What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 245 added, 167 removed, 599 unchanged (41% of the section changed)

3 unchanged sentences

(Thousands, except par value)

March 31, 2023

June 30, 2023

December 31, 2022

9 unchanged sentences

Other long-term assets

LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY

LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' (DEFICIT) EQUITY

Current maturities of long-term debt

1 unchanged sentence

Accounts payable

Supply chain finance program

Derivative liabilities

7 unchanged sentences

Commitments and contingencies (Note 20)

Series A Convertible Preferred Shares, $ 0.01 par value, 24,000 shares authorized, 23,566 shares and 23,588 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively, $ 11.50 liquidation value

Shareholders' Equity

Series A Convertible Preferred Shares, $ 0.01 par value, 24,000 shares authorized, 23,566 shares and 23,588 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively, $ 11.50 liquidation value

Shareholders' (Deficit) Equity

Preferred stock, $ 0.01 par value, 26,000 shares authorized, no shares issued and outstanding

Common stock, $ 0.01 par value, 300,000 shares authorized, 75,628 shares and 75,020 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 300,000 shares authorized, 75,728 shares and 75,020 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in-capital

1 unchanged sentence

Accumulated other comprehensive loss

Total shareholders' equity attributable to Westrock Coffee Company

Noncontrolling interest

Total shareholders' equity

Total Liabilities, Convertible Preferred Shares and Shareholders' Equity

Total shareholders' (deficit) equity attributable to Westrock Coffee Company

Non-controlling interest

Total shareholders' (deficit) equity

Total Liabilities, Convertible Preferred Shares and Shareholders' (Deficit) Equity

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Thousands, except per share data)

4 unchanged sentences

Total operating expenses

Income (loss) from operations

(Loss) income from operations

Other (income) expense

2 unchanged sentences

Loss before income taxes

Income tax benefit

Net income attributable to non-controlling interest

Income tax expense (benefit)

Net (loss) income attributable to non-controlling interest

Net loss attributable to shareholders

4 unchanged sentences

Weighted-average number of shares outstanding (1) :

(1) Retroactively adjusted the three months ended March 31, 2022 for de-SPAC merger transaction as described in Note 4 .

(1) Retroactively adjusted the three and six months ended June 30, 2022 for the de-SPAC merger transaction as described in Note 4 .

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss), net of tax:

3 unchanged sentences

Comprehensive loss

Comprehensive income attributable to non-controlling interests

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive loss attributable to shareholders

10 unchanged sentences

Equity (Deficit)

Balance at March 31, 2022

Net income (loss)

Other comprehensive income (loss)

Equity-based compensation

Accumulating preferred dividends

Balance at June 30, 2022

Balance at March 31, 2023

Net income (loss)

Issuance of common shares related to purchase of non-controlling interest

Accretion of convertible preferred stock

Other comprehensive income (loss)

Equity-based compensation

Balance at June 30, 2023

(1) Retroactively adjusted March 31, 2022 and the three months ended June 30, 2022 for the de-SPAC merger transaction as described in Note 4.

See accompanying notes to condensed consolidated financial statements.

WESTROCK COFFEE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (1)

(Unaudited) (continued)

Comprehensive

Non-Controlling

Paid-in Capital

Income (Loss)

Equity (Deficit)

Balance at December 31, 2021

4 unchanged sentences

Accumulating preferred dividends

Balance at March 31, 2022

Balance at June 30, 2022

Balance at December 31, 2022

4 unchanged sentences

Issuance of common shares related to conversion of Series A Convertible Preferred Shares

Issuance of common shares related to purchase of non-controlling interest

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at March 31, 2023

(1) Retroactively adjusted December 31, 2021 and three months ended March 31, 2022 for de-SPAC merger transaction as described in Note 4.

Balance at June 30, 2023

(1) Retroactively adjusted December 31, 2021 and six months ended June 30, 2022 for the de-SPAC merger transaction as described in Note 4.

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

26 unchanged sentences

Proceeds from debt

Proceeds from supply chain financing program

Payment of debt issuance costs

Net payments from repurchase agreements

Net repayments from repurchase agreements

Proceeds from exercise of stock options

Proceeds from exercise of Public Warrants

Payment for purchase of non-controlling interest

Payment for taxes for net share settlement of equity awards

9 unchanged sentences

Issuance of common shares related to conversion of Series A Preferred Shares

Issuance of common shares related to purchase of non-controlling interest

Accretion of convertible preferred shares

1 unchanged sentence

The total cash and cash equivalents and restricted cash is as follows:

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

Cash and cash equivalents

25 unchanged sentences

The Condensed Consolidated Balance Sheet as of December 31, 2022 was derived from the audited financial statements, but does not include all disclosures required by GAAP.

At March 31, 2023, the Company had an 85 % ownership interest in Falcon Coffees Limited (“Falcon”), which operates our trading business and is reported within our Sustainable Sourcing & Traceability segment.

Equity interests not owned by us are reflected as non-controlling interests.

In the Condensed Consolidated Statements of Operations, we allocate net income (loss) attributable to non-controlling interest to arrive at net income (loss) attributable to common shareholders based on their proportionate share.

On April 3, 2023, the Company purchased the remaining 15 % of the equity interests of Falcon Coffees Limited (“Falcon”) that it did not previously own, resulting in Falcon becoming a wholly owned subsidiary of the Company.

Aggregate consideration paid for the interest totaled $ 3.2 million and included $ 2.0 million in cash and 100,000 Common Shares.

Due to the Company’s controlling financial interest in Falcon prior to the purchase, the transaction was accounted for as an equity transaction.

For periods prior to April 3, 2023, equity interests not owned by us are reflected as non-controlling interests.

proportionate share.

Falcon operates our trading business and is reported within our Sustainable Sourcing & Traceability segment.

The interim financial information is unaudited but, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of results for the interim periods have been included.

4 unchanged sentences

Common Unit Conversion

In connection with the Transaction and pursuant to the Transaction Agreement, (a) each issued and outstanding common unit of the Converting Company (“Common Units”) was automatically converted into 0.1049203474320 shares of common stock, par value $ 0.01 per share, of the Converted Company (each such share, a “Common Share”), (b) each issued and outstanding common equivalent preferred unit of the Converting Company (the “Common Equivalent Preferred Units”) for which the holder had not elected to convert such unit into shares of Series A convertible preferred stock, par value $ 0.01 per share, of the Converted Company (the “Series A Preferred Shares”), automatically converted into 0.1086138208640 Common Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.1049203474320 Common Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit and (c) each outstanding Common Equivalent Preferred Unit for which the holder thereof had made an election to convert such unit into Series A Preferred Shares, converted into 0.1086138208740 Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.0919280171940 Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit.

In connection with the Transaction and pursuant to the Transaction Agreement, (a) each issued and outstanding common unit of the Converting Company (“Common Units”) was automatically converted into 0.1049203474320 shares of common stock, par value $ 0.01 per share, of the Company (each such share, a “Common Share”), (b) each issued and outstanding common equivalent preferred unit of the Converting Company (the “Common Equivalent Preferred Units”) for which the holder had not elected to convert such unit into shares of Series A convertible preferred stock, par value $ 0.01 per share, of the Company (the “Series A Preferred Shares”), automatically converted into 0.1086138208640 Common Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.1049203474320 Common Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit and (c) each outstanding Common Equivalent Preferred Unit for which the holder thereof had made an election to convert such unit into Series A Preferred Shares, converted into 0.1086138208740 Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.0919280171940 Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit.

For the periods prior to the Closing, the number of outstanding units, weighted average number of outstanding units, loss per common unit, equity-based compensation and other financial amounts previously expressed on the basis of Common Units have been retroactively adjusted on the basis of Common Shares reflecting the common unit conversion ratio, as described above.

10 unchanged sentences

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its obligations as they become due within one year after the date that the financial statements are available to be issued.

The Company is dependent on borrowings under its Credit Agreement (Note 12) and cash generated from operations to finance its operations, service its debt requirements, maintain compliance with its covenants, and to fund capital requirements.

The Company believes that its projected cash flow from operations and available borrowings under its Credit Agreement will be sufficient to fund operations for at least the next twelve months.

During the year ended December 31, 2022 and through the quarter ending March 31, 2023, we were and continue to be impacted by the negative effects of inflation on both our customer volume demand and manufacturing costs, including price increases in fuel, food, materials and labor.

We attempt to mitigate the impacts of inflation wherever possible.

Our mitigation strategies include working with our vendors and suppliers to ensure that we have adequate access to raw materials.

In addition, where possible, we seek to recover inflation-impacted costs by passing these costs onto our customers through periodic pricing increases.

However, our pricing increases often lag our cost increases, including increases in commodity costs.

The persistence of these negative effects on our business could adversely impact our ability to reach our revenue and other financial targets.

The Company is dependent on borrowings under its Credit Agreement and cash generated from operations to finance its operations, service its debt requirements, maintain compliance with its covenants, and to fund capital requirements.

On June 30, 2023, the Company amended its Credit Agreement (See Note 12) to provide for greater access to available borrowings and covenant relief, and in August 2023, the Company issued approximately 11.9 million Common Shares for aggregate gross proceeds of $ 118.8 million (See Note 22).

The Company believes that proceeds from the equity issuance, projected cash flow from operations and available borrowings under its Credit Agreement will be sufficient to fund operations for at least the next twelve months.

If we are unable to meet our financial targets and generate sufficient cash flows from operations, it may restrict our liquidity and capital resources and our ability to maintain compliance with our financial covenants.

9 unchanged sentences

Activity in the allowance for credit losses for the periods indicated was as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Balance at beginning of period

3 unchanged sentences

We estimate the fair value of green coffee based on the quoted market price at the end of each reporting period, with changes in fair value being reported as a component of costs of sales in our Condensed Consolidated Statements of Operations.

For the three

months ended March 31, 2023 and 2022, we recognized $ 2.3 million of unrealized gains and $ 5.8 million of unrealized losses, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

For the three and six months ended June 30, 2023, we recognized $ 1.1 million of net unrealized losses and $ 1.1 million of net unrealized gains, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

For the three and six months ended June 30, 2022, we recognized $ 1.7 million and $ 7.5 million of net unrealized losses, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

Supplier Finance Program

On March 2, 2023, the Company entered into a supplier finance program (the “Program”) with a third-party financing provider to provide better working capital usage by deferring payments for certain raw materials.

The Company is party to a supplier finance program (the “Program”) with a third-party financing provider to provide better working capital usage by deferring payments for certain raw materials.

Under the Program, the financing provider remits payment to the Company’s suppliers for approved invoices, and the Company repays the financing provider the amount of the approved invoices, plus a financing charge, on 180 -day terms.

1 unchanged sentence

The Company may request cancellation of the Program in whole or in respect of one or more approved suppliers.

Due to the extension of payment terms beyond the original due date of approved invoices, obligations under the Program are recorded outside of accounts payable in our Condensed Consolidated Balance Sheets.

Due to the extension of payment terms beyond the original due date of approved invoices, obligations under the Program are recorded outside of accounts payable, within supply chain finance program, on our Condensed Consolidated Balance Sheets.

Amounts paid by the financing provider to suppliers are reported as cash inflows from financing activities and a corresponding cash outflow from operating activities in our Condensed Consolidated Statements of Cash Flows.

Amounts paid to the financing provider are reflected as cash outflows from financing activities in our Condensed Consolidated Statements of Cash Flows.

As of March 31, 2023, there were no obligations outstanding under the Program.

As of June 30, 2023, there were $ 29.0 million obligations outstanding under the Program.

There were no such obligations outstanding as of December 31, 2022.

June 30, 2023

Confirmed obligations outstanding at the beginning of the year

Invoices confirmed during the year

Confirmed invoices paid during the year

Confirmed obligations outstanding at the end of the quarter

Warrant Liabilities

1 unchanged sentence

Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period.

The liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Condensed Consolidated Statement of Operations.

The liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Condensed Consolidated Statements of Operations.

The Company remeasures the fair value of the Westrock Public Warrants (as defined in Note 4) based on the quoted market price of the Westrock Public Warrants.

The Westrock Private Warrants (as defined in Note 4) are valued using a binomial lattice valuation model.

For the three months ended March 31, 2023, the Company recognized $ 5.5 million of gains related to the change in fair value of warrant liabilities, which is recognized in other (income) expense in the Condensed Consolidated Statements of Operations.

For the three and six months ended June 30, 2023, the Company recognized $ 11.8 million and $ 6.3 million of losses, respectively, related to the change in fair value of warrant liabilities, which is recognized in other (income) expense in the Condensed Consolidated Statements of Operations.

We account for income taxes under the asset and liability method.

7 unchanged sentences

We re-evaluate our need for a valuation allowance on a quarterly basis.

The effective tax rates for the three months ended March 31, 2023 and March 31, 2022 were 50.2 % and 25.2 %, respectively.

The Company’s effective tax rate for the current period differs from the federal statutory rate primarily due to a change in the valuation allowance against domestic deferred tax assets and discrete items, including the windfall from

equity-based compensation awards.

The effective tax rate for the three months ended March 31, 2023 differs from the effective tax rate for the same period in 2022 primarily due to the change in the valuation allowance and an increase in the windfall from equity-based compensation awards.

There were no changes to uncertain tax benefits during the three months ended March 31, 2023, and the Company does not expect any significant changes to uncertain tax benefits within the next twelve months.

The effective income tax rates for the six months ended June 30, 2023 and 2022 were ( 6.4 %) and 22.7 %, respectively.

The Company’s effective tax rate for the current period differs from the federal statutory rate primarily due to an increase in the valuation allowance against domestic deferred tax assets and permanent differences, including nondeductible expenses related to a change in the fair value of warrants.

The effective tax rate for the six months ended June 30, 2023 differs from the effective tax rate for the same period in 2022 primarily due to the increase in the valuation allowance and permanent differences, including nondeductible expenses related to a change in the fair value of warrants and executive compensation.

There were no changes to uncertain tax benefits during the six months ended June 30, 2023, and the Company does not expect any significant changes to uncertain tax benefits within the next twelve months.

Recently adopted accounting pronouncements

17 unchanged sentences

The 12,868,151 shares issued at Closing include 1,910,000 shares issued to PIPE investors who elected to satisfy their PIPE commitments through the purchase of shares of Class A common stock of Riverview (“Riverview Class A Shares”) on the public market, pursuant to the terms of their respective subscription agreements.

Substantially concurrently with the Closing, the Company received $ 205.9 million in cash proceeds (which amount excludes contribution to the Company of certain related party notes outstanding immediately prior to Closing) from common stock PIPE investments (the “PIPE Financing”), issued 20,590,000 Common Shares to the PIPE investors (which share amount excludes the conversion of the related party notes), and entered into a credit agreement that includes (a) a senior secured first lien revolving credit facility in an initial aggregate principal amount of $ 175.0 million and (b) a senior secured first lien term loan facility in an initial aggregate principal amount of $ 175.0 million.

includes (a) a senior secured first lien revolving credit facility in an initial aggregate principal amount of $ 175.0 million and (b) a senior secured first lien term loan facility in an initial aggregate principal amount of $ 175.0 million.

Prior to the Closing, the Company’s ownership interests consisted of two classes of equity, referred to as Common Units and Common Equivalent Preferred Units.

At inception, each Common Equivalent Preferred Unit has a liquidation preference of $ 1.00 per unit, increased by an amount accruing at the rate of 10 % per annum, compounding annually,

based on its liquidation preference as of the time of such accrual, and reduced by the cumulative amount of any cash dividends or distributions, if any, made by the Company in respect of such Common Equivalent Preferred Unit (the “Common Equivalent Preferred Unit Liquidation Preference”).

At inception, each Common Equivalent Preferred Unit has a liquidation preference of $ 1.00 per unit, increased by an amount accruing at the rate of 10 % per annum, compounding annually, based on its liquidation preference as of the time of such accrual, and reduced by the cumulative amount of any cash dividends or distributions, if any, made by the Company in respect of such Common Equivalent Preferred Unit (the “Common Equivalent Preferred Unit Liquidation Preference”).

In connection with the Closing, holders of Common Equivalent Preferred Units were paid a cash dividend totaling $ 4.4 million, which is equal to the accreted liquidation preference of the Common Equivalent Preferred Units from June 30, 2022 through Closing.

7 unchanged sentences

The financial statements of the combined entity represent a continuation of the financial statements of Westrock, and the net assets of Riverview have been stated at historical cost, with no goodwill or other intangible assets recorded.

The equity and net loss per unit attributable to common equityholders of the Company, prior to the Closing, have been retroactively adjusted as shares reflecting the common unit conversion ratio discussed above.

The equity and net loss per unit attributable to common equity holders of the Company, prior to the Closing, have been retroactively adjusted as shares reflecting the common unit conversion ratio discussed above.

Proceeds from the Transaction and the $ 175.0 million term loan facility were used to pay off and terminate our then existing term loan and asset-based lending agreements, and to pay expenses related to the Transaction and the new credit agreement.

32 unchanged sentences

Such transactions are accounted for as financing transactions in accordance with ASC 606.

At March 31, 2023, the Company has $ 10.2 million of such repurchase agreement obligations, collateralized by the corresponding inventory, that are recorded within accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

At June 30, 2023, the Company has $ 9.4 million of such repurchase agreement obligations, collateralized by the corresponding inventory, that are recorded within accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

Net cash flows associated with these repurchase agreements are reported as financing activities in the Condensed Consolidated Statements of Cash Flows.

7 unchanged sentences

Prior to settlement, these forward sales contracts are recognized at fair value with the unrealized gains or losses recorded within costs of sales in our Condensed Consolidated Statements of Operations.

For the three months ended March 31, 2023 and 2022, we recorded $ 1.0 million of net unrealized losses and $ 6.9 million of net unrealized gains, respectively, within costs of sales.

For the three months ended March 31, 2023 and 2022, the Company recognized $ 24.4 million and $ 38.1 million in revenues under ASC 815, respectively, which are reported within the Company’s Sustainable Sourcing & Traceability segment.

For the three and six months ended June 30, 2023, we recorded $ 2.1 million and $ 1.1 million of net unrealized gains, respectively, within costs of sales.

For the three and six months ended June 30, 2022, we recorded $ 0.3 million and $ 7.2 million of net unrealized gains, respectively, within costs of sales.

For the three and six months ended June 30, 2023, the Company recognized $ 34.7 million and $ 59.1 million in revenues under ASC 815, respectively, and for the three and six months ended June 30, 2022, the Company recognized $ 52.4 million and $ 90.5 million in revenues under ASC 815, respectively, which are reported within the Company’s Sustainable Sourcing & Traceability segment.

Contract Estimates

2 unchanged sentences

These estimated rebates or discounts are included in the transaction price of the Company’s contracts with customers as a reduction to net revenues and are included as accrued sales incentives in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

Accrued sales incentives were $ 1.3 million and $ 1.3 million at March 31, 2023 and December 31, 2022, respectively.

Accrued sales incentives were $ 1.4 million and $ 1.3 million at June 30, 2023 and December 31, 2022, respectively.

We do not disclose the value of unsatisfied performance obligations for contracts (i) with an original expected length of one year or less or (ii) for which the Company recognizes revenue at the amount in which it has the right to invoice as the product is delivered.

1 unchanged sentence

Contract balances relate primarily to advances received from the Company’s customers before revenue is recognized.

The Company does not have any material contract liabilities as of March 31, 2023 or December 31, 2022.

Receivables from contracts with customers are included in accounts receivable, net on the Company’s Condensed Consolidated

Balance Sheets.

At March 31, 2023 and December 31, 2022, accounts receivable, net included $ 118.0 million and $ 104.7 million in receivables from contracts with customers, respectively.

The Company does not have any material contract liabilities as of June 30, 2023 or December 31, 2022.

Receivables from contracts with customers are included in accounts receivable, net on the Company’s Condensed Consolidated Balance Sheets.

At June 30, 2023 and December 31, 2022, accounts receivable, net included $ 103.5 million and $ 104.7 million in receivables from contracts with customers, respectively.

Contract acquisition costs for obtaining contracts that are deemed recoverable are capitalized as contract costs.

Such costs result from the payment of sales incentives and are amortized over the contract life.

As of March 31, 2023 and December 31, 2022, no costs were capitalized as all arrangements were less than a year.

As of June 30, 2023 and December 31, 2022, no costs were capitalized as all arrangements were less than a year.

Disaggregated Revenue

1 unchanged sentence

Further disaggregation of revenues from sales to external customers by type and geographic area, based on customer location, for the periods indicated is as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Flavors, extracts & ingredients

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

United States

10 unchanged sentences

The excess of the cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill.

We recognized approximately $ 1.9 million of goodwill, which is deductible for tax purposes, within our Beverage Solutions segment.

finalized its purchase price allocation during the second quarter of 2023, recognizing approximately $ 2.0 million of goodwill, which is deductible for tax purposes, within our Beverage Solutions segment.

The financial results of Bixby are included in the Beverage Solutions segment from the date of acquisition and were not material, individually or in the aggregate, to our results of operations and therefore, pro forma financial information has not been presented.

1 unchanged sentence

On November 14, 2022, Westrock Beverage Solutions, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company, acquired one hundred percent ( 100 % ) of the equity securities of Kohana Coffee, LLC (“Kohana Coffee”), a Texas limited liability company (“Kohana Acquisition”).

Kohana Coffee is an extract and ready-

to-drink focused business, based in Richmond, California, serving customers in the retail and CPG industries.

Kohana Coffee is an extract and ready-to-drink focused business, based in Richmond, California, serving customers in the retail and CPG industries.

The acquisition allows the Company to accelerate the development, production, and distribution of ready-to-drink products in cans and bottles.

12 unchanged sentences

Accounts payable and accrued liabilities

The above purchase price allocation is considered preliminary and is subject to change when the valuation of assets and liabilities is finalized upon receipt of the final valuation report from a third-party valuation expert, which is anticipated to be finalized during the second quarter of 2023.

During the quarter ended March 31, 2023, we recorded $ 0.1 million of measurement period adjustments, primarily related to the settlement of post-closing working capital adjustments.

The above purchase price allocation was finalized during the second quarter of 2023.

During the first six months of 2023, we recorded approximately $ 0.3 million of measurement period adjustments, primarily related to the settlement of post-closing working capital adjustments.

The cost of the acquisition in excess of the fair market value of the tangible and intangible assets acquired less liabilities assumed represents acquired goodwill, which is deductible for tax purposes.

The goodwill arising from the transaction is primarily attributable to strategic opportunities from the acquisition of Kohana, including our ability to accelerate the development, production, and distribution of ready-to-drink products in cans and bottles to our existing customers.

The following table summarizes inventories as of March 31, 2023 and December 31, 2022:

March 31, 2023

The following table summarizes inventories as of June 30, 2023 and December 31, 2022:

June 30, 2023

December 31, 2022

3 unchanged sentences

Green coffee inventories represent green coffee held for resale.

At March 31, 2023 and December 31, 2022, all green coffee held for resale was included within our Sustainable Sourcing & Traceability segment.

At June 30, 2023 and December 31, 2022, all green coffee held for resale was included within our Sustainable Sourcing & Traceability segment.

Property, Plant and Equipment, Net

The following table summarizes property, plant and equipment, net as of March 31, 2023 and December 31, 2022:

The following table summarizes property, plant and equipment, net as of June 30, 2023 and December 31, 2022:

Depreciable Lives

March 31, 2023

June 30, 2023

December 31, 2022

Buildings (4)

10 - 40 years

11 unchanged sentences

3 - Lease right-of-use assets are amortized over the shorter of the useful life of the asset or the lease term.

Depreciation expense for the three months ended March 31, 2023 and 2022 was $ 3.9 million and $ 4.3 million, respectively.

4 - We identified a $ 10.1 million classification error in the disclosure of buildings, plant equipment, furniture and fixtures, and construction in progress and equipment deposits for the year ended December 31, 2022 .

Amounts presented above reflect the corrected amounts.

Depreciation expense for the three and six months ended June 30, 2023 was $ 4.1 million and $ 8.0 million, respectively, and depreciation expense for the three and six months ended June 30, 2022 was $ 4.3 million and $ 8.5 million, respectively.

Assets classified as construction in progress and equipment deposits are not depreciated, as they are not ready for production use.

All assets classified as construction in progress and equipment deposits at March 31, 2023 are expected to be in production use.

The following table reflects the carrying amount of goodwill as of March 31, 2023 and December 31, 2022:

All assets classified as construction in progress and equipment deposits at June 30, 2023 are expected to be in production use.

The following table reflects the carrying amount of goodwill as of June 30, 2023 and December 31, 2022:

Balance at December 31, 2022

2 unchanged sentences

Measurement period adjustments

Balance at March 31, 2023

Balance at June 30, 2023

Accumulated impairment loss

Intangible Assets, Net

The following table summarizes intangible assets, net as of March 31, 2023 and December 31, 2022:

March 31, 2023

The following table summarizes intangible assets, net as of June 30, 2023 and December 31, 2022:

June 30, 2023

Customer relationships

5 unchanged sentences

Intangible assets, net

Amortization expense of intangible assets was $ 2.0 million and $ 1.7 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the weighted average useful life for definite-lived intangibles is approximately 20 years .

Amortization expense of intangible assets was $ 2.0 million and $ 4.0 million for the three and six months ended June 30, 2023, respectively, and amortization expense of intangible assets was $ 1.7 million and $ 3.4 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, the weighted average useful life for definite-lived intangibles is approximately 20 years .

We have operating leases for manufacturing and production facilities, distribution and warehousing facilities, vehicles and machinery and equipment.

3 unchanged sentences

Balance Sheet Location

March 31, 2023

June 30, 2023

December 31, 2022

6 unchanged sentences

Depending on the nature of the lease, lease costs are classified within costs of sales or selling, general and administrative expense on the Company’s Condensed Consolidated Statements of Operations.

The components of lease costs at March 31, 2023 and 2022, respectively, are as follows:

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

The components of lease costs for the three and six months ended June 30, 2023 and 2022, respectively, are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

Short-term lease cost

The following table presents information about the Company’s weighted average discount rate and remaining lease term as of March 31, 2023 and March 31, 2022:

March 31, 2023

March 31, 2022

The following table presents information about the Company’s weighted average discount rate and remaining lease term as of June 30, 2023 and June 30, 2022:

June 30, 2023

June 30, 2022

Weighted-average discount rate

Weighted-average remaining lease term

Supplemental cash flow information about the Company’s leases as of March 31, 2023 is as follows:

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

Supplemental cash flow information about the Company’s leases as of June 30, 2023 and 2022, respectively, is as follows:

Six Months Ended June 30,

Operating cash flows from operating leases

During the three months ended March 31, 2023, the Company obtained $ 6.0 million of right-of-use operating lease assets in exchange for lease obligations.

During the six months ended June 30, 2023, the Company obtained $ 6.0 million of right-of-use operating lease assets in exchange for lease obligations.

Finance lease assets are recorded in property, plant and equipment, net with the corresponding lease liabilities included in accrued expenses and other current liabilities and long-term debt, net on the Condensed Consolidated Balance Sheets.

There were no material finance leases as of March 31, 2023.

Future minimum lease payments under non-cancellable operating leases as of March 31, 2023 are as follows:

There were no material finance leases as of June 30, 2023.

Future minimum lease payments under non-cancellable operating leases as of June 30, 2023 are as follows:

Remainder of 2023

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Present value of minimum lease payments

Our long-term debt at March 31, 2023 and December 31, 2022 is as follows:

March 31, 2023

Our long-term debt at June 30, 2023 and December 31, 2022 is as follows:

June 30, 2023

December 31, 2022

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Credit Agreement

On August 29, 2022, the Company entered into a credit agreement (the “Credit Agreement”) among the Company, Westrock Beverage Solutions, LLC, as the borrower (the “Borrower”), Wells Fargo Bank, N.A., as administrative agent,

collateral agent, and swingline lender, Wells Fargo Securities, LLC, as sustainability structuring agent, and each issuing bank and lender party thereto.

On August 29, 2022, we entered into a credit agreement (the “Credit Agreement”) among the Company, Westrock Beverage Solutions, LLC, as the borrower (the “Borrower”), Wells Fargo Bank, N.A., as administrative agent, collateral agent, and swingline lender, Wells Fargo Securities, LLC, as sustainability structuring agent, and each issuing bank and lender party thereto.

The Credit Agreement includes (a) a senior secured first lien revolving credit facility in an initial aggregate principal amount of $ 175.0 million (the “Revolving Credit Facility”) and (b) a senior secured first lien term loan facility in an initial aggregate principal amount of $ 175.0 million (the “Term Loan Facility”).

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as the prime rate in effect, (ii) the NYFRB Rate from time to time plus 0.50 % and (iii) the Adjusted Term SOFR for a one month interest period plus 1.00 %, (the “Base Rate”)), in each case plus the applicable margin.

The Applicable Margin ranges from 1.50 % to 2.50 % for Adjusted Term SOFR loans and from 0.50 % to 1.50 % for Base Rate loans, in each case depending on the total net leverage ratio.

The Credit Agreement contains two financial covenants requiring the maintenance of a total net leverage ratio and an interest coverage ratio (the “Financial Covenants”).

Commitment fees on the daily unused amount of commitments under the Revolving Credit Facility range from 0.20 % to 0.35 % depending on the total net leverage ratio.

At March 31, 2023, we had $ 55.0 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 7.3 %, and the interest rate applicable to our Term Loan Facility was 7.4 %.

At June 30, 2023, we had $ 80.0 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 7.3 %, and the interest rate applicable to our Term Loan Facility was 7.4 %, and we had $ 2.6 million of standby letters of credit outstanding.

On February 14, 2023, we entered into an Incremental Assumption Agreement and Amendment No.

1 (the “Amendment”) to the Credit Agreement, which established a new class of incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $ 50.0 million, proceeds of which may be used to fund capital expenditures related to our extract and ready-to-drink facility in Conway, Arkansas, or for general corporate purposes.

The interest rates under the Delayed Draw Term Loan Facility are the same as the interest rates with respect to the initial term loans under the existing Term Loan Facility, and the commitment fees applying to the unused portion of the Delayed Draw Term Loan Facility are the same as the commitment fees with respect to the Revolving Credit Facility.

Any delayed draw term loan funded under the Delayed Draw Term Loan Facility will mature on August 29, 2027.

As of the date of this Quarterly Report on Form 10-Q, no borrowings have been made under the Delayed Draw Term Loan Facility.

On June 30, 2023, we entered into Amendment No.

2 (the “Second Amendment”) to the Credit Agreement.

The Second Amendment established a covenant relief period (the “Covenant Relief Period”) commencing on June 30, 2023, and ending on the earlier to occur of (i) April 1, 2025 and (ii) the date following December 31, 2023, on which the Borrower delivers to the Administrative Agent a certificate of a responsible officer (a) electing to terminate the Covenant Relief Period, (b) demonstrating a total net leverage ratio less than 3.75 x and (c) attaching projections demonstrating compliance with the total net leverage ratio financial covenant (as in effect prior to giving effect to the Covenant Relief Period) until the then-existing latest maturity date.

During the Covenant Relief Period, (i) the total net leverage ratio financial covenant will be (a) 5.00 x for the test period ending June 30, 2023, (b) 5.25 x for the test period ending September 30, 2023, (c) 5.50 x for the test periods ending on or after December 31, 2023 to and including September 30, 2024, (d) 5.00 x for the test period ending December 31, 2024 and (e) 4.50 x for the test period ending March 31, 2025 and (ii) the applicable margin for any term SOFR rate loan will range from 2.50 % to 3.75 % and for any ABR loan will range from 1.50 % to 2.75 %, in each case depending on the total net leverage ratio.

After the Covenant Relief Period, the total net leverage ratio financial covenant and the applicable margin for term SOFR rate loans and ABR loans will revert to the pre-amendment terms of the Credit Agreement.

During and after the Covenant Relief Period, the minimum interest coverage ratio financial covenant will be 2.00 x.

As of June 30, 2023, we were in compliance with the Financial Covenants.

The Term Loan Facility requires quarterly principal payments during the first three years of approximately $ 2.2 million ( 1.25 % of the original principal balance).

Quarterly payments increase to approximately $ 3.3 million and $ 4.4 million ( 1.875 % and 2.5 % of the original principal balance) during the fourth and fifth years, respectively.

We incurred $ 6.0 million of financing fees in connection with the Credit Agreement.

We incurred a total of $ 6.6 million of financing fees in connection with the Credit Agreement and related amendments.

$ 3.3 million of the fees were allocated to the Term Loan Facility and are being amortized utilizing the frozen effective yield method based on the interest rate in place at the issuance of the Term Loan Facility.

$ 3.3 million of the fees were allocated to the Revolving Credit Facility, are reported within other long-term assets on the Condensed Consolidated Balance Sheets and are being amortized ratably over the term of the Revolving Credit Facility.

On February 14, 2023, the Company entered into an Incremental Assumption Agreement and Amendment No.

1 (the “Amendment”) to its Credit Agreement, which established a new class of incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $ 50.0 million, proceeds of which may be used to fund capital expenditures related to our extract and ready-to-drink facility in Conway, Arkansas, or for general corporate purposes.

Any delayed draw term loan funded under the Delayed Draw Term Loan Facility will mature on August 29, 2027.

As of the date of this Quarterly Report on Form 10-Q, no borrowings have been made under the Delayed Draw Term Loan Facility.

We had $ 2.6 million of standby letters of credit outstanding at March 31, 2023.

The Credit Agreement contains two financial covenants requiring maintenance of a total net leverage ratio not to exceed 4.50 to 1.00, with a stepdown to 4.00 to 1.00 on the 18-month anniversary of the closing date of Credit Agreement (with an option to increase to 4.50 to 1.00 following certain permitted acquisitions), and an interest coverage ratio of at least 1.50 to 1.00 (the “Financial Covenants”).

As of March 31, 2023, the Company was in compliance with the Financial Covenants.

International Debt and Lending Facilities

On March 21, 2023, the Company entered into a $ 70 million working capital trade finance facility with multiple financial institutions through its subsidiary, Falcon.

On March 21, 2023, we entered into a $ 70 million working capital trade finance facility with multiple financial institutions through our subsidiary, Falcon.

The facility replaced Falcon’s then existing working capital trade finance facility.

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Borrowings under the new facility will bear interest at the borrower’s option at a rate equal to (a) Term SOFR, as defined in the new facility, plus a margin of 4.00 % plus a liquidity premium set by the lender at the time of borrowing or (b) the Base Rate (determined by reference to the greatest of (i) the Prime Rate, as defined in the new facility, at such time, (ii) one-half of 1.00% in excess of the Federal Funds Effective Rate, as defined in the new facility, at such time, and (iii) Term SOFR for a one-month tenor in effect at such time plus 1.00 %).

At March 31, 2023, there was $ 35.0 million outstanding under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

At June 30, 2023, there was $ 32.8 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

Falcon’s facility contains certain restrictive financial covenants which require Falcon to maintain certain levels of working capital, debt, and net worth.

Falcon was in compliance with these financial covenants as of March 31, 2023.

Westrock Coffee International, LLC, through its subsidiary Rwanda Trading Company, maintains two mortgage-backed lending facilities with a local bank in Rwanda:

(a) a short-term trade finance facility with a balance of $ 7.8 million at March 31, 2023 and (b) a long-term note payable with a balance of $ 1.5 million at March 31, 2023.

Falcon was in compliance with these financial covenants as of June 30, 2023.

Westrock Coffee International, LLC, through its subsidiary Rwanda Trading Company, maintains two mortgage and inventory-backed lending facilities with a local bank in Rwanda:

(a) a short-term trade finance facility with a balance of $ 8.8 million at June 30, 2023 and (b) a long-term note payable with a balance of $ 1.4 million at June 30, 2023.

Additionally, Rwanda Trading Company maintains three short-term futures contract-backed lending facilities from international institutions with outstanding balances of $ 2.5 million, $ 1.2 million and $ 0.9 million at June 30, 2023.

Series A Preferred Shares

In connection with the Transaction, the Company issued 23,587,952 Westrock Series A Preferred Shares, which rank senior to the Common Shares with respect to dividend rights and/or distribution rights upon the liquidation, winding up or dissolution, as applicable, of Westrock.

or dissolution, as applicable, of Westrock.

Each holder of Westrock Series A Preferred Shares is entitled to vote, on an as-converted basis, as a single class with the holders of Common Shares and the holders of any other class or series of capital stock of Westrock then entitled to vote with the Common Shares on all matters submitted to a vote of the holders of Common Shares.

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However, at no time will the Westrock Series A Preferred Shares be reported at a value less than its initial carrying value.

For the three months ended March 31, 2023, the Company recorded $ 0.4 million of accretion with respect to the Westrock Series A Preferred Shares.

For the three and six months ended June 30, 2023, the Company recorded $ 0.1 million of amortization and $ 0.3 million of accretion, respectively, with respect to the Westrock Series A Preferred Shares.

We record all derivatives, whether designated in a hedging relationship or not, at fair value on the Condensed Consolidated Balance Sheets.

We use various types of derivative instruments including, but not limited to, forward contracts, futures contracts, and options contracts for certain commodities.

We use various types of derivative instruments including, but not limited to, forward

contracts, futures contracts, and options contracts for certain commodities.

Forward and futures contracts are agreements to buy or sell a quantity of a commodity at a predetermined future date, and at a predetermined rate or price.

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The changes in fair values of hedges that are determined to be ineffective are immediately reclassified from AOCI into earnings.

We did not discontinue any cash flow hedging relationships during the three months ended March 31, 2023 or 2022.

Within our Beverage Solutions segment, we have entered into coffee futures contracts to hedge our exposure to price fluctuations on green coffee associated with certain price-to-be-fixed purchase contracts, which generally range from

three to twelve months in length.

We did not discontinue any cash flow hedging relationships during the six months ended June 30, 2023 or 2022.

These derivative instruments have been designated as cash flow hedges.

The objective of this hedging program is to reduce the variability of cash flows associated with future purchases of green coffee.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 5.6 million pounds and 29.2 million pounds as of March 31, 2023 and December 31, 2022, respectively.

During the three months ended March 31, 2023 and 2022, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 8.4 million pounds and 41.3 million pounds, respectively.

Approximately $ 0.7 million of net realized losses and $ 4.1 million of net realized gains, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the estimated amount of net losses reported in AOCI that is expected to be reclassified to the Condensed Consolidated Statements of Operations within the next twelve months is $ 3.3 million.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 10.8 million pounds and 29.2 million pounds as of June 30, 2023 and December 31, 2022, respectively.

During the three and six months ended June 30, 2023, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 15.2 million pounds and 23.6 million pounds, respectively.

During the three and six months ended June 30, 2022, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 6.9 million pounds and 48.2 million pounds, respectively.

Approximately $ 1.4 million and $ 2.1 million of net realized losses, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023, respectively.

Approximately $ 2.7 million and $ 6.8 million of net realized gains, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, the estimated amount of net losses reported in AOCI that is expected to be reclassified to the Condensed Consolidated Statements of Operations within the next twelve months is $ 3.1 million.

Within our Sustainable Sourcing & Traceability segment, the Company’s forward sales and forward purchase contracts are for physical delivery of green coffee in a future period.

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Balance Sheet Location

March 31, 2023

June 30, 2023

December 31, 2022

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1 - The fair value of coffee futures excludes amounts related to margin accounts.

The following table presents the pre-tax net gains and losses for our derivative instruments as of March 31, 2023 and March 31, 2022:

Three Months Ended March 31,

The following table presents the pre-tax net gains and losses for our derivative instruments for the three and six months ended June 30, 2023 and 2022, respectively:

Three Months Ended June 30,

Six Months Ended June 30,

Statement of Operations Location

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Observable inputs include quoted prices for similar instruments in active and non-active markets.

Level 2 includes those financial instruments that are valued with industry standard valuation models that incorporate inputs that are observable in the marketplace throughout the full term of the instrument or can otherwise be derived from or supported by observable market data in the marketplace.

Level 2 includes those financial instruments that are valued with industry standard

valuation models that incorporate inputs that are observable in the marketplace throughout the full term of the instrument or can otherwise be derived from or supported by observable market data in the marketplace.

Level 2 inputs may also include insignificant adjustments to market observable inputs.

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These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The following table summarizes the fair value of financial instruments at March 31, 2023:

March 31, 2023

The following table summarizes the fair value of financial instruments at June 30, 2023:

June 30, 2023

Green coffee associated with forward contracts

8 unchanged sentences

Change in fair value

Fair value as of March 31, 2023

Fair value as of June 30, 2023

The following table summarizes the fair value of financial instruments at December 31, 2022:

8 unchanged sentences

The estimated fair value for green coffee inventories associated with forward contracts and forward sales and purchase contracts are based on exchange-quoted prices, adjusted for differences in origin, quantity, quality, and future delivery period, as the exchange quoted prices represent standardized terms for the commodity.

These adjustments are generally determined using broker or dealer quotes or based upon observable market transactions.

These adjustments are generally determined using broker or

dealer quotes or based upon observable market transactions.

As a result, green coffee associated with forward contracts and forward sales and purchase contracts are classified within Level 2 of the fair value hierarchy.

Westrock Public Warrants are valued based on their quoted market price of $ 2.43 and $ 2.27 per warrant as of March 31, 2023 and December 31, 2022, respectively.

Westrock Private Warrants price of $ 2.83 and $ 3.83 per warrant as of March 31, 2023 and December 31, 2022, respectively, are valued using a binomial lattice valuation model, which is considered to be a Level 3 fair value measurement.

Westrock Public Warrants are valued based on their quoted market price of $ 3.00 and $ 2.27 per warrant as of June 30, 2023 and December 31, 2022, respectively.

Westrock Private Warrants price of $ 3.52 and $ 3.83 per warrant as of June 30, 2023 and December 31, 2022, respectively, are valued using a binomial lattice valuation model, which is considered to be a Level 3 fair value measurement.

The primary unobservable inputs were as follows:

March 31, 2023

June 30, 2023

December 31, 2022

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The most significant of these primary unobservable inputs utilized in determining the fair value of the Westrock Private Warrants is the expected volatility of the stock price, which is determined by use of an option pricing model.

Financial instruments consist primarily of cash, accounts receivable, accounts payable, and long-term debt.

The carrying amount of cash, accounts receivable and accounts payable was estimated by management to approximate fair value due to the relatively short period of time to maturity for those instruments.

On August 29, 2022, the Company entered into the Credit Agreement, which includes the Term Loan Facility and the Revolving Credit Facility.

The Term Loan Facility and the Revolving Credit Facility are carried on the Condensed Consolidated Balance Sheets at amortized cost and are estimated by management to approximate fair value as of March 31, 2023 as the interest rate on these facilities is adjusted for changes in the market rates.

Financial instruments consist primarily of cash, accounts receivable, accounts payable, a supply chain finance program and long-term debt.

The carrying amount of cash, accounts receivable, accounts payable and the supply chain finance program was estimated by management to approximate fair value due to the relatively short period of time to maturity for those instruments.

On June 30, 2023, the Company amended its Credit Agreement, which includes the Term Loan Facility and the Revolving Credit Facility.

The Term Loan Facility and the Revolving Credit Facility are carried on the Condensed Consolidated Balance Sheets at amortized cost and are estimated by management to approximate fair value as of June 30, 2023 as the interest rate on these facilities is adjusted for changes in the market rates.

The fair value of the Term Loan Facility and the Revolving Credit Facility was determined based on Level 2 inputs under the fair value hierarchy.

Non-financial assets and liabilities, including property, plant and equipment, goodwill and intangible assets are measured at fair value on a non-recurring basis.

No events occurred during the three months ended March 31, 2023 and 2022, requiring these non-financial assets and liabilities to be subsequently recognized at fair value.

No events occurred during the three and six months ended June 30, 2023 or 2022, requiring these non-financial assets and liabilities to be subsequently recognized at fair value.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), net of tax by component for the three months ended March 31, 2023 and March 31, 2022 is as follows:

Three Months Ended March 31,

Changes in accumulated other comprehensive income (loss), net of tax by component for the three and six months ended June 30, 2023 and June 30, 2022 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Cash flow hedge changes in fair value gain (loss):

3 unchanged sentences

Net other comprehensive income

Other comprehensive income attributable to noncontrolling interests

Other comprehensive income attributable to non-controlling interests

Balance at end of period

4 unchanged sentences

Net other comprehensive income

Other comprehensive income attributable to noncontrolling interests

Other comprehensive income attributable to non-controlling interests

Balance at end of period

1 unchanged sentence

Equity-Based Compensation

During the three months ended March 31, 2023, the Company granted 1.1 million restricted stock units (“RSUs”) under the Westrock Coffee Company 2022 Equity Incentive Plan (the “2022 Equity Plan”).

The RSUs had a grant date fair value of $ 13.0 million, which was calculated using the closing price of the Company’s Common Shares on the applicable date of grant.

During the three and six months ended June 30, 2023, the Company granted 0.1 million and 1.2 million restricted stock units (“RSUs”), respectively, under the Westrock Coffee Company 2022 Equity Incentive Plan (the “2022 Equity Plan”).

The RSUs had a grant date fair value of $ 0.9 million and $ 13.9 million, respectively, which was calculated using the closing price of the Company’s Common Shares on the applicable date of grant.

The RSUs are amortized on a straight-line basis to expense over the vesting period, which is generally three years .

As of March 31, 2023, there were 2.4 million shares available for future issuance under the 2022 Equity Plan.

The following table sets forth the RSU activity under the 2022 Equity Plan for the three months ended March 31, 2023.

As of June 30, 2023, there were 2.3 million shares available for future issuance under the 2022 Equity Plan.

The following table sets forth the RSU activity under the 2022 Equity Plan for the six months ended June 30, 2023.

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Outstanding at June 30, 2023

Earnings per Share

1 unchanged sentence

Our Series A Preferred Shares and RSUs issued under our 2022 Equity Incentive Plan are considered participating securities as they receive non-forfeitable rights to dividends at the same rate as Common Shares.

As participating

securities, we include these instruments in the computation of earnings per share under the two-class method described in ASC 260, Earnings per Share.

As participating securities, we include these instruments in the computation of earnings per share under the two-class method described in ASC 260, Earnings per Share.

Prior to the Conversion, the dilutive effect of CEP Units was calculated by using the “if-converted” method.

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The following potentially dilutive securities were excluded from the computation of diluted shares for the periods indicated because their inclusion would have an anti-dilutive effect due to our reported loss.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Restricted stock

1 unchanged sentence

The following table sets forth the computation of basic and diluted earnings per share under the two-class method for the periods indicated.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Thousands, except per share data)

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Selected financial data related to our segments is presented below for the periods indicated:

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Adjusted EBITDA

Interest expense

Income tax expense

Depreciation and amortization

Acquisition, restructuring and integration expense

Change in fair value of warrant liabilities

Equity-based compensation

Conway extract and ready-to-drink facility start-up costs

Mark-to-market adjustments

Three Months Ended June 30, 2022

Adjusted EBITDA

Interest expense

Income tax benefit

1 unchanged sentence

Acquisition, restructuring and integration expense

Management and consulting fees (S&D Coffee, Inc.

Equity-based compensation

Mark-to-market adjustments

Loss on disposal of property, plant and equipment

Six Months Ended June 30, 2023

Adjusted EBITDA

Interest expense

Income tax expense

Depreciation and amortization

Acquisition, restructuring and integration expense

Change in fair value of warrant liabilities

4 unchanged sentences

Loss on disposal of property, plant and equipment

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Adjusted EBITDA

10 unchanged sentences

Management believes that the resolution of these matters will not have a material adverse effect on our financial position, results of operations, or cash flow.

We have future purchase obligations of $ 278.4 million as of March 31, 2023 that consist of commitments for the purchase of inventory over the next 12 months.

We have future purchase obligations of $ 193.3 million as of June 30, 2023 that consist of commitments for the purchase of inventory over the next 12 months.

These obligations represent the minimum contractual obligations expected under the normal course of business.

In addition, at March 31, 2023, we had an obligation to repurchase $ 10.2 million of inventory associated with repurchase agreements in which the Company’s Sustainable Sourcing & Traceability segment has sold inventory to a third party and from whom the Company’s Beverage Solutions segment has an obligation to repurchase.

The liability for these obligations is recorded within accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheet.

In addition, at June 30, 2023, we had an obligation to repurchase $ 9.4 million of inventory associated with repurchase agreements in which the Company’s Sustainable Sourcing & Traceability segment has sold inventory to a third party and from whom the Company’s Beverage Solutions segment has an obligation to repurchase.

The liability for these

obligations is recorded within accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheet.

Related Party Transactions

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The consolidated financial statements reflect the following transactions with related parties:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest expense, net:

Brown Brothers Harriman

Wooster Capital

Wooster Capital, LLC

Jo Ellen Ford

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The associated expense is recorded within selling, general and administrative expense in our Condensed Consolidated Statements of Operations.

The Company recognized $ 0.6 million and $ 0.8 million of such expenses during the three months ended March 31, 2023 and 2022, respectively.

In addition, the Company reimburses Westrock Group for the usage of a corporate aircraft, and its portion of shared office space.

For the three months ended March 31, 2023 and 2022, the Company recognized expenses of $ 0.3 million and $ 0.3 million, respectively, for such items, which are recorded in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

At March 31, 2023 and December 31, 2022, we had no amounts payable to Westrock Group.

The Company recognized no expenses and $ 0.6 million of such expenses during the three and six months ended June 30, 2023, respectively, and $ 0.8 million and $ 1.7 million of such expenses during the three and six months ended June 30, 2022, respectively.

In addition, the Company reimburses Westrock Group for the usage of a corporate aircraft, and its portion of shared administrative expenses.

For the three and six months ended June 30, 2023, the Company recognized expenses of $ 0.5 million and $ 0.8 million, respectively, for such items, which are recorded in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

For the three and six months ended June 30, 2022, the Company recognized expenses of $ 0.2 million and $ 0.5 million, respectively, for such items.

At June 30, 2023 and December 31, 2022, we had $ 0.5 million and no amounts payable to Westrock Group.

Subsequent Events

On April 3, 2023, the Company purchased the 15 % of Falcon that it did not previously own, resulting in Falcon becoming a wholly-owned subsidiary of the Company.

Aggregate consideration paid for the interest totaled $ 3.2 million and included $ 2.0 million in cash and 100,000 Common Shares.

Due to the Company’s controlling financial interest in Falcon prior to the purchase, the transaction will be accounted for as an equity transaction.

On June 29, 2023, the Company entered into a subscription agreement (the “Subscription Agreement”) with HF Direct Investments Pool, LLC (the “HF Investor”), an affiliate of HF Capital, LLC, pursuant to which the Company agreed to sell and issue to the HF Investor and the HF Investor agreed to purchase from the Company 5,000,000 shares (the “HF Subscription Amount”) of Common Shares of the Company at a purchase price per share of $ 10.00 for aggregate gross proceeds to the Company of $ 50.0 million (such transaction, the “HF Investment”).

On August 3, 2023, the HF Investment closed after the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Additionally, on June 29, 2023 and July 18, 2023, the Company entered into definitive agreements with an affiliate of the Herbert Hunt family (the “Hunt Investor”) and the Arkansas Teacher Retirement System (the “ARTRS” and together with the Hunt Investor, the “Investors”), respectively, pursuant to which the Company agreed to sell and issue to the Investors and the Investors agreed to purchase from the Company a total of 5,000,000 Common Shares of the Company at a purchase price per share of $ 10.00 for aggregate gross proceeds to the Company of $ 50.0 million (such transactions the “PIPE Investments”).

On August 3, 2023, the Company closed on the PIPE Investments.

On July 24, 2023, affiliates of Brown Brothers Harriman & Co.

(the “BBH Investors”) exercised preemptive rights (the “BBH Preemptive Rights”) to purchase approximately 1.9 million Common Shares at a purchase price per share of $ 10.00 , under the terms of that certain Investor Rights Agreement, dated April 4, 2022, by and among the Company, the BBH Investors, and the other parties thereto.

On August 7, 2023, the Company sold and issued the Common Shares to the BBH Investors, receiving aggregate gross proceeds of approximately $ 18.8 million.

The issuance of Common Shares pursuant to the HF Investment, PIPE Investments and BBH Preemptive Rights, is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of the exemption provided by Rule 506(b) of Regulation D promulgated under the Securities Act.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements