4.8 | ) |
|
| 3.4 |
|
|
| (70.8 | ) |
EBITDA |
|
| 42.2 |
|
|
| 58.1 |
|
|
| (15.9 | ) |
|
| (27.4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments(5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gain) loss translation |
|
| 3.1 |
|
|
| (3.8 | ) |
|
| 6.9 |
|
|
| (181.6 | ) |
Constant currency |
|
| 0.4 |
|
|
| - |
|
|
| 0.4 |
|
| ― |
| |
Non-cash impairment losses |
|
| 1.5 |
|
|
| 1.2 |
|
|
| 0.3 |
|
|
| 25.0 |
|
M&A, restructuring, severance |
|
| 4.8 |
|
|
| - |
|
|
| 4.8 |
|
| ― |
| |
Amortization of restricted stock units |
|
| 5.9 |
|
|
| 1.8 |
|
|
| 4.1 |
|
|
| 227.8 |
|
Warrant Exchange costs |
|
| 1.2 |
|
|
| - |
|
|
| 1.2 |
|
| ― |
| |
PE monitoring fees |
|
| - |
|
|
| 0.6 |
|
|
| (0.6 | ) |
|
| (100.0 | ) |
Other non-core and non-cash adjustments |
|
| 1.7 |
|
|
| 0.5 |
|
|
| 1.2 |
|
|
| 240.0 |
|
Adjusted EBITDA |
| $ | 60.8 |
|
| $ | 58.4 |
|
| $ | 2.4 |
|
|
| 4.1 |
|
(see subsequent footnotes)
(1) | Adjust for percentage of completion revenue recognition change. |
(2) | Adjust for percentage of completion revenue recognition change for cost of sales. |
(3) | Adjust tax provision at 21.0% corporate rate for items adjusted above. |
(4) | Reconciliations of EBITDA and Adjusted EBITDA for each period presented are to net (loss) income, the nearest GAAP equivalent, and accordingly include the adjustments shown in the “Adj.” column to net (loss) income of each table. |
(5) | Adjustments are related to non-recurring costs such as: unrealized non-cash (gains) losses on translation of the Predecessor debt, private equity monitoring fees, non-cash (gain) loss on the disposal of machines, acquisition costs, severance and a revenue recognition adjustment related to e3NEO acquisition. Certain costs related to being a public company, such as additional staff, legal and accounting costs that were not included in the Predecessor are also included in Adjusted EBITDA. |
(6) | Effect of Euro constant currency adjustment to a rate of $1.15 US Dollar to €1.00 as follows: |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net revenue |
| $ | (0.7 | ) |
| $ | 1.2 |
|
| $ | 2.4 |
|
| $ | 2.4 |
|
Cost of goods sold |
|
| (0.4 | ) |
|
| 0.7 |
|
|
| 1.4 |
|
|
| 1.4 |
|
Gross profit |
|
| (0.3 | ) |
|
| 0.5 |
|
|
| 1.0 |
|
|
| 1.0 |
|
Selling, general and administrative expenses |
|
| (0.1 | ) |
|
| 0.3 |
|
|
| 0.6 |
|
|
| 0.5 |
|
Transaction costs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Depreciation and amortization expense |
|
| - |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.3 |
|
Other operating expense, net |
|
| (0.1 | ) |
|
| 0.2 |
|
|
| 0.3 |
|
|
| 0.3 |
|
Income (loss) from operations |
|
| (0.1 | ) |
|
| (0.2 | ) |
|
| (0.1 | ) |
|
| (0.1 | ) |
Interest expense |
|
| - |
|
|
| 0.1 |
|
|
| - |
|
|
| 0.1 |
|
Foreign currency loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Loss before income tax expense |
|
| (0.1 | ) |
|
| (0.3 | ) |
|
| (0.1 | ) |
|
| (0.2 | ) |
Income tax benefit |
|
| - |
|
|
| - |
|
|
| 0.1 |
|
|
| - |
|
Net loss |
| $ | (0.1 | ) |
| $ | (0.3 | ) |
| $ | (0.2 | ) |
| $ | (0.2 | ) |
(in thousands) | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | |||||||||||
Net sales | $ | 1,247.8 | $ | (280.3 | ) | $ | 2,412.8 | $ | (3,588.7 | ) | |||||
Cost of sales | 698.0 | (159.5 | ) | 1,378.6 | (2,014.9 | ) | |||||||||
Gross Profit | 549.8 | (120.8 | ) | 1,034.2 | (1,573.8 | ) | |||||||||
Selling, general and administrative | 257.2 | (63.1 | ) | 548.6 | (828.2 | ) | |||||||||
Transaction costs | — | — | — | — | |||||||||||
Depreciation and amortization | 207.0 | (37.7 | ) | 307.4 | (494.9 | ) | |||||||||
Other operating expense, net | 161.5 | (39.8 | ) | 320.9 | (495.8 | ) | |||||||||
Income (loss) from operations | (75.9 | ) | 19.8 | (142.7 | ) | 245.1 | |||||||||
Interest expense | 55.0 | (7.4 | ) | 82.1 | (96.5 | ) | |||||||||
Foreign currency (gain) loss | 2.0 | 0.1 | 3.5 | 0.1 | |||||||||||
Loss before income taxes | (132.9 | ) | 27.1 | (228.3 | ) | 341.5 | |||||||||
Income tax (benefit) expense | (6.4 | ) | 10.1 | (34.8 | ) | 93.8 | |||||||||
Net (loss) income | $ | (126.5 | ) | $ | 17.0 | $ | (193.5 | ) | $ | 247.7 |
Liquidity and Capital Resources
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, capital expenditures, debt service, acquisitions, other commitments and contractual obligations. Ranpak evaluatesWe evaluate liquidity in terms of cash flows from operations and other sources and the sufficiency of such cash flows to fund itsour operating, investing and financing activities.
We believe that itsour estimated cash from operations together with borrowing capacity under the revolving portion of the Facilities will provide Ranpakus with sufficient resources to cover itsour current requirements. Ranpak’sOur main liquidity needs relate to capital expenditures and expenses for the production and maintenance of protective packaging systems placed at end-user facilities, working capital, including the purchase of paper raw materials, and payments of principal and interest on Ranpak’sour outstanding debt. Ranpak expects itsWe expect our capital expenditures to increase as it continueswe continue to grow itsour business. Ranpak’sOur future capital requirements and the adequacy of available funds will depend on many factors, and if Ranpak iswe are unable to obtain needed additional funds, Ranpak willwe may have to reduce itsour operating costs or incur additional debt, which could impair itsour growth prospects and/or otherwise negatively impact itsour business.
We had $13.6$31.3 million in cash and cash equivalents as of September 30, 20192020 and $17.5$19.7 million as of December 31, 2018. It2019. We also had $530.8$426.4 million in debt, $5.4$1.6 million of which was classified as short-term, as of September 30, 2019,2020, compared to $506.5 million (including $4.4$420.4 million in short-term portiondebt, $1.6 million of long-term debt)which was classified as short-term, as of December 31, 2018.
Debt Profile
Ranpak’s previous credit facilities were repaid in connection with the consummation of the Ranpak Business Combination, and were replaced with the following facilities: (1)(i) a $378.2 million dollar-denominated first lien term facility (the “First Lien Dollar Term Facility”) and a €140.0 million euro-denominated first lien term facility (the “First Lien Euro Term Facility” and, together with the First Lien Dollar Term Facility, the “First Lien Term Facility”), and (2)(ii) a $45.0 million revolving facility (together, the “Facilities”“New Credit Facilities”). The material terms of the New Credit Facilities are summarized in Note 58, Long-Term Debt to the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Debt Before the Ranpak Business Combination
Prior to the Ranpak Business Combination, the Company had two first lien credit facilities, a United States Dollar Tranche (“US$ Tranche”) and a Euro Tranche (“Euro Tranche”), a revolving credit facility and a second lien credit facility. The first lien credit facilities included: (1) a seven-year Term Loan (US$ Tranche) facility in the amount of $233.4 million, (2) a seven-year Term Loan (Euro Tranche) facility in the amount of €157.0 million, and (3) a five-year $30.0 million revolving credit facility, of which the equivalent of $13.0 million may be denominated in Euros (collectively, the “Old Credit Facilities”). In March 2017, Ranpak raised $45 million of incremental First Lien (US$ Tranche) debt and used the proceeds to pay down a portion of the Second Lien (US$ Tranche), the results of which saved Ranpak 400 basis points on the applicable interest rate on $45 million of its outstanding debt. Borrowings under the US$ Tranche bore interest in an amount based on either the Adjusted Eurodollar rate (the greater of 1.00% or
LIBOR) plus 3.25% or a Base Rate plus 2.75% (the higher of the Federal Funds effective rate plus ½ of 1%, prime, or the Adjusted Eurodollar rate plus 1%). Borrowings under the Euro Tranche bore interest in an amount based on the Adjusted EURIBOR rate (the greater of 1.00% or EURIBOR) plus 3.25%. Interest on LIBOR and EURIBOR rate loans were payable at the end of the applicable interest periods.
Borrowings under the revolving credit facility bore interest in an amount based on either the base rate or Adjusted Eurodollar rate plus a variable margin that is dependent on the First Lien Net Leverage Ratio. The first lien credit facilities were secured by a first priority security interest in substantially all of the Company’s assets. Principal payments on the first lien term loan facilities were due quarterly and were based on 1% of the annual outstanding balances. Additionally, per the credit agreement, Ranpak was required to make additional annual pre-payments, based on consolidated excess cash flow calculation results.
The second lien credit facility was an eight-year US$ Tranche in the amount of $135.0 million. Borrowings under the US$ Tranche bore interest in an amount based on either the Adjusted Eurodollar rate (the greater of 1.00% or LIBOR) plus 7.25% or a base rate plus 6.25%. The second lien credit agreement was secured by a second priority security interest in substantially all of Ranpak’s assets and includes default provisions and contained a covenant similar to the first lien credit facility described above.
The Old Credit Facilities were repaid in full upon the consummation of the Ranpak Business Combination and replaced with the New Credit Facilities.
Debt After the Ranpak Business Combination
In connection with the stock purchase agreement related to the Ranpak Business Combination, One Madison obtained a debt commitment letter (as amended and restated, supplemented or otherwise modified, the “debt commitment letter”), pursuant to which the Goldman Sachs Lending Partners LLC and certain affiliated investment entities thereof (collectively, the “Lenders”) committed to provide senior secured credit facilities to, in part, (i) fund the Ranpak Business Combination, (ii) repay and terminate the existing indebtedness of Ranpak (the “debt refinancing”) and (iii) pay all fees, premiums, expenses and other transaction costs incurred in connection with the foregoing. The aggregate commitment of the senior secured credit facilities consists of a $289.2 million dollar-denominated first lien term facility and a €140.0 million euro-denominated first lien term facility (with the ability to reduce the dollar-denominated first lien term facility and correspondingly increase the euro-denominated first lien term facility in an amount of up to €60.0 million), a $45.0 million revolving facility (including the right to bring in additional lenders to provide commitments with respect to the revolving facility in an amount of up to $30.0 million and additional borrowing capacity available for letters of credit in an amount of up to $5.0 million), a $100.0 million first lien contingency term facility and a $100.0 million second lien contingency term facility. Upon the consummation of the Ranpak Business Combination, the New Credit Facilities became the direct obligations of certain subsidiaries of Ranpak (collectively, the “borrowers”) and were secured by substantially all of Ranpak’s assets.
Each of the First Lien Term Facility, and the first lien contingency term facility accrue interest at a rate of LIBOR plus 3.75% (assuming a first lien net leverage ratio of less than 5.00:1.00). The second lien contingency term facility accrues interest at a rate of LIBOR plus 7.50%. No amounts have been drawn on under the second lien contingency. The first lien term facility and first lien contingency term facility mature on the seventh anniversary of the date of the closing of the Ranpak Business Combination, June 3, 2026. The revolving facility matures on the fifth anniversary of the date of the Closing June 3, 2024. The second lien contingency term facility matures on the eighth anniversary of the date of the Closing, June 3, 2027 but was not available for us to borrow against at September 30, 2020.
The revolving facility includes borrowing capacity available for letters of credit of up to $5 million. Any issuance of letters of credit will reduce the amount available under the revolving facility.
In addition, the debt financing provides the borrowers with the option to increase commitments under the debt financing in an aggregate amount not to exceed the greater of $95 million and 100% of trailing-twelve months consolidated EBITDA, plus any voluntary prepayments of the debt financing (and, in the case of the revolving facility, to the extent such voluntary prepayments are accompanied by permanent commitment reductions under the revolving facility), plus unlimited amounts subject to the relevant net leverage ratio tests and certain other conditions.
The obligations of the borrowers under the debt financing and certain of their respective obligations under hedging arrangements and cash management arrangements are unconditionally guaranteed by the direct parent of each borrower and each existing and subsequently acquired or organized direct or indirect wholly-owned US or Dutch restricted subsidiary (collectively, the “guarantors”), in each case, other than certain excluded subsidiaries and subject to other customary limitations set forth in the definitive documentation with respect to the debt financing. The debt financing is secured by a security interest in substantially all of the assets of the borrowers and the guarantors (and including a pledge of the equity interests of each borrower and of each guarantor and of their respective direct, wholly-owned restricted subsidiaries), in each case subject to customary exceptions.
The revolving facility requires the borrowers to maintain a maximum first lien net leverage ratio 9.10:1.00 based on the amount of the initial first lien term loans under the debt financing actually borrowed on the closing date based on providing at least a 35% cushion to consolidated EBITDA for the most recent four fiscal quarter periods ending prior to the date of the closing. This “springing” financial covenant is tested on the last day of each fiscal quarter, but only if on such date the sum of (i) the principal amount of outstanding revolving loans under the revolving facility, (ii) drawings on letters of credit under the revolving facility and (iii) the face amount of non-cash collateralized letters of credit under the revolving facility in excess of an amount to be set forth in the definitive documentation with respect to the debt financing exceeds 35% of the total revolving commitments under the revolving facility.
The senior secured credit facilities also contain a number of customary negative covenants. Such covenants, among other things, will limit or restrict the ability of each of the borrowers, their restricted subsidiaries, and where applicable, the direct parent holding companies of the borrowers, to:
• | incur additional indebtedness, issue disqualified stock and make guarantees; |
• | incur liens on assets; |
• | engage in mergers or consolidations or fundamental changes; |
• | sell assets; |
• | pay dividends and distributions or repurchase capital stock; |
• | make investments, loans and advances, including acquisitions; |
• | amend organizational documents; |
• | enter into certain agreements that would restrict the ability to pay dividends; |
• | repay certain junior indebtedness; |
• | engage in transactions with affiliates; and |
• | in the case of the direct parent holding companies of the borrowers, engage in activities other than passively holding the equity interests in the borrowers. |
The aforementioned restrictions are subject to certain exceptions including (i) the ability to incur additional indebtedness, liens, investments, dividends and distributions, and prepayments of junior indebtedness subject, in each case, to compliance with certain financial metrics and certain other conditions and (ii) a number of other traditional exceptions that grant the borrowers continued flexibility to operate and develop their businesses. The senior secured credit facilities also contain certain customary representations and warranties, affirmative covenants and events of default.
Amendment to First Lien Credit Facilities
On February 14, 2020, Ranger Packaging LLC, a Delaware limited liability company (“U.S. Borrower”), Ranpak B.V., a private limited liability company under the laws of the Netherlands (the “Dutch Borrower”; the U.S. Borrower and the Dutch Borrower, the “Borrowers”), Ranger Pledgor LLC, a Delaware limited liability company (“Holdings”), certain other subsidiaries of Holdings, certain lenders party to Amendment No. 1 (as defined below) and Goldman Sachs Lending Partners LLC (the “Administrative Agent”) entered into the Amendment No. 1 to First Lien Credit Agreement (“Amendment No. 1”) to amend the New Credit Facilities.
Among other things, the Amendment No. 1 amends the New Credit Facilities such that (x) the requirement of the Borrowers to apply a percentage of excess cash flow to mandatorily prepay term loans under the New Credit Facilities commences with the fiscal year ending December 31, 2021 (instead of the fiscal year ending December 31, 2020) and (y) the aggregate amount per fiscal year of capital stock of any parent company of the U.S. Borrower that is held by directors, officers, management, employees, independent contractors or consultants of the U.S. Borrower (or any parent company or subsidiary thereof) that the U.S. Borrower may repurchase, redeem, retire or otherwise acquire or retire for value has been increased to the greater of $10,000,000 and 10% of Consolidated Adjusted EBITDA (as defined in the New Credit Facilities) (increased from the greater of $7,000,000 and 7% of Consolidated Adjusted EBITDA) as of the last day of the most recently ended quarter for which financial statements have been delivered.
Borrower Assumption Agreement
On July 1, 2020, in the following order, (i) Rack Holdings Inc. merged with and into Ranger Packaging LLC, with Ranger Packaging LLC as the surviving entity of such merger and (ii) Ranger Packaging LLC merged with and into Ranpak Corp., with Ranpak Corp. as the surviving entity of such merger (clauses (i) and (ii) collectively, the “Reorganization”). Contemporaneously with the Reorganization, Ranger Packaging LLC, Ranpak Corp., Ranger Pledgor LLC, certain other subsidiaries of Ranger Pledgor LLC and Goldman Sachs Lending Partners LLC entered into the Borrower Assumption Agreement whereby, among other things, Ranpak Corp. assumed all obligations, liabilities and rights of Ranger Packaging LLC as the “U.S. Borrower” under the New Credit Facilities.
Cash Flows
The following table sets forth Ranpak’s summary cash flow information for the periods indicated:
|
| Successor |
|
|
| Predecessor |
| ||||||
|
| Nine Months Ended September 30, |
|
| June 3, 2019 |
|
|
| January 1, 2019 |
| |||
|
| 2020 |
|
| – September 30, 2019 |
|
|
| – June 2, 2019 |
| |||
Net cash provided by (used in) operating activities |
| $ | 37.8 |
|
| $ | (0.3 | ) |
|
| $ | 16.7 |
|
Net cash used in investing activities |
|
| (25.5 | ) |
|
| (648.2 | ) |
|
|
| (10.8 | ) |
Net cash provided by (used in) financing activities |
|
| (1.2 | ) |
|
| 663.1 |
|
|
|
| (14.4 | ) |
Effect of Exchange Rate Changes on Cash |
|
| 0.5 |
|
|
| (2.7 | ) |
|
|
| 1.2 |
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| 11.6 |
|
|
| 11.9 |
|
|
|
| (7.3 | ) |
Cash and Cash Equivalents, beginning of period |
|
| 19.7 |
|
|
| 1.7 |
|
|
|
| 17.5 |
|
Cash and Cash Equivalents, end of period |
| $ | 31.3 |
|
| $ | 13.6 |
|
|
| $ | 10.2 |
|
Successor | Predecessor | ||||||||||||
June 3, 2019 through September 30, 2019 | January 1, 2019 through June 2, 2019 | Nine Months Ended September 30, 2018 | |||||||||||
(in thousands) | |||||||||||||
Net cash (used in) provided by operating activities | $ | (11.6 | ) | $ | 24.5 | $ | 26.9 | ||||||
Net cash used in investing activities | (956.3 | ) | (10.8 | ) | (20.9 | ) | |||||||
Net cash provided by (used in) financing activities | 666.5 | (13.3 | ) | (5.4 | ) | ||||||||
Effect of exchange rate changes on cash | 5.2 | (7.7 | ) | 2.0 | |||||||||
Net increase (decrease) in cash and cash equivalents | (296.2 | ) | (7.3 | ) | 2.6 | ||||||||
Cash and cash equivalents, beginning of period | 309.8 | 17.5 | 8.6 | ||||||||||
Cash and cash equivalents, end of period | $ | 13.6 | $ | 10.2 | $ | 11.2 |
Cash Flows Provided (Used in) by Operating Activities
Net cash (used in) provided by operating activities was $(11.6)$37.8 million in the nine months ended September 30, 2020. Cash used in operating activities in the Successor Period of $0.3 million and cash provided by operating activities in the 1H 2019 Predecessor Period of $16.7 million combined for $16.4 million in cash provided by operating activities in the nine months ended September 30, 2019. The changes in operating cash flows are due to changes in working capital related to the payment of accrued transaction costs, $24.5 million in the 2019 1H Predecessor Periodcash earnings and due to increases in working capital utilization to support sales growth in the current quarter.
Cash Flows Used in Investing Activities
Net cash used in investing activities was $(956.3)$25.5 million in the nine months ended September 30, 2020. Cash used in investing activities in the Successor Period of $648.2 million and $10.8 million in the 1H 2019 Predecessor Period combined for $659.0 million in cash used by investing activities in the nine months ended September 30, 2019. The changes are due to the acquisition of Rack Holdings incash used for the Ranpak Business Combination and capitalized cost relatingcapital expenditures related to the acquisition of parts and assembly ofour protective packaging systems placed at end-user facilities. systems.
Cash Flows Provided (Used in) by Financing Activities
Net cash used in investingfinancing activities of $(10.8) million and $(20.9)was $1.2 million in the 2019 1H Predecessor Periodnine months ended September 30, 2020 and prior year period, respectively, resulted from capitalized cost relating to the acquisitionreflects payment of parts and assembly of protective packaging systems placed at end-user facilities.
Contractual Obligations and Other Commitments
Ranpak has leased production facilities in Reno, Nevada, Kansas City, Missouri and Raleigh, North Carolina, in the United States and in Nyrany, Czech Republic, as well as several leased sales and administrative offices. The leases for the four leased
Ranpak has various contractual obligations and commercial commitments that are recorded as liabilities in its audited consolidated financial statements. Other items, such as purchase obligations and other executory contracts, are not recognized as liabilities, but are required to be disclosed. TheThere have been no significant changes outside the ordinary course of business to our “Contractual Obligations” table below presents Ranpak’s significant enforceablein “Management’s Discussion and legally binding obligationsAnalysis of Financial Condition and future commitmentsResults of Operations” of the Form 10-K.
Off-Balance Sheet Arrangements
Ranpak did not have any off-balance sheet arrangements as of September 30, 2019.
(in thousands) | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | |||||||||||||||
Credit Facilities | $ | 530.8 | $ | 5.4 | $ | 10.5 | $ | 10.3 | $ | 504.6 | ||||||||||
Operating Leases | 4.8 | 1.2 | 2.3 | 1.3 | — | |||||||||||||||
Capital Lease Obligations | 0.3 | 0.2 | 0.1 | — | — | |||||||||||||||
Total | $ | 535.9 | $ | 6.8 | $ | 12.9 | $ | 11.6 | $ | 504.6 |
Critical Accounting Policies
Our unaudited condensed consolidated financial statements have any other material contractually binding obligationsbeen prepared in conformity with GAAP, which requires management to make cash payments.estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While Ranpak enters into agreements, generally annually, to fixwe do not believe that the supplier price for the purchase of paper raw materials, nonereported amounts would be materially different, application of these agreements provide for minimum purchase volumes.
Recently Issued and Adopted Accounting Pronouncements
For recently issued and adopted accounting pronouncements, see Note 2, Basis of such date. In September 2019, the Company amended the existing interest rate swap contractPresentation and entered into a new $50.0 million notional swap with similar terms. See Note 8Summary of Significant Accounting Policies to the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Changes in interest rates affect the amount of interest Ranpak earnsincome we earn on cash, cash equivalents and short-term investments and the amount of interest rates Ranpak paysexpense we pay on borrowings under the floating rate portions of Ranpak’sour credit facilities. As of September 30, 2019, Ranpak had term debt in the amount of $530.8 million, $5.4 million of which is short-term, and bore interest at floating base rates, plus a margin based on LIBOR or EURIBOR (in each case subject to a floor of 1.0%). As of September 30, 2019, the applicable LIBOR rate was 2.14% and the applicable EURIBOR rate was negative 0.467%. A hypothetical 100 basis point increase or decrease in the applicable base interest rates under Ranpak’sour credit facilities would have resulted in a $1.3$3.3 million increase or decrease in itsimpact on our cash interest expense for the nine months ended September 30, 2019. For additional information on Ranpak’s outstanding debt, see2020. We use interest rate swap agreements to manage this exposure.
In March 2020, we entered into the Second Amended January 2019 Swap, which amended the Amended January 2019 Swap to a lower rate of 2.1% and extend its maturity to June 1, 2024. In July 2020, we entered into the Borrower Assumption Agreement, which details the Reorganization and the assumption of obligations, liabilities and rights under the New Credit Facilities. Refer to Note 58, Long-Term Debt and Note 9, Derivative Instruments to the unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Changes in Fair Value | Fair Value as of September 30, 2019 | |||||||||||||
Classification | Amount | Classification | Amount | Notional Amount | ||||||||||
Pay-Fixed, Receive-Variable Interest Rate Swap | Interest Expense | $ | (6.4 | ) | Liability - Current | $ | 0.4 | $ | 250.0 | |||||
Liability - Non-current | 6.0 |
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency exchange risk related to itsour transactions and its subsidiaries’ balances that are denominated in currencies other than the U.S. dollar, Ranpak’sour functional currency. See “
For the combined nine monthmonths ended period September 30, 2019,2020, net salesrevenue denominated in currencies other than U.S. dollars amounted to $99.4$117.7 million or 51.9%57.1% of Ranpak'sour net salesrevenue for the period. Substantially all of this amount was denominated in
Commodity Price Risk
While Ranpak’sour business is significantly impacted by price fluctuations related to the purchase, production and sale of paper products, Ranpak iswe are not directly exposed to market price fluctuations in paper purchase or sale prices as it negotiateswe negotiate prices with suppliers on an annual basis and negotiatesnegotiate prices with distributors reflecting competitive market terms. Ranpak’sOur strategy has generally been to obtain competitive prices for itsour products and services and allow operating results to reflect market price movements dictated by supply and demand.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As discussed elsewhere in this Quarterly Report on Form 10-Q,required by Rules 13a-15 and 15d-15 under the Company completedExchange Act, our management, with the Ranpak Business Combination on June 3, 2019 pursuant to which the Company acquired allparticipation of the issuedChief Executive Officer and outstanding equity interests of Rack Holdings. Prior to the Ranpak Business Combination, the Company was a special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. As a result, previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date as the Company’s operations prior to the Ranpak Business Combination were insignificant compared to those of the consolidated entity post-Ranpak Business Combination. The design and implementation of internal controls over financial reporting for the Company's post-Ranpak Business Combination has required and will continue to require significant time and resources from management and other personnel. Because of this, the design and ongoing development of the Company’s framework for implementation and evaluation of internal control over financial reporting is in its preliminary stages. As a result, management was unable, without incurring unreasonable effort or expense, to conduct an assessment onChief Financial Officer, evaluated the effectiveness of the Company'sour disclosure controls and procedures as of September 30, 2019.
Changes in Internal Control Over Financial Reporting
Other than the ongoing steps being taken to remediate the material weaknesses described under “Item 9A. Controls and Procedures—Internal Control Over Financial Reporting” in the Form 10-K, there were no changes during the nine months ended September 30, 2020 in our internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assuranceover financial reporting that the objectives of thehave materially affected, or are reasonably likely to materially affect, our internal control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.over financial reporting.
PART II – OTHER INFORMATION
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. Statements that are not historical facts, including statements about the parties, perspectives and expectations, are forward-looking statements. In addition, any statements that refer to estimates, projections, forecasts or other thancharacterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of historical fact includedthese words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q including, without limitation,may include, for example, statements under “Management’s Discussionabout: our expectations around the performance of the business; our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; our officers and Analysisdirectors allocating their time to other businesses and potentially having conflicts of Financial Conditioninterest with our business; our public securities’ potential liquidity and Resultstrading; the lack of Operations” regardinga market for our financial position, business strategy and the plans and objectives of management for future operations, aresecurities.
The forward-looking statements. When usedstatements contained in this Quarterly Report on Form 10-Q words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negativeare based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of such termsrisks, uncertainties (some of which are beyond our control) or other similar expressions, as they relateassumptions that may cause actual results or performance to usbe materially different from those expressed or our management, identifyimplied by these forward-looking statements. Factors that might cause or contribute to such a discrepancyThese risks include, but are not limited to: (1) our inability to those describedsecure a sufficient supply of paper to meet our production requirements; (2) the impact of the price of kraft paper on our results of operations;(3) our reliance on third party suppliers; (4) the COVID-19 pandemic and associated response (5) the high degree of competition in the markets in which we operate; (6) consumer sensitivity to increases in the prices of our products; (7) changes in consumer preferences with respect to paper products generally; (8) continued consolidation in the markets in which we operate; (9) the loss of significant end-users of our products or a large group of such end-users; (10) our failure to develop new products that meet our sales or margin expectations; (11) our future operating results fluctuating, failing to match performance or to meet expectations; (12) our ability to fulfill our public company obligations; and (13) other SEC filings. Such forward-looking statements are based onrisks and uncertainties indicated from time to time in filings made with the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected bySEC.
Should one or more factors, whichof these risks or uncertainties materialize, they could cause themour actual results to differ materially. The cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward-looking statements. We are not undertaking any obligation to update or revise any forward looking statements whether as a result of certain factors detailednew information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons actingfuture. Accordingly, you should not put undue reliance on our behalf are qualified in their entirety by this paragraph.
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Information about our risk factors is contained in Item 1A of ourthe Form 10-K. A supplemental risk factor was included in the Quarterly Report on Form 10-Q for the fiscal quarterperiod ended June 30, 2019. We believe that at September 30, 2019, thereMarch 31, 2020 (the “Q1-20 10-Q”). There are no other material changes in our risk factors from those disclosed in Item 1A of our Quarterly Report onthe Form 10-Q for the fiscal quarter ended June 30, 2019.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit No. | Description | |
2.1 | ||
2.2 | ||
2.3 | ||
3.1 | ||
3.2 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
31.1* | ||
31.2* | ||
32* | ||
101.INS | Inline XBRL Instance | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEF | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | |
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* | Filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereuntohereunto duly authorized.
Ranpak Holdings Corp. | ||||
Date: | November 6, 2020 | By: | /s/ | |
William Drew | ||||
Senior Vice President and Chief Financial Officer |
54