# Ranpak Holdings Corp.: Form 10-Q for the period ended Mar 31, 2020

- Company: [Ranpak Holdings Corp.](/companies/pack.md) (CIK 1712463)
- Form: 10-Q
- Filed: 2020-05-11
- Accepted by EDGAR: May 11, 2020, 09:26 ET
- Period: 2020-03-31
- Accession: 0001628280-20-007304
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1712463/000162828020007304/ranpakq12020.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1712463/000162828020007304/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-01-01 to 2020-03-31 | $63.4m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2020-01-01 to 2020-03-31 | $36.6m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2020-01-01 to 2020-03-31 | $26.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2020-01-01 to 2020-03-31 | $19.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2020-01-01 to 2020-03-31 | −$600.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-01-01 to 2020-03-31 | $6.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2020-01-01 to 2020-03-31 | −$1.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-01-01 to 2020-03-31 | −$3.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-01-01 to 2020-03-31 | −$0.05 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-01-01 to 2020-03-31 | −$0.05 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-01-01 to 2020-03-31 | 70,862,576 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-01-01 to 2020-03-31 | $11.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-01-01 to 2020-03-31 | $10.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2020-03-31 | $20.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-03-31 | $68.8m | us-gaap:AssetsCurrent |
| Total assets | at 2020-03-31 | $1.09bn | us-gaap:Assets |
| Current liabilities | at 2020-03-31 | $28.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-03-31 | $573.7m | us-gaap:Liabilities |
| Long-term debt | at 2020-03-31 | $415.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2020-03-31 | $1.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2020-03-31 | $518.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 61,725 characters.

### Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Such forward-looking statements are based on 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 by one or more factors, which could cause them 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 as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting 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 as well as the section entitled, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of Ranpak included in our Annual Report on Form 10-K, filed with the SEC on March 17, 2020. For purposes of this section, "Ranpak", "the Company", "we", or "our" refer to (i) Rack Holdings and its subsidiaries (the "Predecessor") for the three months ended March 31, 2019 the "Predecessor Period," prior to the consummation of the Ranpak Business Combination and (ii) Ranpak Holdings Corp. and its subsidiaries (the "Successor ") for the three months ended March 31, 2020 the "Successor Period," after the consummation of the Ranpak Business Combination, unless the context otherwise requires. Capitalized terms used and not defined herein have the meanings disclosed elsewhere in the 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'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; Raleigh, North Carolina; and Reno, Nevada in the United States, in Heerlen, the Netherlands and Nyrany, Czech Republic. Ranpak also maintains sales and administrative offices in Paris, France; Shanghai, China; Tokyo, Japan; and Singapore. Ranpak is a global business that generates approximately 54.8% of its net sales for the fiscal year 2019 outside of the United States.

As of March 31, 2020, Ranpak had an installed base of approximately 106.9 thousand protective packaging systems serving a diverse set of distributors and end-users. Ranpak generated net sales of $63.4 million and $66.1 million in the three months ended March 31, 2020 and 2019, respectively.

### 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 $794.9 million, which reflects a post-closing adjustment of $0.7 million for net working capital and additional consideration, and €140.0 million ($160.8 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").

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' 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 $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 $487.6 million as of such date, was repaid in full. In December 2019, the Company closed 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.

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 have 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 estimated that these incremental costs on an annual basis amounted 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 year ended 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.*** As a result of the geographic diversity of Ranpak’s operations, it is exposed to the effects of currency translation. Currency transaction exposure results when Ranpak generates net sales in one currency at one time and incurs expenses in another currency at another time, or when it realizes gain or loss on intercompany transfers. While Ranpak seeks to limit its currency transaction exposure by matching the currencies in which it incurs sales and expenses, it may not always be able to do so.

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 re-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 sales and expenses could also adversely impact its cash flows. See “*Qualitative and Quantitative Disclosures About Market Risk.”*

***Acquisitions.*** On February 28, 2017, Ranpak acquired e3NEO 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, whereby the seller may be entitled to receive an earn-out payment in an amount up to the greater of (i) $2.6 million and (ii) 48% of the trailing twelve (12) month EBITDA of e3NEO calculated as of December 31, 2020. In order to be eligible to receive the Minimum Earn-Out Amount pursuant to the purchase agreement, e3NEO must have caused the business to receive purchase orders from customers and receive sign-off from customers upon completion of a successful factory acceptance test related to certain next generation machines on or before December 31, 2019, subject to reasonable approval of the Company. The earn-out payment was not earned and, in April 2020, we entered into a settlement arrangement with the former majority owner of e3NEO to provide, among other things, for a payment to the earn-out counterparties in the amount of approximately $1.6 million, of which $1.4 million was accrued at December 31, 2019 and March 31, 2020. The remaining $0.2 million was subject to approval by French authorities, which was obtained and expensed in April 2020. The Company paid approximately $0.8 million in April 2020. See Note 7, *"Acquisition"* to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. While recent acquisitions, such as 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.

***Seasonality.*** Ranpak estimates that approximately one-third of its net sales, 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 sales 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. 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 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—***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 approximately 106.9 thousand units as of March 31, 2020 an increase of 8.3 thousand units, or 8.5% from 98.5 thousand units as of March 31, 2019. The following table presents Ranpak’s installed base of protective packaging systems by product line as of March 31, 2020 and 2019:

*(in thousands)*

| Protective Packaging Systems | As of March 31, 2020 | 2019 | 3/31/2020 vs. 3/31/2019 Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Cushioning machines | 32.6 | 31.6 | 1.0 | 3.2 |
| Void-fill machines | 61.7 | 57.3 | 4.4 | 7.7 |
| Wrapping machines | 12.6 | 9.6 | 3.0 | 30.8 |
| Total | 106.9 | 98.5 | 8.4 | 8.5 |

***Paper 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 sets forth Ranpak’s results of operations for the Successor Period (three months ended March 31, 2020) and Predecessor Period (three months ended March 31, 2019) with line items presented in millions of dollars.

The Ranpak Business Combination is accounted for under the scope of business combination guidance in ASC 805 as One Madison Corporation was deemed to be the accounting acquirer while Rack Holdings was deemed the "Predecessor". Accordingly, the business combination is accounted for using the acquisition method which requires the Company to record the fair value of assets acquired and liabilities assumed from Rack Holdings (see Note 7, "Acquisition").

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) depicts the financial statements of Rack Holdings, and the period after the Closing (labeled Successor Period) 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 Periods and for the Successor Periods 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"). We have, however, also disclosed below Earnings 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 board of directors 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's operating results in the same manner as our management and board 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—***EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: benefit from (provision for) income taxes; interest expense; and depreciation and amortization.

***Adjusted EBITDA—***Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss), adjusted to exclude: benefit from (provision for) income taxes; interest expense; depreciation and amortization; stock-based compensation expense; expenses related to the Ranpak Business Combination and, in certain periods, certain other income and expense items.

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 data for the three months ended March 31, 2020 and 2019. 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 Ranpak Business Combination as well as to reflect a constant currency presentation between periods for the convenience of readers. We refer to these data as pro forma data in our discussion. However, such pro forma data have not been prepared in accordance with Article 11 of Regulation S-X. We reconcile this data to our GAAP data for the same period under “Presentation and Reconciliation of GAAP to Non-GAAP Measures” for the three months ended March 31, 2020.

***Comparison of Successor Period Three Months Ended March 31, 2020, Predecessor Period Three Months Ended March 31, 2019 and Pro Forma Three Months Ended March 31, 2020***

|  | Successor Three Months Ended March 31, 2020 ($) | % Net sales | Predecessor Three Months Ended March 31, 2019 ($) | % Net sales | Pro Forma Three Months Ended March 31, 2020 ($) | % Net sales | Change to March 31, 2019 ($)% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $63.4 |  | $66.1 |  | $64.8 |  | $(1.3) | (2.0) |
| Cost of sales | 36.6 | 57.7 | 37.9 | 57.3 | 37.4 | 57.7 | (0.5) | (1.3) |
| Gross Profit | 26.8 | 42.3 | 28.2 | 42.7 | 27.4 | 42.3 | (0.8) | (2.8) |
| Selling, general and administrative | 19.6 | 30.9 | 14.3 | 21.6 | 19.9 | 30.7 | 5.6 | 39.2 |
| Depreciation and amortization | 7.5 | 11.8 | 10.7 | 16.2 | 7.6 | 11.7 | (3.1) | (29.0) |
| Other operating expense, net | 0.3 | 0.5 | 1.0 | 1.5 | 0.5 | 0.8 | (0.5) | (50.0) |
| Income (loss) from operations | (0.6) | (0.9) | 2.2 | 3.3 | (0.6) | (0.9) | (2.8) | (127.3) |
| Interest expense | 6.2 | 9.8 | 8.1 | 12.3 | 6.2 | 9.6 | (1.9) | (23.5) |
| Foreign currency (gain) loss | (1.5) | (2.4) | (1.9) | (2.9) | (1.5) | (2.3) | 0.4 | (27.4) |
| Loss before income taxes | (5.3) | (8.4) | (4.0) | (6.1) | (5.3) | (8.2) | (1.3) | 33.1 |
| Income tax benefit | (1.7) | (2.7) | (0.6) | (0.9) | (1.7) | (2.6) | (1.1) | 183.3 |
| Net (loss) income | $(3.6) | (5.7) | $(3.4) | (5.1) | $(3.6) | (5.6) | $(0.2) | 21.1 |
| **Non-GAAP:** |  |  |  |  |  |  |  |  |
| EBITDA | $15.4 |  | $20.3 |  | $15.5 |  | $(4.8) | (23.6)% |
| Adjusted EBITDA | $18.1 |  | $19.7 |  | $18.1 |  | $(1.6) | (8.1)% |

#### Net sales

The following table and the discussion that follows compares Ranpak’s net sales by geographic region and by product line for the three months ended March 31, 2020 and 2019 on a GAAP basis and 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 the three months ended March 31, 2020:

|  | Successor Three Months Ended March 31, 2020 ($) | % Net sales | Predecessor Three Months Ended March 31, 2019 ($) | % Net sales | Pro Forma Three Months Ended March 31, 2020 ($) | % Net sales | Change to March 31, 2019 ($)% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| North America | 27.1 | 42.7 | 29.9 | 45.2 | 27.1 | 41.8 | (2.8) | (9.4) |
| Europe/Asia | 36.3 | 57.3 | 36.2 | 54.8 | 37.7 | 58.2 | 1.5 | 4.0 |
| Total | 63.4 | 100.0 | 66.1 | 100.0 | 64.8 | 100.0 | (1.3) | (2.0) |
| Cushioning machines | 28.5 | 45.0 | 32.2 | 48.7 | 29.3 | 45.2 | (2.9) | (9.1) |
| Void-Fill machines | 24.7 | 39.0 | 26.9 | 40.7 | 25.1 | 38.7 | (1.8) | (6.6) |
| Wrapping machines | 7.9 | 12.4 | 5.3 | 8.0 | 8.0 | 12.3 | 2.7 | 52.7 |
| Other | 2.3 | 3.6 | 1.7 | 2.6 | 2.4 | 3.8 | 0.7 | 41.2 |
| Total | 63.4 | 100.0 | 66.1 | 100.0 | 64.8 | 100.0 | (1.3) | (2.0) |

Net sales for the three months ended March 31, 2020 and 2019 totaled $63.4 million and $66.1 million, respectively. Net sales decreased $2.7 million or 4.1% as a result of a decrease in the volume of Ranpak’s paper consumable products of approximately 1.2 pp, partially offset by an increase of approximately 1.2 pp in sales of automated box sizing equipment in addition to a decrease in the price of Ranpak's paper consumable products which contributed a 2.6 pp decrease in sales. Net sales were positively impacted by increases in wrapping and automation net sales, which were partially offset by decreases in cushioning, and void-fill net sales. Cushioning decreased $3.7 million, or 11.5%, to $28.5 million from $32.2 million, void-fill decreased $2.2 million, or 8.2%, to $24.7 million from $26.9 million, wrapping increased $2.6 million, or 49.1%, to $7.9 million from $5.3 million, while other sales increased $0.6 million, or 35.3% to $2.3 million from $1.7 million, in each case for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Other net sales includes automated box sizing equipment and non-paper revenue from packaging systems installed in the field. Pro forma net sales were $64.8 million for the three months ended March 31, 2020, a $3.1 million, or 4.6%, decrease from $67.9 million for the three months ended March 31, 2019 after adjusting to a constant currency in both periods.

Net sales in North America for the three months ended March 31, 2020 and 2019 totaled $27.1 million and $29.9 million, respectively, a decrease of $2.8 million or 9.4%. The change was attributable to decreases in cushioning and void-fill sales partially offset by increases in wrapping volumes and prices.

Net sales in Europe/Asia for the three months ended March 31, 2020 and 2019, totaled $36.3 million and $36.2 million, respectively, an increase of $0.1 million or 0.3%. Pro forma net sales in Europe/Asia were $37.7 million in the three months ended March 31, 2020, a decrease of $0.3 million, or 0.8%, from $38.0 million for the three month period ended March 31, 2019, on a constant currency basis, driven primarily by decreases in cushioning, partially offset by increases in wrapping and void-fill sales.

#### Cost of Sales

Cost of sales for the three months ended March 31, 2020 and 2019 totaled $36.6 million and $37.9 million, respectively. Cost of sales decreased $1.3 million or 3.4% due to decreases in volume and a decrease in the price of paper, offset by an increase in depreciation of $1.5 million over the prior year. Pro forma cost of sales decreased by $1.7 million, or 4.3%, to $37.4 million in the three months ended March 31, 2020 from $39.1 million for the three month period ended March 31, 2019 after 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 decreased by 0.1 pp to 42.3% in the three months ended March 31, 2020 from 42.4% for the comparable period in 2019.

#### Selling, General and Administrative Expenses (SG&A)

SG&A expenses for the three months ended March 31, 2020 and 2019 totaled $19.6 million and $14.3 million, respectively. SG&A expenses increased $5.3 million or 37.1% 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 $5.5 million, or 38.2%, to $19.9 million in the three months ended March 31, 2020 from $14.4 million for the comparable period in 2019 after adjusting to a constant currency in both periods. As a percentage of pro forma net sales, pro forma SG&A increased to 30.7% in the three months ended March 31, 2020 from 21.2% in the three months ended March 31, 2019 on a constant currency basis.

#### Depreciation and Amortization

Depreciation and amortization expenses for the three months ended March 31, 2020 and 2019 totaled $7.5 million and $10.7 million, respectively. Depreciation and amortization expenses decreased $3.2 million or 29.9% 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 $3.2 million, or 29.6%, to $7.6 million in the three months ended March 31, 2020 from $10.8 million for the three months ended March 31, 2019 on a constant currency basis. As a percentage of pro forma net sales, pro forma depreciation and amortization expenses decreased to 11.7% in the three months ended March 31, 2020 from 15.9% in the three months ended March 31, 2019 on a constant currency basis.

#### Other Operating Expense (Income), Net

Other operating expenses (income), net, for the three months ended March 31, 2020 and 2019 totaled $0.3 million and $1.0 million, respectively. Other operating expenses (income), net, decreased $0.7 million or 70.0% due to the loss on sale of machines recognized in the prior year period as well as decreased research and development expense in the current year period. Pro forma other operating expenses (income), net, was $0.5 million in the three months ended March 31, 2020 compared to $1.1 million for the three months ended March 31, 2019 on a constant currency basis. As a percentage of pro forma net sales, pro forma other operating expenses (income), net, decreased to 0.8% in the three months ended March 31, 2020 from 1.6% in the three months ended March 31, 2019 on a constant currency basis.

#### Interest Expense

Interest expense for the three months ended March 31, 2020 and 2019 totaled $6.2 million and $8.1 million, respectively. Interest expense decreased $1.9 million or 23.5% due to decreased debt levels and lower interest rates. Pro forma interest expense decreased by $1.9 million, or 23.5%, to $6.2 million in the three months ended March 31, 2020 compared to $8.1 million for the three months ended March 31, 2019 on a constant currency basis due to decreased debt levels and lower interest rates. As a percentage of pro forma net sales, pro forma interest expense decreased to 9.6% in the three months ended March 31, 2020 from 11.9% in the three months ended March 31, 2019.

#### Foreign Currency Gain

Foreign currency gain for the three months ended March 31, 2020 and 2019 totaled $1.5 million and $1.9 million, respectively. Foreign currency gain decreased $0.4 million or 21.1% due to the net impact of the re-measurement of Ranpak’s Euro-denominated term facility and its Euro-denominated intercompany note to a Dutch subsidiary in the Predecessor Periods. Pro forma foreign currency gain was $1.5 million in the three months ended March 31, 2020 compared to $1.9 million for the three months ended March 31, 2019 on a constant currency basis. As a percentage of pro forma net sales, pro forma foreign currency (gain) loss decreased to 2.3% in the three months ended March 31, 2020 from 2.8% in the three months ended March 31, 2019 on a constant currency basis.

#### Income Tax Benefit

Income tax benefit for the three months ended March 31, 2020 and 2019 totaled $1.7 million, or an effective tax rate of 32.3%, and $0.6 million, or an effective tax rate of 15.2%, respectively, an increase in tax benefit of $1.1 million or 17.1%. The fluctuation in the effective tax rate between periods was primarily attributable to a jurisdictional mix of income. 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 United States, and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

#### Net Loss

Net loss for the three months ended March 31, 2020 and 2019 totaled $3.6 million and $3.4 million, respectively, an increase of $0.2 million or 5.9%. Pro forma net loss was $3.6 million in the three months ended March 31, 2020 compared to net loss of $3.2 million for the three month period ended March 31, 2019 on a constant currency basis. The change was due to the reasons discussed above.

#### Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

EBITDA for the three months ended March 31, 2020 and 2019 totaled $15.4 million and $20.3 million, respectively, a decrease of $4.9 million or 23.9%. Adjusting for transaction costs associated with the Ranpak Business Combination, constant currency and other one-time costs, pro forma Adjusted EBITDA for the three months ended March 31, 2020 and 2019 totaled $18.1 million and $19.7 million, respectively, a decrease of $1.6 million, or 8.1% on a constant currency basis.

### 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 data for the three months ended March 31, 2020 is useful when comparing the current and prior 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 certain non-GAAP measures including the non-GAAP pro forma measures, to GAAP information presented in this Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and 2019:

*(in millions)*

| Successor As Reported Three Months Ended March 31, 2020 | Adjustments (6) Three Months Ended March 31, 2020 | Pro Forma Three Months Ended March 31, 2019 | Predecessor As Reported Three Months Ended March 31, 2019 | Adjustments (6) |  | Pro Forma |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales $63.4 | $1.4 | $64.8 | $66.1 | $1.8 | (1) | $67.9 |
| Cost of sales (COS) 36.6 | 0.8 | 37.4 | 37.9 | 1.2 | (2) | 39.1 |
| Gross Profit 26.8 | 0.6 | 27.4 | 28.2 | 0.6 |  | 28.8 |
| Selling, general and administrative (SGA) 19.6 | 0.3 | 19.9 | 14.3 | 0.1 |  | 14.4 |
| Depreciation and amortization 7.5 | 0.1 | 7.6 | 10.7 | 0.1 |  | 10.8 |
| Other operating expense, net 0.3 | 0.2 | 0.5 | 1.0 | 0.1 |  | 1.1 |
| Income (loss) from operations (0.6) | — | (0.6) | 2.2 | 0.3 |  | 2.5 |
| Interest expense 6.2 | — | 6.2 | 8.1 | — |  | 8.1 |
| Foreign currency (gain) loss (1.5) | — | (1.5) | (1.9) | — |  | (1.9) |
| (Loss) Income before income taxes (5.3) | — | (5.3) | (4.0) | 0.3 |  | (3.7) |
| Income tax (benefit) expense (1.7) | — | (1.7) | (0.6) | 0.1 | (3) | (0.5) |
| Net (loss) income $(3.6) | $— | (3.6) | $(3.4) | $0.2 |  | (3.2) |
| Add (5): |  |  |  |  |  |  |
| COS Depreciation & amortization |  | 7.0 |  |  |  | 5.5 |
| SG&A Depreciation & amortization |  | 7.6 |  |  |  | 10.7 |
| Interest expense |  | 6.2 |  |  |  | 8.1 |
| Income tax (benefit) expense |  | (1.7) |  |  |  | (0.6) |
| EBITDA |  | 15.5 |  |  |  | 20.5 |
| Adjustments (4): |  |  |  |  |  |  |
| Unrealized (gain) loss translation |  | (1.5) |  |  |  | (2.1) |
| Constant currency adjustment at 1.15 |  | 0.1 |  |  |  | 0.1 |
| Non-cash impairment losses |  | 0.2 |  |  |  | 0.1 |
| M&A, restructuring and severance |  | 1.3 |  |  |  | 0.8 |
| PE sponsor costs |  | — |  |  |  | 0.5 |
| Restricted stock unit expense |  | 2.2 |  |  |  | — |
| Other non-core and non-cash adjustments |  | 0.3 |  |  |  | (0.2) |
| Adjusted EBITDA |  | $18.1 |  |  |  | $19.7 |

43

*(in millions)*

| As Reported Successor Predecessor Better/(Worse) to Predecessor Three Months Ended March 31, 2019 Three Months Ended March 31, 2020 % of net sales Three Months Ended March 31, 2019 % of net sales Three Months Ended March 31, 2020 | % of net sales | Pro Forma Successor Three Months Ended March 31, 2019 | % of net sales | Predecessor |  | Better/(Worse) to Predecessor Three Months Ended March 31, 2019 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales $63.4 $66.1 $(2.7) | (4.1)% | $64.8 |  | $67.9 |  | $(3.1) | (4.6)% |
| Cost of sales (COS) 36.6 57.7% 37.9 57.3% (1.3) | (3.4)% | 37.4 | 57.7% | 39.1 | 57.6% | (1.7) | (4.3)% |
| Gross Profit 26.8 42.3% 28.2 42.7% (1.4) | (5.0)% | 27.4 | 42.3% | 28.8 | 42.4% | (1.4) | (4.9)% |
| Selling, general and administrative (SGA) 19.6 30.7% 14.3 21.6% 5.3 | 37.1% | 19.9 | 30.7% | 14.4 | 21.2% | 5.5 | 38.2% |
| Depreciation and amortization 7.5 11.7% 10.7 16.2% (3.2) | (29.9)% | 7.6 | 11.7% | 10.8 | 15.9% | (3.2) | (29.6)% |
| Other operating expense, net 0.3 0.8% 1.0 1.5% (0.7) | (70.0)% | 0.5 | 0.8% | 1.1 | 1.6% | (0.6) | (54.5)% |
| Income (loss) from operations (0.6) (0.9)% 2.2 3.3% (2.8) | (127.3)% | (0.6) | (0.9)% | 2.5 | 3.7% | (3.1) | (124.0)% |
| Interest expense 6.2 9.6% 8.1 12.3% (1.9) | (23.5)% | 6.2 | 9.6% | 8.1 | 11.9% | (1.9) | (23.5)% |
| Foreign currency (gain) loss (1.5) (2.3)% (1.9) (2.9)% 0.4 | (21.1)% | (1.5) | (2.3)% | (1.9) | (2.8)% | 0.4 | (21.1)% |
| (Loss) Income before income taxes (5.3) (8.2)% (4.0) (6.1)% (1.3) | 32.5% | (5.3) | (8.2)% | (3.7) | (5.4)% | (1.6) | 43.2% |
| Income tax (benefit) expense (1.7) (2.6)% (0.6) (0.9)% (1.1) | 183.3% | (1.7) | (2.6)% | (0.5) | (0.7)% | (1.2) | 240.0% |
| Net (loss) income $(3.6) (5.6)% $(3.4) (5.1)% $(0.2) | 5.9% | (3.6) | (5.6)% | (3.2) | (4.7)% | (0.4) | 12.5% |
| Add (5): |  |  |  |  |  |  |  |
| COS Depreciation & amortization |  | 7.0 |  | 5.5 |  | 1.5 | 27.3% |
| SG&A Depreciation & amortization |  | 7.6 |  | 10.7 |  | (3.1) | (29.0)% |
| Interest expense |  | 6.2 |  | 8.1 |  | (1.9) | (23.5)% |
| Income tax (benefit) expense |  | (1.7) |  | (0.6) |  | (1.1) | 183.3% |
| EBITDA |  | 15.5 |  | 20.5 |  | (5.0) | (24.4)% |
| Adjustments (4): |  |  |  |  |  |  |  |
| Unrealized (gain) loss translation |  | (1.5) |  | (2.1) |  | 0.6 | (28.6)% |
| Constant currency adjustment at 1.15 |  | 0.1 |  | 0.1 |  | — |  |
| Non-cash impairment losses |  | 0.2 |  | 0.1 |  | 0.1 | 100.0% |
| M&A, restructuring and severance |  | 1.3 |  | 0.8 |  | 0.5 | 62.5% |
| PE sponsor costs |  | — |  | 0.5 |  | (0.5) | (100.0)% |
| Restricted stock unit expense |  | 2.2 |  | — |  | 2.2 |  |
| Other non-core and non-cash adjustments |  | 0.3 |  | (0.2) |  | 0.5 | (250.0)% |
| Adjusted EBITDA |  | $18.1 |  | $19.7 |  | $(1.6) | (8.1)% |

(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) 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.

(5) 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.

(6) Effect of Euro constant currency adjustment to a rate of $1.15 US Dollar to €1.00 as follows:

*(in thousands)*

|  | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 |
| --- | ---: | ---: |
| Net sales | $1,425.8 | $481.1 |
| Cost of sales | 797.1 | 278.5 |
| Gross Profit | 628.7 | 202.7 |
| Selling, general and administrative | 342.2 | 101.3 |
| Depreciation and amortization | 80.9 | 53.3 |
| Other operating expense, net | 195.3 | 63.5 |
| Income (loss) from operations | 10.3 | (15.4) |
| Interest expense | 29.8 | 10.5 |
| Foreign currency (gain) loss | 6.0 | 1.4 |
| Loss before income taxes | (25.5) | (27.3) |
| Income tax (benefit) expense | (23.3) | (7.6) |
| **Net (loss) income** | **$(2.2)** | **$(19.7)** |

### 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. We evaluate liquidity in terms of cash flows from operations and other sources and the sufficiency of such cash flows to fund our operating, investing and financing activities.

We believe that our estimated cash from operations together with borrowing capacity under the revolving portion of the Facilities will provide us with sufficient resources to cover our current requirements. Our 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 our outstanding debt. We expect our capital expenditures to increase as we continue to grow our business. Our future capital requirements and the adequacy of available funds will depend on many factors, and if we are unable to obtain needed additional funds, we may have to reduce our operating costs or incur additional debt, which could impair our growth prospects and/or otherwise negatively impact our business. Further, volatility in the equity and credit markets resulting from the COVID-19 pandemic could make obtaining new equity or debt financing more difficult or expensive.

We had $20.2 million in cash and cash equivalents as of March 31, 2020 and $19.7 million as of December 31, 2019. We also had $424.6 million in debt, $1.5 million of which was classified as short-term, as of March 31, 2020, compared to $428.2 million in debt, $1.6 million of which was classified as short-term, as of December 31, 2019. In December 2019, we closed a public offering of our Class A common stock generating net proceeds of approximately $107.7 million that was used to pay down long-term debt. At March 31, 2020, we did not have amounts outstanding under our $45.0 million revolving credit facility, and we had no borrowings under such facility at March 31, 2020 and through April 30, 2020.

### 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) 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) a $45.0 million revolving facility (together, the “New Credit Facilities”). The material terms of the New Credit Facilities are summarized in Note 8, "*Long-Term Debt*" to the 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 March 31, 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.

### Cash Flows

The following table sets forth Ranpak’s summary cash flow information for the periods indicated:

*(in millions)*

|  | Successor Three Months Ended March 31, 2020 | Predecessor Three Months Ended March 31, 2019 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $11.6 | $13.6 |
| Net cash used in investing activities | (10.5) | (6.6) |
| Net cash used in financing activities | (0.4) | (1.1) |
| Effect of exchange rate changes on cash | (0.2) | (0.2) |
| Net increase in cash and cash equivalents | 0.5 | 5.7 |
| Cash and cash equivalents, beginning of period | 19.7 | 17.5 |
| Cash and cash equivalents, end of period | $20.2 | $23.2 |

#### Cash Flows Provided by Operating Activities

Net cash (used in) provided by operating activities was $11.6 million in the Successor Period due to changes in working capital driven by a decrease in accounts receivable and cash earnings of the business and $13.6 million in the Predecessor Period due to increases in working capital utilization to support sales growth in the quarter.

#### Cash Flows Used in Investing Activities

Net cash used in investing activities was $10.5 million in the Successor Period, due to capitalized cost relating to the acquisition of parts and assembly of protective packaging systems placed at end-user facilities. Net cash used in investing activities was $6.6 million in the Predecessor Period resulting from capitalized cost relating to the acquisition of parts and assembly of protective packaging systems placed at end-user facilities.

#### Cash Flows Provided by Financing Activities

Net cash used in financing activities was $0.4 million in the Successor Period and reflects payment of debt. Net cash used in financing activities was $1.1 million in the Predecessor Period, primarily related to the payment of debt.

### 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 production facilities expire in September 2020, July 2020, December 2024 and April 2026, respectively. Ranpak recognizes rent expense on a straight-line basis over the relevant lease period.

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. There have been no significant changes outside the ordinary course of business to our “Contractual Obligations” table in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K.

### Off-Balance Sheet Arrangements

Ranpak did not have any off-balance sheet arrangements as of March 31, 2020.

### Critical Accounting Policies

Our unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which requires management to make 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 we do not believe that the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and various other assumptions that we believe are reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting policies and estimates, are disclosed in our Quarterly Report on Form 10-K

### Recently Issued and Adopted Accounting Pronouncements

For recently issued and adopted accounting pronouncements, see Note 2, "*Basis of Presentation and Summary of Significant Accounting Policies*" to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

### Departure of Chief Financial Officer

As of May 15, 2020, Trent Meyerhoefer will step down as our Chief Financial Officer and leave the Company to pursue other opportunities. William Drew, who currently serves as the Chief of Staff of the Company, will assume the role of Interim Chief Financial Officer while we conduct a search to find a permanent replacement.

## Market risk

As filed, 2,882 characters.

### Interest Rate Risk

Changes in interest rates affect the amount of interest income we earn on cash, cash equivalents and short-term investments and the amount of interest expense we pay on borrowings under the floating rate portions of our credit facilities. A hypothetical 100 basis point increase or decrease in the applicable base interest rates under our credit facilities would have resulted in a $1.1 million impact on our cash interest expense for the three months ended March 31, 2020. 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. Refer to Note 8, *Long-Term Debt* and Note 9, *Derivative Instruments* to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on our debt and interest rate swap agreements. There were no other changes to our debt and interest rate swap agreements from those disclosed in the Form 10-K.

### Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange risk related to our transactions and subsidiaries’ balances that are denominated in currencies other than the U.S. dollar, our functional currency. See “—Factors Affecting the Comparability of Ranpak’s Results of Operations - Effect of Currency Fluctuations” for more information about Ranpak’s foreign currency exchange rate exposure. We seek to naturally hedge our foreign exchange transaction exposure by matching the transaction currencies for our cash inflows and outflows and maintaining access to credit in the principal currencies in which we conduct business. Currently, we do not hedge our foreign exchange transaction or translation exposure, but may consider doing so in the future.

For the three months ended March 31, 2020, net sales denominated in currencies other than U.S. dollars amounted to $36.3 million or 57.2% of our net sales for the period. Substantially all of this amount was denominated in Euro. A 10% increase or decrease in the value of the Euro to the U.S. dollar would have caused our reported net sales for the three-month ended March 31, 2020 to increase or decrease by approximately $3.6 million.

### Commodity Price Risk

While our business is significantly impacted by price fluctuations related to the purchase, production and sale of paper products, we are not directly exposed to market price fluctuations in paper purchase or sale prices as we negotiate prices with suppliers on an annual basis and negotiate prices with distributors reflecting competitive market terms. Our strategy has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand.

## Controls and procedures

As filed, 4,321 characters.

### 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 required by Rules 13a-15 and 15d-15 under the Exchange Act, our management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2020. Based on this evaluation of our disclosure controls and procedures, our management, with the participation of the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of March 31, 2020 because of material weaknesses in our internal control over financial reporting, as described under “Item 9A. Controls and Procedures—Internal Control Over Financial Reporting” in our Annual Report on Form 10-K for the year ended December 31, 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 our Annual Report on Form 10-K for the year ended December 31, 2019, there were no changes during the quarter ended March 31, 2020 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting given that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact to their design and implementation.

### PART II – OTHER INFORMATION

### Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Such forward-looking statements are based on 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 by one or more factors, which could cause them 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 as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

## Risk factors

As filed, 4,554 characters.

Information about our risk factors is contained in Item 1A of the Form 10-K. The following risk factor supplements the risk factors in the Form 10-K and should be read in conjunction with the risk factors in the Form 10-K. There are no other material changes in our risk factors from those disclosed in the Form 10-K.

***The COVID-19 pandemic has impacted our business and could in the future materially and adversely affect our business.***

The novel strain of the coronavirus identified in late 2019 and now affecting the global community has impacted and is expected to continue to impact our business and operations, and the full nature and extent of the impact is highly uncertain and may be beyond our control. Among other things, uncertainties relating to COVID-19 include the duration of the outbreak, the severity of the virus, and the actions, or perception of actions that may be taken, to contain or treat its impact, by governments and others, including declarations of states of emergency, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations.

As many governmental measures providing for business shutdowns generally exclude critical infrastructure and the businesses that support critical infrastructure, such as packaging companies like us, all of our manufacturing facilities currently remain operational. Nevertheless, the impact of these measures over time, as well as additional measures we have adopted or may adopt in the future that are intended to protect the health and safety of our employees, is uncertain and could limit our manufacturing productivity. Likewise, in the event large numbers of our manufacturing workforce become ill with COVID-19 or otherwise, our productivity could be adversely affected. Any such reduction in our manufacturing productivity, whether resulting from governmental or our internal policies intended to contain the spread of the COVID-19 virus or from employee illness could hinder our ability to meet customer demand, which could have a material adverse effect on our financial condition and results of operation.

Similarly, as a result of the COVID-19 pandemic and measures taken in response to it, our suppliers and vendors may not have the materials, capacity, or capability to enable the manufacture of the parts we use to assemble our packaging machines or the paper we convert into packaging consumables. To date, we experienced delays in obtaining certain supplies used in the assembly of our packaging machines that we source from China. While these delays have not resulted in our inability to deliver packaging machines to any of our distributors or end users, to the extent they continue, or other of our suppliers or vendors are unable to provide us with the supplies we need according to our schedule and specifications, we may need to seek alternate suppliers or vendors, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our distributors or end-users, each of which would affect our results of operations. Additionally, restrictions or disruptions in transportation logistics, such as reduced availability of sea or ground transport, port closures and increased border controls or closures, have started to result in delays and could result in higher costs, either of which could harm our profitability, make our products less competitive, or cause our distributors or end-users to seek alternative suppliers.

Furthermore, many of our end-users have been and could continue to be negatively impacted as a result of disruption in demand for their products due to the decline in global economic activity resulting from the COVID-19 pandemic. To the extent demand for the products sold by our end-users continues to decline or the duration of any decline is longer than they anticipate, our distributors’ and end-users’ demand for our packaging systems will also decline, which could negatively impact our sales and have a material adverse effect on our business, results of operations and financial condition.

The impact of the COVID-19 pandemic continues to evolve and its duration and ultimate disruption to our operations, supply chain, distributors and end-users, and the related financial impact on us, cannot be estimated at this time. Should any such disruptions continue for an extended period of time, the impact could have a more severe adverse effect on our business, results of operations and financial condition.

Filed May 11, 2020.
Source: SEC EDGAR, the filing index for accession 0001628280-20-007304. Last ingested by Listed: Nov 6, 2026, 16:47 ET. No prices; not investment advice.