What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 295 added, 218 removed, 626 unchanged (45% of the section changed)

3 unchanged sentences

(Thousands, except par value)

June 30, 2023

September 30, 2023

December 31, 2022

9 unchanged sentences

Other long-term assets

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

LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY

Current maturities of long-term debt

11 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 June 30, 2023 and December 31, 2022, respectively, $ 11.50 liquidation value

Shareholders' (Deficit) Equity

Series A Convertible Preferred Shares, $ 0.01 par value, 24,000 shares authorized, 23,512 shares and 23,588 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively, $ 11.50 liquidation value

Shareholders' 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, 75,728 shares and 75,020 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 300,000 shares authorized, 88,039 shares and 75,020 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in-capital

1 unchanged sentence

Accumulated other comprehensive loss

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

Total shareholders' equity attributable to Westrock Coffee Company

Non-controlling interest

Total shareholders' (deficit) equity

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

Total shareholders' equity

Total Liabilities, Convertible Preferred Shares and Shareholders' Equity

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Thousands, except per share data)

4 unchanged sentences

Total operating expenses

(Loss) income from operations

Income (loss) from operations

Other (income) expense

Interest expense

Interest expense, net

Change in fair value of warrant liabilities

Loss before income taxes

Income (loss) before income taxes and equity in earnings from unconsolidated entities

Income tax expense (benefit)

Net (loss) income attributable to non-controlling interest

Net loss attributable to shareholders

Equity in (earnings) loss from unconsolidated entities

Net income (loss)

Net income (loss) attributable to non-controlling interest

Net income (loss) attributable to shareholders

Participating securities' share in earnings

Accretion of Series A Convertible Preferred Shares

Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net

Common equivalent preferred dividends

Accumulating preferred dividends

Net loss attributable to common shareholders

Loss per common share (1) :

Net income (loss) attributable to common shareholders

Earnings (loss) per common share:

Weighted-average number of shares outstanding:

(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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Total other comprehensive income (loss)

Comprehensive loss

Comprehensive income (loss)

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive loss attributable to shareholders

Accretion of convertible preferred shares

Comprehensive income (loss) attributable to shareholders

Participating securities' share in earnings

Accretion of Series A Convertible Preferred Shares

Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net

Common equivalent preferred dividends

Accumulating preferred dividends

Comprehensive loss attributable to common shareholders

Comprehensive income (loss) attributable to common shareholders

See accompanying notes to condensed consolidated financial statements.

6 unchanged sentences

Equity (Deficit)

Balance at March 31, 2022

Balance at June 30, 2022

Net income (loss)

Issuance of common shares upon closing of de-SPAC merger transaction, net of issuance costs, net of $ 2,469 of taxes (see Note 4)

Issuance of common shares related to PIPE financing

Issuance of common shares related to conversion of debt to equity (see Note 12)

Issuance of common shares related to conversion of Common Equivalent Preferred Units (see Note 4)

Common Equivalent Preferred Unit dividends ( 0.02 per unit)

Loss on extinguishment of Common Equivalent Preferred Units

Other comprehensive income (loss)

Equity-based compensation

Accumulating preferred dividends

Balance at September 30, 2022

Balance at June 30, 2023 (2)

Balance at March 31, 2023

Net income (loss)

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

Issuance of common shares, net of issuance costs

Issuance of common shares related to stock options exercised

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

Accretion of convertible preferred stock

1 unchanged sentence

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.

Net share settlement of equity awards

Balance at September 30, 2023

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

(2) Adjusted to correct for a three thousand dollar classification difference between the par value of common stock and additional paid in capital.

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

Net income (loss)

Issuance of common shares upon closing of de-SPAC merger transaction, net of issuance costs, net of $ 2,469 of taxes (see Note 4)

Issuance of common shares related to PIPE financing

Issuance of common shares related to conversion of debt to equity (see Note 12)

Issuance of common shares related to conversion of Common Equivalent Preferred Units (see Note 4)

Common Equivalent Preferred Unit dividends ( 0.02 per unit)

Loss on extinguishment of Common Equivalent Preferred Units

Other comprehensive income (loss)

2 unchanged sentences

Accumulating preferred dividends

Balance at June 30, 2022

Balance at September 30, 2022

Balance at December 31, 2022

5 unchanged sentences

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

Issuance of common shares, net of issuance costs

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

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.

Balance at September 30, 2023

(1) Retroactively adjusted December 31, 2021 and nine months ended September 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

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

4 unchanged sentences

Provision for credit losses

Amortization of deferred financing fees included in interest expense

Amortization of deferred financing fees included in interest expense, net

Write-off of unamortized deferred financing fees

Loss on debt extinguishment

Loss on disposal of property, plant and equipment

14 unchanged sentences

Acquisition of business, net of cash acquired

Acquisition of equity method investments and non-marketable securities

Proceeds from sale of property, plant and equipment

4 unchanged sentences

Proceeds from supply chain financing program

Payments on supply chain financing program

Proceeds from related party debt

Debt extinguishment costs

Payment of debt issuance costs

Net repayments from repurchase agreements

Proceeds from de-SPAC merger and PIPE financing

Proceeds from common equity issuance

Payment of common equity issuance costs

Payment of preferred equity issuance costs

Net proceeds from (repayments of) repurchase agreements

Proceeds from exercise of stock options

Proceeds from exercise of Public Warrants

Common equivalent preferred dividends

Payment for purchase of non-controlling interest

2 unchanged sentences

Effect of exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents and restricted cash

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Issuance of common shares related to Public Warrant exercise

Issuance of common shares related to restricted stock units vesting

Issuance of common shares related to acquisitions

3 unchanged sentences

Accumulating preferred dividends

Exchange of Redeemable Common Equivalent Preferred Units for Series A Convertible Preferred Shares

Exchange of Redeemable Common Equivalent Preferred Units for common shares

Related party debt exchanged for common shares

Loss on extinguishment of Common Equivalent Preferred Units

See accompanying notes to condensed consolidated financial statements.

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

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

Cash and cash equivalents

15 unchanged sentences

(“Merger Sub I”), and Origin Merger Sub II, LLC (“Merger Sub II”) (as amended, modified or supplemented, the “Transaction Agreement”), the Company completed its de-SPAC merger transaction with Riverview (the “Transaction”).

In connection with the closing of the Transaction (the “Closing”), the Company converted from a Delaware limited liability company to a Delaware corporation (the “Conversion”) and changed its corporate name from “Westrock Coffee Holdings, LLC” (the “Converting Company”) to “Westrock Coffee Company.” Pursuant to the Transaction Agreement, Merger Sub I merged with and into Riverview, with Riverview surviving the merger as a direct wholly owned subsidiary of Westrock (such merger, the “SPAC Merger”) and immediately following the consummation of the SPAC Merger, Riverview merged with and into Merger Sub II, with Merger Sub II surviving the merger as a direct wholly owned subsidiary of Westrock (the “LLC Merger”, and together with the SPAC Merger, the “Mergers”).

In connection with the closing of the Transaction (the “Closing”), the Company converted from a Delaware limited liability company to a Delaware corporation (the “Conversion”) and changed its corporate name from “Westrock Coffee Holdings, LLC” (the “Converting Company”) to “Westrock Coffee Company.” Pursuant to the Transaction Agreement, Merger Sub I merged with and into Riverview, with Riverview surviving the merger as a direct wholly owned subsidiary of the Company (such merger, the “SPAC Merger”) and immediately following the consummation of the SPAC Merger, Riverview merged with and into Merger Sub II, with Merger Sub II surviving the merger as a direct wholly owned subsidiary of the Company (the “LLC Merger”, and together with the SPAC Merger, the “Mergers”).

See Note 4 for additional disclosures related to the 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.

Basis of Presentation and Consolidation

7 unchanged sentences

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.

Aggregate consideration paid for the interest totaled $ 3.2 million and included $ 2.0 million in cash and 100,000 shares of common stock, par value $ 0.01 per share, of the Company (“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.

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.

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

5 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 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.

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 Common Shares, (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 “Westrock Series A Preferred Shares”), automatically converted into 0.1086138208640 Common Shares if such Common Equivalent Preferred Unit was designated a Westrock 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 Westrock Series A Preferred Shares, converted into 0.1086138208740 Westrock Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.0919280171940 Westrock Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit.

Units have been retroactively adjusted on the basis of Common Shares reflecting the common unit conversion ratio, as described above.

Reclassifications

10 unchanged sentences

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.

The Company believes that proceeds from the equity issuance in August 2023, 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.

However, during the three and nine months ended September 30, 2023, the Company recognized losses from operations of $ 5.4 million and $ 14.1 million, respectively, and negative cash flows from operations for the nine-month period ended September 30, 2023 of $ 75.1 million primarily resulting from lower than projected sales of roast and ground coffee.

As a result of the lower than expected sales volumes, substantially driven by current overall market and industry conditions, the Company has reduced its full year projections.

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.

As management’s ability to amend its financial covenants cannot be assured, management has committed to raise additional capital, delay growth capital expenditures and/or reduce operating expenses, as necessary, in order to have adequate liquidity and to remain in compliance with its debt covenants.

As management’s ability to amend its financial covenants cannot be assured, management has committed to raise additional capital, delay growth capital expenditures and/or reduce operating expenses, including headcount, salary and/or bonus reductions, all of which are in the Company’s control, as necessary, in order to have adequate liquidity and to remain in compliance with its debt covenants.

The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

4 unchanged sentences

This evaluation considers the customer demographic, such as large commercial customers as compared to small businesses or individual customers.

We consider our accounts receivable delinquent or past due based on payment terms established with each customer.

We consider our accounts

receivable delinquent or past due based on payment terms established with each customer.

Accounts receivable are written off when the account is determined to be uncollectible.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 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

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.

For the three and nine months ended September 30, 2023, we recognized $ 0.5 million of net unrealized losses and $ 0.6 million of net unrealized gains, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

For the three and nine months ended September 30, 2022, we recognized $ 0.6 million and $ 8.1 million of net unrealized losses, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

Capitalized Interest

We capitalize a portion of interest costs incurred related to assets that require a period of time to get them ready for their intended use.

The amount of interest capitalized is based on eligible expenditures incurred during the period involved in bringing the assets to their intended use and the Company’s weighted-average interest rate during the period.

For the three and nine months ended September 30, 2023, we capitalized $ 1.0 million of interest costs.

Supply Chain Finance Program

The Company is party to a supply chain 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, within supply chain finance program, on 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 our 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 June 30, 2023, there were $ 29.0 million obligations outstanding under the Program.

As of September 30, 2023, there were $ 67.5 million obligations outstanding under the Program.

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

June 30, 2023

September 30, 2023

Confirmed obligations outstanding at the beginning of the year

8 unchanged sentences

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

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.

For the three and nine months ended September 30, 2023, the Company recognized $ 25.1 million and $ 18.8 million of gains, 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.

For the three and nine months ended September 30, 2022, the Company recognized $ 5.2 million of losses related to the change in fair value of warrant liabilities.

Equity Method Investments

The equity method of accounting is used for investments in entities, partnerships and similar interests in which we have significant influence but do not control.

Under the equity method, we adjust our investment in unconsolidated entities for additional contributions made, distributions received and income or losses from our pro-rata share of these unconsolidated affiliates’ net income or loss.

At September 30, 2023, we had a $ 0.5 million investment in one unconsolidated entity, which is recorded in other long-term assets on the Condensed Consolidated Balance Sheets.

Equity Investments

The Company holds strategic investments in other companies.

These investments are accounted for under the measurement alternative described in Investments - Equity Securities (“ASC 321”) for equity investments that do not have readily determinable fair values.

These investments are measured at cost, less impairment, if any.

The Company does not exercise significant influence over these companies.

These investments are recorded in other long-term assets on the Condensed Consolidated Balance Sheets.

At September 30, 2023, the Company had an equity investment with a carrying value of approximately $ 1.0 million, for which there is no readily determinable fair value.

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 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.

The effective income tax rates for the nine months ended September 30, 2023 and 2022 were 18.7 % and 13.0 %, 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 nontaxable income related to a change in the fair value of warrants.

The effective tax rate for the nine months ended September 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 nontaxable income related to a change in the fair value of warrants and executive compensation.

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

Recently adopted accounting pronouncements

Update ASU 2022-04 - Liabilities—Supplier Finance Programs (Subtopic 405-50):

ASU 2022-04 - Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations

5 unchanged sentences

The amendments to ASU 2022-04 do not affect the recognition, measurement or financial statement presentation of obligations covered by supplier finance programs.

Update ASU 2021-08 – Business Combinations (Topic 805):

ASU 2021-08 – Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU 2021-08, which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, instead of at fair value on the acquisition date as previously required by ASC 805.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), instead of at fair value on the acquisition date as previously required by ASC 805, Business Combinations (“ASC 805”).

The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for acquired revenue contracts and revenue contracts not acquired in a business combination.

5 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.

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.

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, 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.

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.

1 unchanged sentence

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.

Pursuant to the Transaction Agreement, (a) each issued and outstanding Common Unit converted into 0.1049203474320 Common Shares, (b) each issued and outstanding Common Equivalent Preferred Unit for which the holder had not elected to convert such unit into shares of Series A convertible preferred stock of Westrock (the “Westrock Series A Preferred Shares”) (see Note 13), automatically converted into 0.1086138208640 Common Shares if such Westrock 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 Westrock Preferred Unit, for which the holder thereof had made an election to convert such unit into Westrock Series A Preferred Shares, converted into 0.1086138208740 Westrock Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.0919280171940 Westrock Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit.

Pursuant to the Transaction Agreement, (a) each issued and outstanding Common Unit converted into 0.1049203474320 Common Shares, (b) each issued and outstanding Common Equivalent Preferred Unit for which the holder had not elected to convert such unit into shares of Westrock Series A Preferred Shares (see Note 13), automatically converted into 0.1086138208640 Common Shares if such Westrock 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 Westrock Preferred Unit, for which the holder thereof had made an election to convert such unit into Westrock Series A Preferred Shares, converted into 0.1086138208740 Westrock Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series A Common Equivalent Preferred Unit or 0.0919280171940 Westrock Series A Preferred Shares if such Common Equivalent Preferred Unit was designated a Series B Common Equivalent Preferred Unit.

As a result, we issued 34,855,535 Common Shares to holders of Common Units, 2,220,305 Common Shares to holders of Common Equivalent Preferred Units who elected to convert their Common Equivalent Preferred Units into Common Shares, and 23,587,952 Westrock Series A Preferred Shares to holders who elected to convert their Common Equivalent Preferred Units into Westrock Series A Preferred Shares.

In addition, at Closing, (i) each outstanding share of class B common stock of Riverview (the “Riverview Class B Shares” together with the Riverview Class A Shares, the “Riverview Shares”) (other than the Riverview Class B Shares held as treasury stock, which were automatically cancelled and extinguished at Closing), automatically converted into one Riverview Class A Share, (ii) each outstanding Riverview Class A Share (including the Riverview Class A Shares resulting from the conversion of Riverview Class B Shares at Closing but excluding any Riverview Class A Shares held as treasury stock, which were automatically cancelled and extinguished at Closing) were exchanged for one Common Share, (iii) each outstanding warrant to purchase Riverview Class A Shares (the “Riverview Warrants”) was, by its terms, automatically converted into a comparable warrant to purchase Common Shares (the “Westrock Warrants”) on the terms and subject to the conditions set forth in the warrant agreement for the Riverview Warrants and the amended and restated warrant agreement for the Westrock Warrants, (iv) each Riverview Share held immediately prior to Closing by Riverview as treasury stock was automatically canceled and extinguished and (v) each share of capital stock of Merger Sub I issued and outstanding immediately prior to Closing was automatically canceled and extinguished and converted into one share of common stock, par value $ 0.01 , of the surviving corporation in the SPAC Merger.

In connection with obtaining the approval of the Mergers by Riverview’s stockholders, Riverview provided an opportunity for its stockholders to redeem all or a portion of their outstanding Riverview Class A Shares.

The Transaction is a capital transaction in substance and not a business combination under ASC 805, Business Combinations (“ASC 805”).

In connection with obtaining the approval of the Mergers by Riverview’s shareholders, Riverview provided an opportunity for its shareholders to redeem all or a portion of their outstanding Riverview Class A Shares.

The Transaction is a capital transaction in substance and not a business combination under ASC 805.

As a result, Westrock is treated as the accounting acquirer and Riverview is treated as the acquired company for financial reporting purposes per ASC 805.

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The Westrock Warrants entitle the holder to purchase one share of Common Share at an exercise price of $ 11.50 per share.

The Westrock Warrants may only be exercised for a whole number of shares, and will expire on August 26, 2027 (i.e., five years following the Closing), or earlier upon redemption or liquidations.

The Westrock Warrants may only be exercised for a whole number of shares, and will expire on August 26, 2027 (i.e., five years following the Closing), or earlier upon redemption or liquidation.

Westrock may redeem the outstanding Westrock Public Warrants (i) in whole and not in part;

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During any period when Westrock fails to maintain an effective registration statement registering the Common Shares issuable upon the exercise of the Westrock Warrants, Westrock is required to permit holders of Westrock Warrants to exercise their Westrock Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended, or another exemption.

If and when the Public Warrants become redeemable by Westrock, Westrock may exercise its redemption right even if Westrock is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

The Westrock Private Warrants, which became transferable, assignable and salable on September 26, 2022 (i.e., 30 days after the Closing), are currently held by the Riverview Sponsor, and are generally identical to the Westrock Public Warrants, except they cannot be redeemable by Westrock so long as they are held by the Riverview Sponsor or its permitted transferees.

The Riverview Sponsor, or its permitted transferees, have the option to exercise the Westrock Private Warrants on a cashless basis.

If the Westrock Private Warrants are held by holders other than the Riverview Sponsor or its permitted transferees, the Westrock Private Warrants will become redeemable by Westrock and exercisable by the holders on the same basis as the Westrock Public Warrants.

If and when the Westrock Public Warrants become redeemable by Westrock, Westrock may exercise its redemption right even if Westrock is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

The Westrock Private Warrants, which were initially held by Riverview Sponsor Partners, LLC (the “Riverview Sponsor”), are generally identical to the Westrock Public Warrants, except they cannot be redeemable by Westrock so long as they are held by the Riverview Sponsor or its permitted transferees.

Furthermore, the Riverview Sponsor, or its permitted transferees, have the option to exercise the Westrock Private Warrants on a cashless basis.

During the quarter ended September 30, 2023, the Riverview Sponsor transferred ownership of its Westrock Private Warrants.

At September 30, 2023, 2,026,046 warrants are held by permitted transferees and retain the rights of the Westrock Private Warrants described above, while 5,373,954 warrants are now redeemable by Westrock and exercisable by the holders on the same basis as the Westrock Public Warrants.

Revenue from Contracts with Customers (ASC 606)

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The transaction price of a contract, net of discounts and expected returns, is allocated to each distinct performance obligation based on the relative standalone selling price of the obligation and is recognized as revenue when the performance obligation is satisfied.

The standalone selling price is the estimated price we would charge for the good or service in a separate transaction with similar customers in similar circumstances.

The standalone selling price is the estimated price we would charge for the good or

service in a separate transaction with similar customers in similar circumstances.

Identifying distinct performance obligations and determining the standalone selling price for each performance obligation within a contract requires management judgment.

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

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.

At September 30, 2023, the Company has $ 6.0 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.

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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 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.

For the three and nine months ended September 30, 2023, we recorded $ 0.7 million of net unrealized losses and $ 0.4 million of net unrealized gains, respectively, within costs of sales.

For the three and nine months ended September 30, 2022, we recorded a nominal amount and $ 7.3 million of net unrealized gains, respectively, within costs of sales.

For the three and nine months ended September 30, 2023, the Company recognized $ 42.4 million and $ 101.6 million in revenues under ASC 815, respectively, and for the three and nine months ended September 30, 2022, the Company recognized $ 56.6 million and $ 147.0 million in revenues under ASC 815, respectively, which are reported within the Company’s Sustainable Sourcing & Traceability segment.

Contract Estimates

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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 $ 1.4 million and $ 1.3 million at June 30, 2023 and December 31, 2022, respectively.

Accrued sales incentives were $ 1.3 million and $ 1.3 million at September 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.

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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 June 30, 2023 or December 31, 2022.

The Company does not have any material contract liabilities as of September 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.

At September 30, 2023 and December 31, 2022, accounts receivable, net included $ 102.9 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 June 30, 2023 and December 31, 2022, no costs were capitalized as all arrangements were less than a year.

As of September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Flavors, extracts & ingredients

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

United States

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

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 Company 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.

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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 June 30, 2023 and December 31, 2022:

June 30, 2023

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 September 30, 2023 and December 31, 2022:

September 30, 2023

December 31, 2022

3 unchanged sentences

Green coffee inventories represent green coffee held for resale.

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

At September 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 June 30, 2023 and December 31, 2022:

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

Depreciable Lives

June 30, 2023

September 30, 2023

December 31, 2022

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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.

Depreciation expense for the three and nine months ended September 30, 2023 was $ 4.4 million and $ 12.4 million, respectively, and depreciation expense for the three and nine months ended September 30, 2022 was $ 4.1 million and $ 12.7 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 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:

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

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

Balance at December 31, 2022

2 unchanged sentences

Measurement period adjustments

Balance at June 30, 2023

Balance at September 30, 2023

Accumulated impairment loss

Intangible Assets, Net

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

June 30, 2023

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

September 30, 2023

Customer relationships

5 unchanged sentences

Intangible assets, net

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 .

Amortization expense of intangible assets was $ 2.0 million and $ 6.0 million for the three and nine months ended September 30, 2023, respectively, and amortization expense of intangible assets was $ 1.7 million and $ 5.0 million for the three and nine months ended September 30, 2022, respectively.

As of September 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.

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The following table summarizes the amount of right-of-use lease assets and lease liabilities included in each respective line item on the Company’s Condensed Consolidated Balance Sheets:

September 30,

Balance Sheet Location

June 30, 2023

December 31, 2022

Right-of-use operating lease assets

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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 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,

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

Three Months Ended September 30,

Nine Months Ended September 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 June 30, 2023 and June 30, 2022:

June 30, 2023

June 30, 2022

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

September 30, 2023

September 30, 2022

Weighted-average discount rate

Weighted-average remaining lease term

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,

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

Nine Months Ended September 30,

Operating cash flows from operating leases

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.

During the nine months ended September 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 June 30, 2023.

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

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

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

Remainder of 2023

2 unchanged sentences

Present value of minimum lease payments

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

June 30, 2023

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

September 30, 2023

December 31, 2022

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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 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.

At September 30, 2023, we had $ 45.0 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 9.0 %, and the interest rate applicable to our Term Loan Facility was 9.2 %, 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.

1 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.

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.

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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.

As of September 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).

6 unchanged sentences

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

The new facility is uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

The new facility will mature one year from inception.

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 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.

The facility is uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

The facility will mature one year from inception.

Borrowings under the facility will bear interest at the borrower’s option at a rate equal to (a) Term SOFR, as defined in the 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 facility, at such time, (ii) one-half of 1.00% in excess of the Federal Funds Effective Rate, as defined in the facility, at such time, and (iii) Term SOFR for a one-month tenor in effect at such time plus 1.00 %).

At September 30, 2023, there was $ 42.5 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 June 30, 2023.

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

On September 28, 2023, we entered into a $ 5.0 million unsecured working capital trade finance facility with responsAbility Climate Smart Agriculture & Food Systems Fund through our subsidiary, Falcon.

The facility will mature on December 31, 2026, and requires stepped repayments of $ 0.5 million on December 31, 2024, $ 1.0 million on December 31, 2025 and $ 3.5 million on December 31, 2026.

Borrowings under the facility will bear interest at the borrower’s option at a rate equal to (a) (i) the most recent applicable Term SOFR for the longest period (for which Term SOFR is available) which is less than the applicable interest period of the loan or (ii) If no such Term SOFR is available for a period which is less than the applicable interest period, SOFR for the day which is two U.S.

Government Securities Business Days before the Quotation day;

or (b) the most recent applicable Term SOFR (as of Quotation Day) for the

shortest period (for which Term SOFR is available) which exceeds the applicable interest period of that loan, in each case plus the applicable margin.

At September 30, 2023, there was $ 5.0 million of outstanding borrowings under the facility, which is recorded in long-term debt, net on 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 tangible net worth.

Falcon was in compliance with these financial covenants as of September 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.

(a) a short-term trade finance facility with a balance of $ 8.5 million at September 30, 2023 and (b) a long-term note payable with a balance of $ 1.4 million at September 30, 2023.

Additionally, Rwanda Trading Company maintains three short-term futures contract-backed lending facilities from international institutions with outstanding balances of $ 0.8 million, $ 0.7 million and $ 0.6 million at September 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.

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.

12 unchanged sentences

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 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.

For the three and nine months ended September 30, 2023, the Company recorded $ 0.1 million of amortization and $ 0.2 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.

9 unchanged sentences

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 six months ended June 30, 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 nine months ended September 30, 2023 or 2022.

three to twelve months in length.

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 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.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 16.5 million pounds and 29.2 million pounds as of September 30, 2023 and December 31, 2022, respectively.

During the three and nine months ended September 30, 2023, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 30.3 million pounds and 53.9 million pounds, respectively.

During the three and nine months ended September 30, 2022, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 8.8 million pounds and 57.0 million pounds, respectively.

Approximately $ 3.1 million and $ 5.2 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 nine months ended September 30, 2023, respectively.

Approximately $ 4.3 million and $ 11.1 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 and nine months ended September 30, 2022, respectively.

As of September 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 $ 0.1 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.

3 unchanged sentences

Balance Sheet Location

June 30, 2023

September 30, 2023

December 31, 2022

11 unchanged sentences

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 for the three and six months ended June 30, 2023 and 2022, respectively:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Statement of Operations Location

15 unchanged sentences

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 June 30, 2023:

June 30, 2023

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

September 30, 2023

Green coffee associated with forward contracts

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Fair value as of December 31, 2022

Transfer out of Level 3

Change in fair value

Fair value as of June 30, 2023

Fair value as of September 30, 2023

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

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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 $ 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.

Westrock Public Warrants are valued based on their quoted market price of $ 1.86 and $ 2.27 per warrant as of September 30, 2023 and December 31, 2022, respectively.

Westrock Private Warrants price of $ 2.14 and $ 3.83 per warrant as of September 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:

June 30, 2023

September 30, 2023

December 31, 2022

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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 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 September 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 and six months ended June 30, 2023 or 2022, requiring these non-financial assets and liabilities to be subsequently recognized at fair value.

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

At September 30, 2023, the Company had an equity investment with a carrying value of approximately $ 1.0 million, for which there is no readily determinable fair value.

This investment is recorded at cost within other long-term assets on the Condensed Consolidated Balance Sheets.

As of September 30, 2023, there have been no adjustments, upward or downward, to the carrying value.

Accumulated Other Comprehensive Income (Loss)

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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

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Equity-Based Compensation

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.

During the three and nine months ended September 30, 2023, the Company granted 0.1 million and 1.3 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 $ 1.0 million and $ 15.0 million, respectively, which was calculated using the closing price of the 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 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.

As of September 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 nine months ended September 30, 2023.

Outstanding at December 31, 2022

Outstanding at June 30, 2023

Outstanding at September 30, 2023

Earnings per Share

Prior to the Conversion, the Company’s ownership interests consisted of two classes of equity units, referred to as Common Units and Common Equivalent Preferred Units (“CEP Units”), which have been retroactively adjusted as shares reflecting the conversion ratios discussed in Note 4.

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.

Westrock Series A Preferred Shares and our 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 (“ASC 260”) .

As a result of the Company’s net income position for the three months ended September 30, 2023, a portion of our undistributed earnings have been allocated to participating securities in accordance with the provisions of ASC 260.

Neither the Series A Preferred Shares nor the RSUs have a contractual obligation to share in losses of the Company.

However, undistributed earnings are allocated to the participating securities.

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

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The dilutive effect of time-based option awards and RSUs is calculated using the treasury stock method, while performance-based awards are treated as contingently issuable.

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Restricted stock

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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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Thousands, except per share data)

Basic Earnings per Common Share

Net loss attributable to common shareholders

Net income (loss) attributable to common shareholders

Weighted-average common shares outstanding - basic

Basic loss per common share

Basic earnings (loss) per common share

Diluted Earnings per Common Share

Net loss attributable to common shareholders - basic

Net income (loss) attributable to common shareholders - basic

Effect of participating securities

Effect of non-participating securities

Net loss attributable to common shareholders - diluted

Net income (loss) attributable to common shareholders - diluted

Weighted-average common shares outstanding - basic

Impact of if-converted securities

Effect of other dilutive securities

Effect of dilutive participating securities

Effect of dilutive non-participating securities

Weighted-average common shares outstanding - diluted

Dilutive loss per common share

Dilutive earnings (loss) per common share

Segment Information

(“S&D”), impairment charges, changes in the fair value of warrant liabilities, non-cash mark-to-market adjustments, certain costs specifically excluded from the calculation of EBITDA under our material debt agreements, such as facility start-up costs, and other similar or infrequent items (although we may not have had such charges in the periods presented).

Our two operating segments, Beverage Solutions and Sustainable Sourcing & Traceability, are evaluated using Adjusted EBITDA, which is a segment performance measure we define as net income determined in accordance with GAAP, before interest expense, net, provision for income taxes, depreciation and amortization, equity-based compensation expense and the impact, which may be recurring in nature, of acquisition, transaction and integrations costs, including management services and consulting agreements entered into in connection with the acquisition of S&D Coffee, Inc., impairment charges, changes in the fair value of warrant liabilities, non-cash mark-to-market adjustments, certain costs specifically excluded from the calculation of EBITDA under our material debt agreements, such as facility start-up costs, and other similar or infrequent items (although we may not have had such charges in the periods presented).

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Adjusted EBITDA

Interest expense

Income tax expense

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

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Mark-to-market adjustments

Three Months Ended June 30, 2022

Loss on disposal of property, plant and equipment

Net income (loss)

Three Months Ended September 30, 2022

Adjusted EBITDA

Interest expense

Income tax benefit

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

Acquisition, restructuring and integration expense

Change in fair value of warrant liabilities

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

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Loss on disposal of property, plant and equipment

Six Months Ended June 30, 2023

Net income (loss)

Nine Months Ended September 30, 2023

Adjusted EBITDA

Interest expense

Income tax expense

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

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Loss on disposal of property, plant and equipment

Six Months Ended June 30, 2022

Net income (loss)

Nine Months Ended September 30, 2022

Adjusted EBITDA

Interest expense

Income tax benefit

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

Acquisition, restructuring and integration expense

Change in fair value of warrant liabilities

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

2 unchanged sentences

Loss on disposal of property, plant and equipment

Net income (loss)

Commitments and Contingencies

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

We have future purchase obligations of $ 234.0 million as of September 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 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.

In addition, at September 30, 2023, we had an obligation to repurchase $ 6.0 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

Prior to the Conversion, the Company had subordinated debt issued to Wooster Capital, LLC, which is owned and controlled by our co-founder and Chairman, Joe T.

Ford, and Jo Ellen Ford, who have ownership in the Company.

During 2022, Brown Brothers Harriman, who is a holder of Series A Preferred Shares, and prior to the Conversion was holder of Westrock Series A and Series B Preferred Units, participated in Falcon’s working capital trade finance facility.

Ford, and the estate of Jo Ellen Ford, who have or had ownership in the Company.

During 2022, Brown Brothers Harriman & Co., which is a holder of Westrock Series A Preferred Shares and participant of the August 2023 equity issuance, and prior to the Conversion was a holder of Westrock Series A and Series B Preferred Units, participated in Falcon’s working capital trade finance facility.

As such, these persons and entities are deemed related parties.

The Consolidated Financial Statements reflect the following transactions with related parties:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest expense, net:

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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 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.

The Company recognized no expenses and $ 0.6 million of such expenses during the three and nine months ended September 30, 2023, respectively, and $ 0.8 million and $ 2.5 million of such expenses during the three and nine months ended September 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 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.

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

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

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.

For the three and nine months ended September 30, 2023, the Company recognized expenses of $ 0.5 million and $ 1.3 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 nine months ended September 30, 2022, the Company recognized expenses of $ 0.3 million and $ 1.0 million, respectively, for such items.

At September 30, 2023 and December 31, 2022, we had no amounts payable to Westrock Group.

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