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Item 1A. Risk Factors

2024-03-15 compared with 2023-03-21 · 103 added, 352 removed, 225 unchanged (67% of the section changed)

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This Annual Report on Form 10-K is qualified in its entirety by all these risk factors.

Summary of Risk Factors

The following is a summary of the principal risks that could adversely affect our business, financial condition and results of operations.

Risks Related to Our Business

● We have incurred and may continue to incur net losses and may not achieve or maintain profitability in the future.

● Any failure to retain key personnel or recruit qualified personnel could adversely impact us.

● We do not currently have written contracts with certain of our co-manufacturers.

The loss of these co-manufacturers or the inability of these co-manufacturers to fulfill our orders could have a material adverse effect on our business.

● Further consolidation among our customers or the loss of any key customer could negatively affect our sales, profitability and future growth.

● If we are unable to anticipate customer preferences and successfully develop new products, or if we fail to effectively manage the introduction of new products, our business will suffer.

● Our inability to hedge commodity risks.

● Our accounts receivable represents a significant portion of our current assets and a substantial portion of our trade accounts receivables relate principally to a limited number of customers, increasing our exposure to bad debts and counterparty risk.

● If we have overestimated the size of our addressable market, our future growth opportunities may be limited.

● We are subject to U.S.

and international laws and regulations that could adversely affect our business, including anti-corruption laws and trade controls laws, and noncompliance with such laws could subject us to criminal or civil liability.

● We may not achieve the projected benefits or successfully integrate future acquisitions and our M&A activities may divert our management’s attention.

● We may not be able to effectively manage the growth and increased complexity of our business.

● Fluctuations in our operating results adversely affect our financial condition and cash flow and may make it difficult to project future results and meet the earnings expectations of securities analysts or investors.

● Disruption in operations at any of our production and distribution facilities, or failure to complete the construction of our new production facility in Conway, Arkansas on time or at all, could affect our ability to manufacture or distribute products and could adversely affect our business and sales.

● Future litigation or disputes could lead us to incur significant liabilities or harm our reputation.

● Our failure to comply with applicable transfer pricing and similar regulations may harm our business and financial results.

● If we are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of personal, financial or other confidential information relating to our customers, suppliers, employees or business, including through unauthorized access, theft, use or destruction of such data, our operations could be disrupted, our ability to provide our products could be interrupted, our reputation may be harmed and we may be exposed to liability and loss of customers and business.

● We may become subject to intellectual property disputes or be forced to defend our intellectual property rights.

● Our future levels of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.

● The Credit Agreement contains covenants that may restrict our ability to operate our business.

● We may not have access to additional capital, including under our Revolving Credit Facility if the financial institutions that are lenders under the Revolving Credit Facility fail to extend credit under it, when needed to operate and grow our business.

● Exercise of redemption rights by the holders of our Series A convertible preferred stock, par value $0.01 per share, (the “Series A Preferred Shares”) may adversely affect the cash that we have available for other purposes and our ability to execute our business strategy.

● A change in the assumptions used to value our goodwill or other intangible assets, or the impairment of our goodwill or intangible assets, could negatively impact our financial condition and operating results.

● Our insurance and reserves may be insufficient to cover future claims and liabilities.

● Additional income tax liabilities and changes in tax laws may adversely affect us, and the IRS, other tax authorities, or a court may disagree with our tax positions, which may result in adverse effects on our financial condition or the value of our Common Shares.

● Westrock has identified, and may identify additional, material weaknesses in its internal control over financial reporting, which may result in material misstatements of Westrock’s consolidated financial statements, cause Westrock to fail to meet its periodic reporting obligations or cause investors to lose confidence in accuracy of our financial reports.

● Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect Westrock’s business, investments and results of operations.

● The accuracy of Westrock’s financial statements and related disclosures could be adversely affected if the judgments, assumptions or estimates used in Westrock’s critical accounting policies are inaccurate.

● Our board of directors and management have significant control over our business.

● There are provisions in our certificate of incorporation and bylaws, the Investor Rights Agreement and of Delaware law that may prevent or delay attempts to acquire a controlling interest in Westrock, which could decrease the trading price of the Common Shares.

Risks Related to Our Industry

● Availability of and fluctuations in the cost of green coffee and other key raw materials and certain of our ingredients and packaging materials, or disruption in our supply chain, could negatively affect our margins and profitability.

● We are exposed to risks associated with the interruption of supply and increased costs as a result of our reliance on third-party transportation carriers for shipment of our products.

● Increased competition in coffee, liquid extract consumables or other beverage channels may adversely affect sales of our products.

Our inability to maintain or grow market share through continued differentiation of our products and competitive pricing could adversely affect our completive position, customer retention, financial condition, operating results and cash flow.

● Quality control problems or food safety issues could adversely affect our sales and brand reputation, lead to product recalls or result in product liability claims.

● Climate change, severe weather patterns, and water scarcity could have a material adverse effect on our business and results of operations.

● Our business may fluctuate as a result of seasonality.

Risks Related to General Economic Conditions

● A resurgence of the novel coronavirus, or COVID-19, and emergence of new variants of the virus could materially adversely affect our financial condition and results of operations.

● Our revenue and profits depend on the level of customer spending for discretionary items, which is sensitive to general economic conditions and other factors.

● Our business and the businesses of our suppliers are subject to macroeconomic conditions that, in the event of deterioration, could adversely affect our financial condition, operating results and cash flow.

Risks Related to Our Business

We have incurred net losses in the past, may incur net losses in the future, and may not achieve or maintain profitability in the future.

We may not complete the construction of our new production facility in Conway, Arkansas in time or at all and may incur additional expenses in the process, which could hamper our ability to satisfy demand and meet revenue targets.

In 2021, we purchased a 524,000 square foot manufacturing facility in Conway, Arkansas with the intent to build out the capacity and capabilities needed to meet our customer demand.

Construction on the facility began in late 2022 and we are in active discussions with prospective customers related to price, terms, volume and commitments.

If the completion of this facility is delayed or otherwise not completed, or if we incur additional expenses in the process of opening this facility, it might hamper our ability to satisfy customer demand and meet revenue targets, which could cause our profitability to suffer.

Disruption in operations at any of our production and distribution facilities could affect our ability to manufacture or distribute products and could adversely affect our business and sales.

Our sales and distribution network requires a large investment to maintain and operate, and we rely on a limited number of production and distribution facilities.

Our production capacity is currently concentrated in our Concord, North Carolina, North Little Rock, Arkansas, Richmond, California and Johor Bahru, Malaysia facilities, and will soon be supplemented by our planned production expansion at our new Conway, Arkansas facility.

If we were to experience a prolonged disruption in the operation of these facilities due to damage from fire, natural disaster, power loss, labor shortages, or a failure of production equipment or information technology systems supporting our production processes, we may not have sufficient capacity at our other facilities to meet our customers’ demands.

If demand increases more than we forecast, we will need to either expand our capabilities internally or acquire additional capacity.

Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take significant time to start production, which would have an adverse impact on our financial condition, results of operations and cash flows.

In addition, we use a significant amount of electricity, gasoline, diesel and oil, natural gas and other energy sources to operate our production and distribution facilities.

An increase in the price, disruption of supply or shortage of fuel and other energy sources that may be caused by increased demand or by events such as climate change, natural disasters, power outages, cyberattacks or the like, could lead to higher electricity, transportation and other commodity costs, which could negatively impact our profitability, financial condition or results of operations.

We have incurred net losses in the past, may incur net losses in the future, may not achieve or maintain profitability in the future, and fluctuations in our operating results make it difficult to project future results.

Our rapid growth makes it difficult for us to forecast our future operating results, which have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are beyond our control.

In the years ended December 31, 2023, 2022 and 2021, we incurred net losses of $34.6 million, $55.5 million and $21.3 million, respectively.

These losses could continue for the next several years as we expand our product offering and continue to scale our commercial operations.

Even if we are able to increase sales of our products, there can be no assurance that we will ever be profitable.

We may incur significant net losses for the foreseeable future as we:

● continue to hire additional personnel to improve the operations of our business;

● increase our sales and marketing functions, including expansion of our manufacturing and distribution capabilities;

● hire additional personnel to support compliance requirements in connection with being a public company;

● expand operations and manufacturing.

These losses could continue for the next several years as we expand our product offering and continue to scale our commercial operations by hiring additional personnel to improve the operations of our business and support public company compliance requirements, increasing our sales and marketing functions and expanding our manufacturing and distribution capabilities.

If our products do not achieve sufficient market acceptance, our revenue growth rate may be slower than we expect, we may not be able to increase revenue enough to offset the increase in operating expenses resulting from investments, and we will not become profitable.

There can be no assurance that we will ever achieve or sustain profitability.

Even if we are able to increase sales of our products, there can be no assurance that we will ever achieve or sustain profitability.

Any failure to retain key personnel or recruit qualified personnel could adversely impact our financial condition, results of operations and cash flow.

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increased healthcare and workers’ compensation insurance costs;

increased wages and costs of other benefits necessary to attract and retain high quality employees with the appropriate skill sets and increased wages, benefits and costs related to any COVID-19 resurgence.

In addition, our wages and benefits programs may be insufficient to attract and retain talented employees.

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We do not maintain key person life insurance policies on any of our executive officers.

We do not currently have written contracts with certain of our co-manufacturers.

The loss of these co-manufacturers or the inability of these co-manufacturers to fulfill our orders would adversely affect our ability to make timely deliveries of our products and could have a material adverse effect on our business.

For the years ended December 31, 2022, 2021 and 2020, 7.1%, 7.8% and 9.6% of our revenue was derived from products manufactured at manufacturing facilities owned and operated by our co-manufacturers.

We do not currently

have written manufacturing contracts with co-manufacturers who represented 5.0% of our revenue for the year ended December 31, 2022.

In the absence of a written contract, any of such co-manufacturers could seek to alter or terminate its relationship with us at any time, leaving us with periods during which we have limited or no ability to manufacture our products.

If we need to replace a co-manufacturer, there can be no assurance that additional capacity will be available when required on acceptable terms, or at all.

An interruption in, or the loss of operations at, one or more of our co-manufacturing facilities, which may be caused by work stoppages, disease outbreaks or pandemics, acts of war, terrorism, fire, earthquakes, flooding or other natural disasters at one or more of these facilities, could delay, postpone or reduce production of some of our products, which could have a material adverse effect on our business, results of operations and financial condition until such time as such interruption is resolved or an alternate source of production is secured.

We believe there are a limited number of competent, high-quality co-manufacturers in the industry that meet our strict quality and control standards, and as we seek to obtain additional or alternative co-manufacturing arrangements in the future, there can be no assurance that we would be able to do so on satisfactory terms, in a timely manner, or at all.

Therefore, the loss of one or more co-manufacturers, any disruption or delay at a co-manufacturer or any failure to identify and engage co-manufacturers for new products and product extensions could delay, postpone or reduce production of our products, which could have a material adverse effect on our business, results of operations and financial condition.

Further consolidation among our customers or the loss of any key customer could negatively affect our sales, profitability and future growth.

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To the extent that we do not have written contracts with customers, they can stop purchasing our products at any time without penalty and are free to purchase products from our competitors.

There can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as they have in the past.

There can be no assurance that our customers will

continue to purchase our products in the same mix or quantities or on the same terms as they have in the past.

Our customers may also take actions that we cannot control or anticipate, such as changing their business strategy or introducing products that may compete with ours.

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If we are unable to anticipate customer preferences and successfully develop new products, or if we fail to effectively manage the introduction of new products, our business will suffer.

Our business depends on our ability to satisfy our customers with our beverage products.

In order for us to maintain or improve Westrock’s operating results and grow its revenue, it is important that our customers continue purchasing our products.

Our business depends on our ability to satisfy our customers with our beverage products and their continued purchase of our products.

Our customers generally have no obligation to continue or otherwise extend their purchasing, and there can be no assurance that our customers will continue or otherwise extend their purchasing for similar periods or for the same amount of our products.

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If our customers do not continue purchasing our products, our revenues would decline, and we may not realize improved operating results from our customer base.

Our accounts receivable represents a significant portion of our current assets and a substantial portion of our trade accounts receivables relate principally to a limited number of customers, increasing our exposure to bad debts and counterparty risk, which could potentially have a material adverse result on our results of operations.

A significant portion of our trade accounts receivable are from five customers, which represented approximately 44% and 54% of our trade accounts receivable for the years ended December 31, 2023 and 2022, respectively.

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This could increase our exposure to losses from bad debts and have a materially adverse effect on our business, financial condition and results of operations.

Our estimated addressable market is subject to inherent challenges and uncertainties.

If we have overestimated the size of our addressable market, our future growth opportunities may be limited.

Our total addressable market in the United States is calculated based on an estimated percentage of households that purchase coffee products at least once per year, which we generally estimate based on internal and third-party market research, historical surveys and interviews with market participants.

As a result, our addressable market is subject to significant uncertainty and is based on assumptions that may not prove to be accurate.

Our estimates are based, in part, on third-party reports and are subject to significant assumptions and estimates.

These estimates, as well as the estimates relating to the size and expected growth of the markets in which we operate, and our penetration of those markets, may change or prove to be inaccurate.

While we believe that the information on which we base our addressable market estimates is generally reliable, such information is inherently imprecise.

In addition, our expectations, assumptions and estimates of future opportunities are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described herein.

If third-party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data, our future growth opportunities may be affected.

If our addressable market, or the size of any of the various ancillary markets in which we operate, proves to be inaccurate, our future growth opportunities may be limited, and there could be a material adverse effect on our business, financial condition and results of operations.

Our growth depends, in part, on our continued penetration and expansion into additional markets, and we may not be successful in doing so.

Our estimated addressable market and our continued penetration and expansion into additional markets is subject to inherent challenges and uncertainties that could have a material adverse effect on our results of operations and future growth opportunities.

As a result, our addressable market, as well as our estimates relating to the size and expected growth of the markets in which we operate, our penetration of those markets and our expectations regarding future opportunities, are based on assumptions and estimates that may prove inaccurate and are subject to significant uncertainty.

If our assumptions, estimates or expectations prove to be inaccurate, there could be a material adverse effect on our business, financial condition and results of operations.

We believe that our future growth depends not only on serving existing customers, but also on continuing to get new customers and expanding our distribution base in the United States and internationally.

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If we are not successful, this could have a material adverse effect on our business, financial condition and results of operations.

We are subject to U.S.

We are subject to various federal, state, local and foreign laws that affect how we conduct our business, including the manufacturing, safety, sourcing, labeling, storing, transportation, marketing, advertising, distribution and sale of our products, our relations with distributors and retailers, and our employment, environmental, privacy, health and trade practices.

These laws and regulations and interpretations thereof are subject to change as a result of political, economic or social events.

Any new laws and regulations or changes in existing laws or their interpretations could result in

increased compliance costs, capital expenditures, incremental investments and other financial obligations for us and our business partners, which could affect our profitability.

Additionally, our expanding international business will also expose us to additional regulatory regimes, which may be very different from the ones we are used to complying with domestically, and these foreign laws may occasionally conflict with domestic laws.

Aside from the regulatory risks of doing business in foreign countries, our business in these countries is also subject to certain U.S.

laws, regulations and policies, including the U.S.

Foreign Corrupt Practices Act, or “FCPA,” as well as trade control laws such as economic sanctions, customs and import laws, and export control laws and regulations.

The FCPA generally prohibits companies from making direct or indirect improper payments to non-U.S.

government officials for the purpose of obtaining or retaining business or obtaining an improper business advantage.

Both the SEC and U.S.

Department of Justice have aggressively enforced the FCPA in recent years.

Our operations in foreign countries may place us in contact with persons who may be considered “foreign officials” under the FCPA, resulting in greater risk of potential violations of the FCPA (or other applicable public corruption regimes).

We also have activities in jurisdictions that are perceived to present heightened risks of public corruption.

The FCPA also requires that we keep accurate books and records and maintain a system of adequate internal controls.

In addition to the FCPA’s prohibitions on public corruption, the UK Bribery Act 2010, the Malaysian Anti-Corruption Commission Act 2009, and other anti-corruption laws that could apply to our international activities also prohibit commercial bribery and requesting or accepting bribes.

trade control laws prohibit certain transactions and dealings involving sanctioned countries, governments, persons, without a license or other appropriate authorization.

As we increase our international sales and business, our risks of non-compliance with the FCPA and U.S.

trade control laws may increase.

Although we have implemented policies and procedures designed to ensure that we, our employees and our intermediaries comply with the FCPA, other applicable anti-corruption or anti-bribery laws, and applicable trade control laws, there is no assurance that such policies or procedures will prevent illegal acts by our employees or intermediaries, or protect us against liability under the FCPA, other anti-corruption regimes, or trade sanctions laws.

Our business must also be conducted in compliance with applicable economic and trade sanctions laws and regulations, such as those administered and enforced by the U.S.

Department of Treasury’s Office of Foreign Assets Control, the U.S.

Department of State, the U.S.

Department of Commerce, the United Nations Security Council and other relevant sanctions authorities.

Our global operations expose us to the risk of violating, or being accused of violating, economic and trade sanctions laws and regulations.

Despite our compliance efforts and activities, we cannot assure compliance by our employees or representatives for which we may be held responsible, and any such violation could materially adversely affect our reputation, business, financial condition and results of operations.

Changes in international tax treaties or international trade policy, or the imposition of increased or new tariffs, quotas or trade barriers on key commodities, could also adversely affect our business.

Violations of these laws or regulations could have a material adverse effect on us, by imposing substantial financial penalties or significant operational limitations, diverting management’s attention and resources and incurring significant defense costs and other professional fees.

Investigations of potential violations of these laws by local, state, federal or foreign authorities could also harm our reputation and have an adverse impact on our business, financial condition and results of operations.

We have in the past and may in the future acquire companies, which can divert our management’s attention and we may also be unable to integrate such businesses or identify and achieve their projected benefits.

Our future success will depend, in part, on our ability to grow in the face of changing customer demands and competition.

A core part of our strategy is to grow through acquisitions.

We successfully completed the acquisition of S&D Coffee, Inc.

(“S&D”) in February 2020, our de-SPAC merger transaction with Riverview in August 2022 and our acquisition of Kohana Coffee in November 2022, and we expect to pursue additional acquisitions.

However, we may be unable to identify and consummate additional acquisitions, and we may incur significant transaction costs for acquisitions that we do not complete.

We currently are, and expect in the future to be, engaged in evaluating potential transactions.

However, we may be unable to identify and consummate additional acquisitions, and we may incur significant transaction costs in seeking acquisitions that we do not complete.

Furthermore, the identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not complete acquisitions on favorable terms, if at all.

Such acquisitions may

disrupt our ongoing business operations, divert management from their primary responsibilities, increase our expenses and subject us to increased regulatory requirements.

Risks we face in connection with acquisitions include:

● incurrence of charges or assumption of debt or other liabilities that could result in adverse tax consequences that negatively affect our operating results;

● difficulties or unforeseen expenditures while integrating the business, products, and personnel of the acquired company;

● failure to realize anticipated synergies;

● disruption to our ongoing business through the diversion of resources or increased expenses;

● diversion of our management’s attentions from ongoing business operations;

● reduced cash liquidity in the business;

● the dilution of then-existing stockholders and reduced earnings per share as a result of any issuance of equity securities.

In addition to the above risks, we may not successfully integrate and manage businesses that we acquire or fully achieve anticipated cost savings and synergies from acquisitions in the timeframe we anticipate or at all and projections of the anticipated benefits of any acquisition can be negatively affected by intervening events beyond our control.

Projected growth opportunities could also require a greater-than-anticipated amount of trade and promotional spending.

Such acquisitions may disrupt our ongoing business operations, divert management from their primary responsibilities, increase our expenses and subject us to increased regulatory requirements.

In addition, we may not successfully integrate and manage businesses that we acquire or fully achieve anticipated cost savings and synergies from acquisitions in the timeframe we anticipate or at all and projections of the anticipated benefits of any acquisition can be negatively affected by intervening events beyond our control.

There can be no assurance that we will successfully or efficiently integrate any businesses that we may acquire in the future, and the failure to do so could have a material adverse effect on our business, financial condition and operating results.

If we continue to grow rapidly, we may not be able to effectively manage the growth and increased complexity of our business and, as a result, our business, financial condition and operating results could suffer.

Our rapid growth has placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, supply chain, quality control, regulatory support, customer service, sales force management and general and financial administration.

Further, we have a limited history of operating our legacy business and the acquired S&D business as a combined company.

Our rapid growth has placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, supply chain, distribution capabilities, quality control, product development, regulatory support, customer service, sales force management and general and financial administration.

We could also experience challenges in obtaining sufficient raw materials and manufacturing capacity to produce the products we sell, along with delays in production and shipments.

As we continue to grow and potentially acquire other businesses, we will need to continue building our operational, financial and management controls as well as our reporting systems and procedures.

Managing our planned growth effectively may require us to:

● enhance our facilities and purchase additional equipment at our facilities;

● upgrade or enhance our information technology systems;

● expand our inventory and packaging throughput;

● successfully hire, train and motivate additional employees.

If our operations continue to grow rapidly, we may experience challenges in obtaining sufficient raw materials and manufacturing capacity to produce the products we sell, along with delays in production and shipments.

We could also be required to continue to expand our sales and marketing, product development, and distribution capabilities or further expand our workforce.

Any such expansion could strain our resources, expose us to new legal risks in new jurisdictions, and cause operating difficulties.

Any enhancements, expansions and additions to our property, plant and equipment or workforce necessary to manage our growth could strain our resources, expose us to new legal risks in new jurisdictions, and cause operating difficulties.

If we are unable to manage our growth and increased complexity effectively, we may be unable to execute our business plan, which could lead to a material adverse effect on our business, financial condition and operating results.

Fluctuations in our operating results adversely affect our financial condition and cash flow, and may make it difficult to project future results and meet the earnings expectations of securities analysts or investors.

In addition to the other risks described herein, such factors include changes in accounting principles, fluctuations in the selling prices of our products, research reports and changes in financial estimates by analysts about us, our competitors or our industry,

strategic decisions by us or our competitors, such as acquisitions, capital investments or changes in business strategy, the depth and liquidity of the market for Common Shares, activism by any large stockholder or group of stockholders, speculation by the investment community regarding our business, actual or anticipated growth rates relative to our competitors, terrorist acts, natural disasters, pandemics (including COVID-19), perceptions of the investment opportunity associated with Common Shares relative to other investment alternatives, competition, changes in consumer preferences and market trends (including, for example, an acceleration in any shift from hot coffee to cold brews and extracts), seasonality, our ability to retain and attract customers, our ability to manage inventory and fulfillment operations and maintain gross margin.

The effects of any of these and other factors could, either individually or in the aggregate, negatively impact our operating results and cause the market price of Common Shares to decline.

Disruption in operations at any of our production and distribution facilities could affect our ability to manufacture or distribute products and could adversely affect our business and sales.

Our sales and distribution network requires a large investment to maintain and operate, and we rely on a limited number of production and distribution facilities.

If demand increases more than we forecast, we will need to either expand our capabilities internally or acquire additional capacity.

Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take a significant time to start production, which would have an adverse impact on our financial condition, results of operations and cash flows.

We also rely on the timely and free flow of goods through open and operational ports from our suppliers and manufacturers.

Labor disputes or disruptions at ports, our common carriers, or our suppliers or manufacturers could create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during periods of significant importing or manufacturing, potentially resulting in delayed or canceled orders by customers, unanticipated inventory accumulation or shortages, and harm to our business, results of operations, and financial condition.

In addition, we rely upon independent freight carriers for product shipments from our distribution centers to our customers.

We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive products from suppliers or deliver products to customers in a timely and cost-effective manner.

In addition, we use a significant amount of electricity, gasoline, diesel and oil, natural gas and other energy sources to operate our production and distribution facilities.

In 2021, we purchased a 524,000 square foot manufacturing facility in Conway, Arkansas with the intent to build out the capacity and capabilities needed to meet our customer demand.

Construction on the facility began in late 2022 and we are in active discussions with prospective customers related to price, terms, volume and commitments.

We are subject to U.S.

These laws and regulations and interpretations thereof are subject to change as a result of political, economic or social events.

Any new laws and regulations or changes in existing laws or their interpretations, changes in international tax treaties or international trade policy, or the imposition of increased or new tariffs, quotas or trade barriers on key commodities, could result in increased compliance costs, capital expenditures, incremental investments and other financial obligations for us and our business partners, which could affect our profitability.

Our expanding international business will expose us to additional regulatory regimes, such as the U.S.

Foreign Corrupt Practices Act (FCPA), the UK Bribery Act 2010, the Malaysian Anti-Corruption Commission Act 2009, and other anti-corruption laws as well as trade control laws such as economic sanctions, customs and import laws, and export control

laws and regulations.

We have activities in jurisdictions that are perceived to present heightened risks of public corruption, and our operations in foreign countries may place us in contact with persons who may be considered “foreign officials” under the FCPA, resulting in greater risk of potential violations of the FCPA (or other applicable public corruption regimes).

As we increase our international sales and business, our risks of non-compliance with the FCPA, other applicable anti-corruption or anti-bribery laws, and applicable trade control laws may increase.

Although we have implemented policies and procedures designed to ensure that we, our employees and our intermediaries comply with these laws, there is no assurance that such policies or procedures will prevent illegal acts by our employees or intermediaries, or protect us against liability under the FCPA, other anti-corruption regimes, or trade sanctions laws.

Violations of these laws or regulations could have a material adverse effect on us, by imposing substantial financial penalties, significant operational limitations and reputational harm, diverting management’s attention and resources and incurring significant defense costs and other professional fees.

Future litigation or disputes could lead us to incur significant liabilities or harm our reputation.

We have in the past and/or may in the future become subject to legal proceedings, disputes, claims, investigations, regulatory proceedings, or similar actions that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial matters, or employment claims brought by our employees.

We have in the past and/or may in the future become subject to legal proceedings (including class actions), disputes, claims, investigations, regulatory proceedings, or similar actions that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial matters, employment claims brought by our employees, product liability, product labeling, public statements and disclosures under securities laws, antitrust, advertising, consumer protection and wage and hour laws.

Further, state or federal regulators could make inquiries and/or conduct investigations with respect to one or more of our products.

We may become a defendant in class action litigation, including litigation regarding employment practices, product labeling, public statements and disclosures under securities laws, antitrust, advertising, consumer protection and wage and hour laws.

Plaintiffs in class action litigation may seek to recover amounts that are large and may be indeterminable for some period of time.

We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and estimate, if possible, the amount of potential losses.

We will establish a reserve as appropriate based upon assessments and estimates in accordance with our accounting policies.

We will base our assessments, estimates and disclosures on the information available to us at the time and rely on legal and management judgment.

Actual outcomes or losses may differ materially from assessments and estimates.

We are subject to risk and uncertainties related to liabilities, including damages, fines, penalties, and substantial legal and related costs, that may result from these claims and litigation.

Some or all of our expenditures to defend, settle, or litigate these matters may not be covered by insurance or could impact our cost of, and ability to obtain, insurance in the future.

Further, because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses.

Any material legal proceedings (including class actions), disputes, claims, investigations, regulatory proceedings, or similar actions could have a material adverse effect on our business, results of operations, and financial condition.

Our business reputation and our relationship with our customers, suppliers, and employees may also be adversely impacted by our involvement in legal proceedings.

Even if any such litigation or claims lack merit, the process of defending against these claims may result in substantial costs to the business and divert management’s attention and resources, which can harm our business, operating results and financial condition.

Any adverse publicity resulting from allegations made in litigation claims or legal proceedings may also adversely affect our reputation, which in turn could adversely affect our operating results.

Our failure to comply with applicable transfer pricing and similar regulations may harm our business and financial results.

In many countries, including the United States, we are subject to transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned and are taxed accordingly.

Although we believe that we are in substantial compliance with all applicable regulations and restrictions, we are subject to the risk that governmental authorities could audit our transfer pricing and related practices and assert that additional taxes are owed.

In the event that the audits or assessments are concluded adversely to our positions, we may be required to pay additional taxes, interest, and penalties and we may or may not be able to offset or mitigate the consolidated effect of foreign income tax assessments through the use of U.S.

foreign tax credits.

As a result, our operations may be negatively impacted, our effective tax rate may increase, and our cash flows may be materially adversely affected.

Because the laws and regulations governing U.S.

foreign tax credits are complex and subject to periodic legislative amendment, we cannot be sure that we will in fact be able to take advantage of any foreign tax credits in the future.

We may not always be in compliance with all applicable tax laws, including transfer pricing laws, despite our efforts to be aware of and to comply with such laws.

In such case, we may need to adjust our operating procedures and, as a result, our financial condition, results of operations, and cash flows could be materially adversely affected.

We are increasingly dependent on information technology and our ability to process data in order to operate and sell our products, and if we are unable to protect against software and hardware vulnerabilities, service interruptions, data corruption, cyber-based attacks, ransomware or security breaches, or if we fail to comply with our commitments and assurances regarding the privacy and security of such data, our operations could be disrupted, our ability to provide our products could be interrupted, our reputation may be harmed and we may be exposed to liability and loss of customers and business.

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These information technology networks and systems may be vulnerable to data security and privacy threats, cyber and otherwise.

Moreover, the risk of unauthorized circumvention of our security measures or those of third parties on whom we rely has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques, including, without

limitation, “phishing” or social engineering incidents, ransomware, extortion, account takeover attacks, denial or degradation of service attacks and malware.

Further, breaches experienced by other companies may also be leveraged against us.

For example, credential stuffing attacks are becoming increasingly common and sophisticated actors can mask their attacks, making them increasingly difficult to identify and prevent.

We have technology security initiatives and disaster recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that data security breaches do not occur.

We have technology security initiatives and disaster recovery plans in place to mitigate

our risk to these vulnerabilities, but these measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that data security breaches do not occur.

If our information technology networks and systems or data processing suffer damage, security breaches, vulnerabilities, disruption or shutdown, and we do not effectively resolve the issues in a timely manner, they could cause a material adverse impact to our business, reputation and financial condition.

Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks, which may remain undetected until after they occur.

Despite our efforts to protect our information technology networks, systems and information, we may not be able to anticipate or to implement effective preventive and remedial measures against all data security and privacy threats.

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No security solution, strategy or measures can address all possible security threats.

Our applications, systems, networks, software and physical facilities could have material vulnerabilities, be breached or personal or confidential information could be otherwise compromised due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our personnel or our customers to disclose information or usernames and/or passwords, or otherwise compromise the security of our applications, systems, networks, software and/or physical facilities.

We cannot be certain that we will be able to address any such vulnerabilities, in whole or part, and there may be delays in developing and deploying patches and other remedial measures to adequately address vulnerabilities and taking such remedial steps could adversely impact or disrupt our operations.

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An actual or perceived breach of our security systems or those of our third-party service providers may require notification under applicable data privacy regulations or for customer relations or publicity purposes, which could result in reputational harm, costly litigation (including class action litigation), material contract breaches, liability, settlement costs, loss of sales, regulatory scrutiny, actions or investigations, loss of confidence in our business, diversion of management’s time and attention, and significant fines, penalties, assessments, fees and expenses.

The costs to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, and our efforts to address these problems may not be successful.

These costs include, but are not limited to, retaining the services of cybersecurity providers;

compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations;

and costs related to maintaining redundant networks, data backups and other damage-mitigation measures.

We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business.

Additionally, most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data.

Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach.

We may not have adequate insurance coverage for handling security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney’s fees and other impacts that arise out of incidents or breaches.

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In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss.

Moreover, our privacy risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of personal and/or sensitive data.

In addition, our cybersecurity risk could be increased as a result of the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia.

We utilize a third-party monitoring service that constantly surveils for

developing threats as part of our normal security programs, including with respect to any new cybersecurity threats that may be presented by the unfolding conflict between Russia and Ukraine.

The unauthorized access, theft, use or destruction of personal, financial or other confidential information relating to our customers, suppliers, employees or business could expose us to reputational damage and operational risk, negatively affect our business and expose us to potential liability.

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Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties.

However, we may not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights, and such third parties may bring claims alleging such infringement, misappropriation or violation.

Actions we may take to enforce or defend our intellectual property rights may be expensive and divert management’s attention away from the ordinary operation of our business, and our inability to secure and protect our intellectual property rights could materially and adversely affect our brand and business, operating results, financial condition and prospects.

Furthermore, such actions, even if successful, may not result in an adequate remedy or protection.

In addition, many companies have the capability to dedicate greater resources to enforce their intellectual property rights and to defend claims that may be brought against them.

If a third party is able to obtain an injunction preventing us from selling allegedly infringing products or services, or if we cannot license or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of our products or services or cease business activities related to such intellectual property.

We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations.

Such claims could subject us to significant liability for damages and could result in our having to stop selling a product or service found to be in violation of a third party’s rights.

Further, we might be required to seek a license for third-party intellectual property, which may not be available on reasonable royalty or other terms.

Alternatively, we could be required to develop an alternative non-infringing product or service, which could require significant effort and expense.

If we cannot license or develop an acceptable alternative for any infringing aspect of our business, we would be forced to limit our products or services, which could affect our ability to compete effectively.

Any of these results would harm our business, operating results, financial condition and prospects.

Our future levels of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.

As of December 31, 2022, we had outstanding total indebtedness of $216.9 million and $175.0 million of undrawn borrowings available under our Revolving Credit Facility (other than $2.6 million of standby letters of credit outstanding).

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

Any subsequent additions to our indebtedness could impact our financial flexibility due to increased cash flows required to make required interest and principal payments.

The covenants in our Credit Facilities and our future levels of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.

As of December 31, 2023, we had outstanding total indebtedness of $279.0 million and $110.0 million of undrawn borrowings available under our Revolving Credit Facility (other than $2.6 million of standby letters of credit outstanding), and outstanding indebtedness under the Credit Agreement bears interest at a variable rate.

Any subsequent additions to our indebtedness or increases in market rate of interest increases could impact our financial flexibility due to increased cash flows required to make required interest and principal payments.

Greater demands on our funds may limit our ability to invest in our growth, including inhibiting our ability to meet working capital requirements, make capital expenditures or fund acquisitions.

Increased indebtedness may also limit our ability to adjust to rapidly changing market conditions, making us more vulnerable to general adverse industry and economic conditions, which could create a competitive disadvantage relative to our competitors.

In addition, outstanding indebtedness under the Credit Agreement bears interest at a variable rate, making us vulnerable to increases in the market rate of interest.

If the market rate of interest increases substantially, we will have to pay additional interest on this indebtedness, which would reduce cash available for our other business needs.

Failure to make payments or comply with covenants under our applicable debt instruments could result in an event of default.

If an event of default occurs and the lender accelerates the amounts due, we may need to seek additional financing, which may not be available on acceptable terms, in a timely manner or at all.

In such event, we may not be able to make accelerated payments, and the lender could seek to enforce security interests in the collateral securing such indebtedness, which includes substantially all of our assets.

The Credit Agreement contains covenants that may restrict our ability to operate our business.

The Credit Agreement contains various affirmative and negative covenants that may, subject to specified significant exceptions, restrict our ability, including specified material subsidiaries, to incur debt and our ability, including specified material subsidiaries, to, among other things, have liens on our property, merge or consolidate with any other person or sell or convey assets above a specified minimum threshold to any one person, and engage in sale-and-leaseback transactions depending on the characterization of the proceeds.

Our ability, including specified material subsidiaries, to comply with these provisions may be affected by events beyond our control.

Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and could result in a default and acceleration under other agreements containing cross-default provisions.

Failure to comply with these covenants or make payments could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and could result in a default and acceleration under other agreements containing cross-default provisions.

Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.

If the financial institutions that are lenders under the Credit Agreement fail to extend credit under the facility, our liquidity and results of operations may be adversely affected.

Each financial institution that is or becomes a lender under the Credit Agreement will be responsible on a several but not joint basis for providing a portion of the loans to be made under the facility.

If any participant or group of participants with a significant portion of the commitments under the Credit Facility fails to satisfy its or their respective obligations to extend credit under the facility and we are unable to find a replacement for such participant or participants on a timely basis (if at all), our liquidity may be adversely affected.

Operating and growing our business may require additional capital, and if capital is not available to us, our business, operating results, financial condition and prospects may suffer.

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If our cash needs exceed our expectations or we experience rapid growth, we could experience strain in our cash flow, which could adversely affect our operations in the event we are unable to obtain other sources of liquidity.

If we seek to raise funds through equity or debt financing, those funds may

prove to be unavailable, may only be available on terms that are not acceptable to us or may result in significant dilution to our then-existing stockholders or higher levels of leverage.

If we seek to raise funds through equity or debt financing, those funds may prove to be unavailable, may only be available on terms that are not acceptable to us or may result in significant dilution to our then-existing stockholders or higher levels of leverage.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives, to grow both organically and through acquisitions, and to respond to business opportunities, challenges or unforeseen circumstances, could be significantly limited, and our business, operating results, financial condition and prospects could be materially and adversely affected.

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Impairment may result from significant changes in the manner of use of the acquired assets, negative industry, or economic trends, and/or any changes in key assumptions regarding our fair value.

At December 31, 2022, we had $114.0 million of goodwill on our Consolidated Balance Sheet.

Any further deterioration in our business related to the COVID-19 pandemic, rising costs due to persistent inflationary impacts, continued increases in interest rates, or other market, industry, or operational trends, could result in further impairment of our goodwill, which would negatively impact our financial conditions and results of operations.

Our insurance and reserves may be insufficient to cover future claims and liabilities.

The premiums associated with our insurance continue to increase.

General liability, fire, workers’ compensation, directors’ and officers’ liability, life, employee medical, dental and vision, and automobile risks present a large potential liability.

While we accrue for this liability based on historical claims experience, future claims may exceed claims we have incurred in the past.

Should a different number of claims occur compared to what was estimated or the cost of the claims increase beyond what was anticipated, reserves recorded may not be sufficient, and the accruals may need to be adjusted accordingly in future periods.

A successful claim against us that is not covered by insurance or is in excess of our reserves or available insurance limits could negatively affect our business, financial condition and results of operations.

We maintain finished goods product coverage in amounts we believe to be adequate.

However, we cannot assure stockholders that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage.

Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others.

A product liability judgment against us or a product recall or the damage to our reputation resulting therefrom could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

Exposure to additional income tax liabilities could negatively affect our future profitability.

We are subject to income taxes in the United States and in various jurisdictions outside the United States.

Our effective tax rate and profitability could be subject to volatility or adversely affected by a number of factors, including:

● changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect;

● changes in accounting and tax standards or practice;

● changes in the mix of earnings and losses in various jurisdictions with differing tax rates;

● changes in the valuation of deferred tax assets and liabilities;

● our operating results before taxes.

In addition, we may be subject to audits of our income, sales and other taxes by U.S.

federal, state and local and non-U.S.

taxing authorities.

Outcomes from these audits could have a material and adverse effect on our operating results, financial condition and prospects.

At December 31, 2023, we had $116.1 million of goodwill on our Consolidated Balance Sheets.

Any negative industry or economic trends, such as rising costs due to persistent inflationary impacts, continued increases in interest rates, or other market, industry, or operational trends, and/or any changes in key assumptions could result in further impairment of our goodwill, which would negatively impact our reported results of operations.

Changes in tax laws may adversely affect us, and the IRS, other tax authorities, or a court may disagree with our tax positions, which may result in adverse effects on our financial condition or the value of our Common Shares.

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In the absence of such guidance, we will take positions with respect to a number of unsettled issues.

There is no assurance that the IRS, any other tax authorities, or a court will agree with the positions taken by us, in which case tax penalties and interest may be imposed that could adversely affect our business, cash flows or financial performance.

Westrock has identified material weaknesses in its internal control over financial reporting, which may result in material misstatements of Westrock’s consolidated financial statements or cause Westrock to fail to meet its periodic reporting obligations.

There is no assurance that the IRS, any other tax authorities, or a court will agree with the positions taken by us, in

which case tax penalties and interest may be imposed that could adversely affect our business, cash flows or financial performance.

Westrock has identified, and may in the future identify additional, material weaknesses in its internal control over financial reporting or fail to maintain effective internal control over financial reporting, which may result in material misstatements of Westrock’s consolidated financial statements or cause Westrock to fail to meet its periodic reporting obligations.

As further described in Item 9A of this Annual Report on Form 10-K, Westrock has identified material weaknesses in its internal control over financial reporting.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As a result, management has concluded that, because of these material weaknesses, our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2023.

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Notwithstanding these measures or efforts, there is no assurance that any remediation efforts will ultimately have the intended effects.

Additionally, these remediation measures will be time consuming, will result in Westrock incurring significant costs, and will place significant demands on our financial and operational resources.

If we fail to complete the remediation of these material weaknesses, or after having remediated such material weakness, thereafter fail to maintain the effectiveness of our internal control over financial reporting or our disclosure controls and procedures, we could be subjected to regulatory scrutiny, civil or criminal penalties or shareholder litigation, the defense of any of which could cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, and we could be required to pay damages to settle such actions if any such actions were not resolved in our favor.

Additionally, these remediation measures, as well as testing and maintaining controls, are time consuming, result in Westrock incurring significant costs, and place significant demands on our financial and operational resources.

If we (i) fail to complete the remediation of these material weaknesses, or after having remediated such material weakness, thereafter fail to maintain the effectiveness of our internal control over financial reporting or our disclosure controls and procedures, (ii) identify additional material weaknesses (iii) if Westrock’s independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting once it is no longer an emerging growth company or (iv) if Westrock is unable to conclude in our quarterly and annual reports that our disclosure controls and procedures are effective, we could be subjected to regulatory scrutiny, civil or criminal penalties or shareholder litigation, the defense of any of which could cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, and we could be required to pay damages to settle such actions if any such actions were not resolved in our favor.

Continued or future failure to maintain effective internal control over financial reporting could also result in financial statements that do not accurately reflect our financial condition or results of operations.

There can be no assurance that we will not conclude in the future that the existing material weaknesses continue to exist or that we will not identify any significant deficiencies or other material weaknesses that will impair our ability to report our financial condition and results of operations accurately or on a timely basis.

Westrock may identify additional material weaknesses in the future or fail to maintain effective internal control over financial reporting, which may result in material misstatements of Westrock’s consolidated financial statements.

As a result, investors may lose confidence in the accuracy of our financial reports, which would harm our business and the trading price of our Common Shares.

To comply with the requirements of being a public company, Westrock has undertaken various actions, and will take additional actions, such as remediating the material weaknesses described above, implementing additional internal controls and procedures and hiring internal audit staff or consultants.

Testing and maintaining internal controls can divert our management’s attention from other matters that are important to the operation of our business.

Additionally, when evaluating internal controls over financial reporting, Westrock may identify additional material weaknesses that it may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.

If Westrock identifies any additional material weaknesses in its internal control over financial reporting or is unable to remediate the material weakness described above or comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or if Westrock’s independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting once it is no longer an emerging growth company, or if Westrock is unable to conclude in our quarterly and annual reports that our disclosure controls and procedures are effective, investors may lose confidence in the accuracy and completeness of Westrock’s financial reports and the market price of our Common Shares could be negatively affected, and Westrock could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

In addition, if Westrock fails to remediate any material weakness, including the material weakness described above, our financial statements could be inaccurate and Westrock could face restricted access to capital markets.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect Westrock’s business, investments and results of operations.

Westrock is subject to laws and regulations enacted by national, regional and local governments.

In particular, it is required to comply with SEC and other legal requirements.

Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.

Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on Westrock’s business, investments and results of operations.

In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on Westrock’s business and results of operations.

The accuracy of Westrock’s financial statements and related disclosures could be adversely affected if the judgments, assumptions or estimates used in Westrock’s critical accounting policies are inaccurate.

The preparation of financial statements and related disclosure in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in Westrock’s consolidated financial statements and related notes.

Westrock’s critical accounting policies, which are included in the section captioned “ Management’s Discussion

and Analysis of Financial Condition and Results of Operations ” in this Annual Report, describe those significant accounting policies and methods used in the preparation of Westrock’s consolidated financial statements that Westrock considers “critical” because they require judgments, assumptions and estimates that materially affect Westrock’s consolidated financial statements and related disclosures.

As a result, if future events differ significantly from the judgments, assumptions and estimates in Westrock’s critical accounting policies, those events or assumptions could have a material impact on Westrock’s consolidated financial statements and related disclosures.

If future events differ significantly from the judgments, assumptions and estimates in Westrock’s critical accounting policies, those events or assumptions could have a material impact on Westrock’s consolidated financial statements and related disclosures.

In addition, changes in accounting interpretations or assumptions could impact Westrock’s financial statements and Westrock’s ability to timely prepare Westrock’s financial statements.

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Westrock’s certificate of incorporation and bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover.

These provisions include, among others, those establishing:

● the division of our board of directors until the 2028 meeting of our stockholders into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time-consuming and difficult;

● the inability of our stockholders to call a special meeting;

● rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;

● the right of our board of directors to issue preferred stock without stockholder approval;

● the inability of stockholders to remove directors without cause until the class to which such directors belong is declassified;

● the ability of our directors, not our stockholders, to fill vacancies on the board of directors;

● certain terms of the Series A Preferred Shares, including the (i) rights of the holders of the Series A Preferred Shares to vote as a separate class with respect to certain matters, including amendments to the certificate of incorporation and bylaws of Westrock that would adversely affect the rights, preferences, privileges, voting power or special rights of the Series A Preferred Shares and, for so long as the BBH Investors own at least sixty percent (60%) of the Series A Preferred Shares that they owned as of August 26, 2022, any Fundamental Change in which the holders of Series A Preferred Shares would receive less than $18.50 per share (subject to customary adjustments), and (ii) the rights of the Preferred Shares in a Fundamental Change to receive at least a specified amount.

On April 4, 2022, Westrock entered into the Investor Rights Agreement with (i) Westrock Group, LLC, The Stephens Group, LLC, Sowell Westrock, L.P.

These provisions include, among others, our classified board structure, the inability of our stockholders to call a special meeting, rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings, the right of our board of directors to issue preferred stock without stockholder approval, the inability of stockholders to remove directors without cause until the class to which such directors belong is declassified , the ability of our directors, not our stockholders, to fill vacancies on the board of directors and certain rights of the Series A Preferred shareholders.

On June 29, 2023, Westrock entered into the Amended and Restated Investor Rights Agreement (the “Amended and Restated Investor Rights Agreement”) with (i) Westrock Group, LLC, The Stephens Group, LLC, Sowell Westrock, L.P.

and any affiliate of Joe T.

Ford, Scott T.

Ford, Witt Stephens, Jim Sowell or their respective families that becomes an owner of any shares of Westrock’s common stock from another WCC Investor and

becomes a party to the Investor Rights Agreement, so long as such person remains an affiliate of Joe T.

Ford, Witt Stephens, Jim Sowell or their respective families that becomes an owner of any shares of Westrock’s common stock from another WCC Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains an affiliate of Joe T.

Ford, Scott T.

Ford, Witt Stephens, Jim Sowell or their families (the “WCC Investors”), (ii) BBH Capital Partners V, L.P., BBH Capital Partners V-A, L.P., BBH CPV WCC Co-Investment LLC, and any controlled affiliate of Brown Brothers Harriman & Co.

and (iii) Riverview Sponsor Partners, LLC (“Riverview Sponsor”), which also contains certain provisions that may prevent or delay attempts to acquire a controlling interest in Westrock.

These include the following provisions:

● The board of directors is required to consist of ten directors and each of the WCC Investors, the BBH Investors and Riverview Sponsor are entitled to nominate for inclusion in Westrock’s slate of individuals for election to the board of directors two directors if they (or, in the case of Riverview Sponsor, a specified reference group) own at least 10% of the outstanding stock of Westrock and one director if they (or, in the case of Riverview Sponsor, a specified reference group) own at least 5% but less 10% of the outstanding stock of Westrock.

● Any increase or decrease of the size of the Westrock board of directors above or below ten directors requires the consent of each of the WCC Investors, the BBH Investors and Riverview Sponsor, so long as they have the right to designate at least one director.

● If an Escalation Event is ongoing during the period during which the BBH Investors have the right to designate at least one director pursuant to the Investor Rights Agreement, Westrock may not take specified actions, that would require lender consent under the Credit Facility, without the consent of the BBH Investors.

(the “BBH Investors”) that becomes an owner of any shares of Westrock’s common stock or the Series A Convertible Preferred Stock from another BBH Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains a controlled affiliate of Brown Brothers Harriman & Co., (iii) Riverview Sponsor Partners, LLC and any controlled affiliate of Brad Martin that becomes an owner of any shares of Westrock’s common stock from another RVAC Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains an affiliate of Brad Martin (the “RVAC Investors”) and (iv) HF Direct Investments Pool, LLC and any controlled affiliate of HF Capital, LLC that becomes an owner of any shares of Westrock’s common stock from another HF Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains an affiliate of HF Capital, LLC (the “HF Investors” together with the WCC Investors, BBH Investors and RVAC Investors, the “Investor Parties”).

The Amended and Restated Investor Rights Agreement contains certain provisions that may prevent or delay attempts to acquire a controlling interest in Westrock, including board designation and other approval rights of the Investor Parties.

In addition, because Westrock does not elect to be exempt from Section 203 of the DGCL, this provision could also delay or prevent a change of control that you may favor.

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Westrock is an “emerging growth company,” as defined in the JOBS Act.

Westrock could continue to be considered an emerging growth company for up to five years, although Westrock would lose that status sooner if Westrock’s gross revenues exceed $1.235 billion, if it issues more than $1 billion in nonconvertible debt in a three-year period, or if the fair value of Common Shares held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter (and Westrock has been a public company for at least 12 months and has filed one annual report on Form 10-K).

For as long as Westrock continues to be an emerging growth company, Westrock may take advantage of exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies, including reduced disclosure obligations regarding executive compensation in Westrock’s periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

It is unclear whether investors will find Common Shares less attractive because Westrock may rely on these exemptions.

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This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

Westrock has elected to avail itself of this exemption from new or revised accounting standards and, therefore, while Westrock is an emerging growth company, Westrock will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies.

Westrock has elected to avail itself of this exemption from new or revised accounting standards.

As a result, Westrock’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates, and Westrock will incur additional costs in connection with complying with the accounting standards applicable to public companies at such time or times as they become applicable to Westrock.

Any proceeds that we may receive from the exercise of the Warrants is highly dependent on the price of our Common Shares.

As of December 31, 2022, we have 19,372,916 outstanding warrants to purchase our Common Shares (the “Warrants”), which expire on the earliest to occur of August 26, 2027 (i.e.

As of December 31, 2023, we had 19,144,120 outstanding warrants to purchase 19,144,120 Common Shares (the “Warrants”), exercisable at an exercise price of $11.50 per share, which expire on the earliest to occur of August 26, 2027 (i.e.

the five year anniversary of the Closing), redemption or liquidation.

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If the price of our Common Shares is less than $11.50 per share, it is unlikely that such holders will exercise their Warrants.

As of December 30, 2022 (the last trading day of 2022), the closing price of our Common Shares was $13.36 per share, which is greater than the Warrant exercise price of $11.50.

Even if our warrants are in the money, there can be no assurance that warrant holders will exercise their warrants prior to their expiration.

Our Warrants that are listed on the NASDAQ (the “Public Warrants”), under certain conditions as described in their warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or exercised on a cashless basis.

Our Warrants that are not listed on the NASDAQ (the “Private Placement Warrants”) are not redeemable so long as they are held by Riverview Sponsor or its permitted transferees (except as otherwise set forth herein).

Our Westrock Public Warrants under certain conditions, as described in their warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis.

Our Westrock Private Placement Warrants are not redeemable so long as they are held by the Riverview Sponsor Partners, LLC or its permitted transferees.

As such, it is possible that we may never generate any or only very limited cash proceeds from the exercise of our warrants.

To the extent such warrants are exercised, additional Common Shares will be issued, which will result in dilution to the holders of our Common Shares and increase the number of Common Shares eligible for resale in the public market.

Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Shares, which increases the likelihood of periods when our warrants will not be in the money prior to their expiration.

Risks Related to Our Industry

Increases in the cost of green coffee may not be able to be passed through to customers, which could adversely impact our gross margins and profitability.

Our primary raw material green coffee is an exchange-traded agricultural commodity that is subject to price fluctuations, depending on a variety of factors, including outside speculative influences such as indexed and algorithmic commodity funds, climate patterns in coffee-producing countries, economic and political conditions affecting coffee-producing countries such as unrest and armed conflict, foreign currency fluctuations, real or perceived supply shortages, crop disease (such as coffee rust) and pests, general increase in farm inputs and costs of production, an increase in green coffee purchased and sold on a negotiated basis rather than directly on commodity markets in response to higher production costs relative to “C” market prices, acts of terrorism, pandemics or other disease outbreaks (including the COVID-19 pandemic), government actions and trade barriers or tariffs, and the actions of producer organizations that have historically attempted to influence green coffee prices through agreements establishing export quotas or by otherwise limiting coffee supplies.

Our primary raw material green coffee is an exchange-traded agricultural commodity that is subject to price fluctuations, depending on a variety of factors, including outside speculative influences such as indexed and algorithmic commodity funds, climate patterns in coffee-producing countries, economic and political conditions affecting coffee-producing countries such as unrest and armed conflict, foreign currency fluctuations, real or perceived supply shortages, crop disease (such as coffee rust) and pests, general increase in farm inputs and costs of production, an increase in green coffee purchased and sold on a negotiated basis rather than directly on commodity markets in response to higher production costs relative to “C” market prices, acts of terrorism, pandemics or other disease outbreaks, government actions and trade barriers or tariffs, and the actions of producer organizations that have historically attempted to influence green coffee prices through agreements establishing export quotas or by otherwise limiting coffee supplies.

Additionally, specialty green coffees tend to trade on a negotiated basis at a premium above the “C” market price.

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Failure to properly execute an effective hedging strategy with respect to the price of green coffee may materially adversely affect our business and operating results.

Recently, there has been heightened volatility in the “C” market price that has driven prices, at times, to five-year highs.

This volatility has been driven by uncertainty over several factors, including the impact of weather patterns in coffee producing regions, global supply chain constraints and shipping shortages, and speculative trading.

Specifically, severe frosts and drought in Brazil threaten to negatively impact crop yields for multiple harvests, which could reduce supply and increase costs.

As noted above, while these derivative instruments allow us to hedge the “C” market price volatility for a portion of our green coffee supply, our hedging strategy cannot completely mitigate our exposure to the “C” market price risk.

Fluctuations in other commodity prices and in the availability of certain of our ingredients and packaging materials could negatively affect our margins and profitability.

In addition to green coffee, our other commodity inputs are also exposed to the risk of cost fluctuations.

These inputs include tea, spices, and the materials used in our packaging, such as carton board and plastic.

These inputs include tea, spices, sugar, dairy and the materials used in our packaging, such as carton board and plastic.

Although these commodities are available from a number of sources, we have very little control over the factors that can influence the prices we pay, including economic and political conditions, foreign currency fluctuations, transportation and storage costs, export restrictions, weather conditions and global climate patterns, and natural disasters (including floods, droughts, frosts, earthquakes and hurricanes).

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We are exposed to risks associated with the interruption of supply and increased costs as a result of our reliance on third-party transportation carriers for shipment of our products.

Our ability to maintain our high-quality coffee product offering depends in part on our ability to acquire ingredients that meet our specifications from reliable suppliers.

To date, notwithstanding the current supply chain disruptions which we believe have contributed to increased costs, deliveries have been consistent and not a source of material disruption to our business.

However, shortages or interruptions in the supply of ingredients caused by unanticipated demand, problems in production or distribution, coffee bean contamination, inclement weather or other conditions could adversely affect the availability and quality of our ingredients in the future, which could harm our business, financial condition or results of operations.

If any of our distributors or suppliers performs inadequately, or our distribution or supply relationships are materially disrupted for any reason, our business, financial condition or results of operations could be adversely affected.

If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause coffee shortages, which could cause a customer to purchase less of our coffee products.

If that were to happen, affected customers could experience significant reductions in sales during the shortage or thereafter, if coffee drinkers change their preferences as a result.

This reduction in sales could materially adversely affect our business, financial condition or results of operations.

In addition, our approach to competing in the beverage industry depends in large part on our continued ability to provide coffee products that are sustainably sourced.

As we increase our use of these ingredients, the ability of our suppliers to expand output or otherwise increase their supplies to meet our needs may be constrained.

We could face difficulties to obtain a sufficient and consistent supply of these ingredients on a cost-effective basis.

Our business depends on our relations with key suppliers to maintain a steady supply of green coffee and tea.

If any of these supply relationships deteriorate or we are unable to renegotiate contracts with suppliers (with similar or more favorable terms) or find alternative sources for supply, we may be unable to procure a sufficient quantity of high-quality coffee beans, tea and other raw materials at prices acceptable to us or at all which could negatively affect our results of operations.

Further, nonperformance by suppliers could expose us to supply risk under coffee purchase commitments for delivery in the future.

Additionally, supply is affected by many factors in the coffee-growing countries including weather, pest damage, economic conditions, acts of terrorism, as well as efforts by coffee growers to expand or form cartels or associations.

Our operations are also exposed to the political and social environment of the emerging and less developed markets from which we source coffee beans, including Africa, Indonesia, and Central and South America.

These regions have the potential for civil and political unrest, and such instability could affect our ability to purchase coffee from those regions.

If green coffee beans from a region become unavailable or prohibitively expensive, we could be forced to use alternative coffee beans or discontinue certain blends, which could adversely impact our sales.

Any material interruption in our supply chain, such as material interruption of roasted coffee supply due to the casualty loss at any of our roasting plants or suppliers, interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, pandemics, social or labor unrest, natural disasters or political disputes and military conflicts that cause a material disruption in our supply chain could have a negative impact on our business and our profitability.

Product shortages could result in disruptions in our ability to deliver products to our customers, a deterioration of our relationship with our customers, decreased revenues or an inability to expand our business.

The industry for coffee and liquid extract consumables is highly competitive, resulting in a high degree of competitive pressure on our products.

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In addition, competitors may be able to develop roasting or blending methods that are more advanced than our production methods, which may also harm our competitive position.

Increased competition in coffee or other beverage channels may adversely affect sales of our products.

If we do not succeed in differentiating ourselves through our product offerings or if we are not effective in setting proper pricing, then our competitive position may be weakened, we could fail to retain our existing customer base, and our sales and profitability may decline.

Our inability to secure an adequate supply of key raw materials, including green coffee and tea, or disruption in our supply chain, could result in increased costs and adversely affect our business.

Our business depends on our relations with key suppliers to maintain a steady supply of green coffee and tea.

Further, nonperformance by suppliers could expose us to supply risk under coffee purchase commitments for delivery in the future.

Additionally, supply is affected by many factors in the coffee-growing countries including

weather, pest damage, economic conditions, acts of terrorism, as well as efforts by coffee growers to expand or form cartels or associations.

These regions have the potential for civil and political unrest, and such instability could affect our ability to purchase coffee from those regions.

Quality control problems or food safety issues could adversely affect our sales and brand reputation, lead to product recalls or result in product liability claims.

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Additionally, clean water is critical to the preparation of coffee, tea and other beverages, and we have no ability to ensure that our customers use a clean water supply to prepare these beverages.

Instances or reports of food safety issues involving our products, whether or not accurate, such as unclean water supply, food or beverage-borne illnesses, tampering, contamination, mislabeling, or other food or beverage safety issues, including due to the failure of our third-party co-packers to maintain the quality of our products and to comply with our product specifications, could damage the value of our brands, negatively impact sales of our products, and potentially lead to product recalls, production interruptions, product liability claims, litigation or damages.

A significant product liability claim against us, whether or not successful, or a widespread product recall, may reduce our sales and harm our business.

We maintain product liability insurance coverage in amounts we believe to be adequate.

However, we cannot assure stockholders that we will not incur claims or liabilities that exceed the amount of our insurance coverage.

A significant product liability claim (whether or not successful), a product liability judgment against us or a widespread product recall or the damage to our reputation resulting therefrom could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

Climate change, severe weather patterns, and water scarcity could have a material adverse effect on our business and results of operations.

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If we are unable to adjust our production to these seasonal variations, we may not be able to fulfill demand for our products or we may overproduce our products, either of which could adversely affect our performance.

Risks Related to General Economic Conditions

A resurgence of the novel coronavirus, or COVID-19, and emergence of new variants of the virus could materially adversely affect our financial condition and results of operations.

In fiscal years 2020 and 2021, the COVID-19 pandemic had a material impact on our financial condition and results of operations.

The measures taken around the country to contain the spread of the virus adversely affected our business and those of our customers.

The outbreak led to the implementation of restrictive measures by federal, state and local government authorities in an effort to contain COVID-19.

These measures included travel bans and restrictions, quarantines, shelter-in-place orders, and shutdowns and constrained our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.

While almost all of these restrictions have been eased, the emergence of new variants or sub-variants of COVID-19 (some of which may be more transmissible or more lethal) may result in the reinstitution of certain of the restrictions and increased economic uncertainty, which could have a material adverse effect on our financial condition and results of operations.

Our revenue and profits depend on the level of customer spending for discretionary items, which is sensitive to general economic conditions and other factors.

Our products are discretionary items for end-use customers.

Risks Related to General Economic and Other Conditions

Our business, revenue and profits and the businesses of our suppliers and our customers depend on the level of customer spending for discretionary items, which is sensitive to general economic conditions and other factors.

Our products are discretionary items for end-use customers, and customer demand is highly sensitive to changes in overall economic, political and other conditions that impact consumer confidence and spending.

Global economic forces and conditions beyond our control affect our business both directly and indirectly through the business of our suppliers and our customers.

Therefore, the success of our business depends significantly on economic factors and trends in consumer spending.

Consumers also have discretion as to where to spend their disposable income and may choose to purchase other items.

As global economic conditions continue to be volatile, and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to declines.

There are a number of factors that influence consumer spending, including actual and perceived economic conditions, consumer confidence, disposable consumer income, consumer credit availability, unemployment, inflation, interest rates, energy costs (including the price of gasoline), tax rates in the markets where our products are sold to end-use customers, global conflicts, natural disasters, climate change, acts of terrorism and public health issues (such as the COVID-19 pandemic, which had a material impact on our financial condition in fiscal years 2020 and 2021).

For example, in response to the COVID-19 pandemic, the response and restrictive measures taken around the country (e.g., travel bans and restrictions, quarantines, shelter-in-place orders, and shutdowns) to contain the spread of the virus adversely affected our business by, among other things, constraining our workforce and operations and the operations of our customers, vendors and suppliers.

Consumers also have discretion as to where to spend their disposable income and may choose to forgo our products or purchase other items.

As global economic and other conditions continue to be volatile, and economic uncertainty remains, trends in consumer discretionary spending and levels of disposable income remain unpredictable and subject to declines.

Any of these factors could harm discretionary consumer spending, resulting in a reduction in demand for our products, decreased prices, increased costs to make sales, and harm to our business and results of operations.

Our business and the businesses of our suppliers are subject to macroeconomic conditions that, in the event of deterioration, could adversely affect our financial condition, operating results and cash flow.

Global economic forces and conditions beyond our control affect our business both directly and indirectly through the business of our suppliers.

We depend on developing and maintaining close relationships with our suppliers to sell us quality products on favorable terms.

These relationships can be harmed by macro-economic factors beyond our control, including a general decline in the economy and economic conditions, the ongoing war between Russia and Ukraine, and inflation in the costs for goods and services.

These events could negatively influence our suppliers, making it more difficult for them to meet their delivery and product-quality obligations to us.

The Westrock board of directors is responsible for overseeing the risks to Westrock related to the ongoing conflict between Russia and Ukraine.

The Westrock board of directors has been routinely evaluating with Westrock’s management and its financial advisors the possible impact of such conflict on Westrock, including increased risk of cybersecurity attacks, supply chain disruptions and commodity price increases.

As Westrock does not have direct operations or material direct customers in Russia or Ukraine, the direct impact of the ongoing conflict on Westrock is likely to be limited.

Nonetheless, global macro-economic effects of the conflict, such as higher interest rates and higher coffee commodity prices may increase our costs, which we may not be able to pass on to our customers.

These financial and operational difficulties faced by both us and our suppliers could also increase the cost of the products we purchase, the timing of settlement for our obligations to the suppliers, or our ability to source products from them.

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Supply chain disruptions and cost increases related to inflation are having, and could continue to have, an adverse effect on our business, operating results and financial condition.

In 2021 and 2022, we experienced inflationary cost increases in our underlying expenses, including commodity prices, interest rates, transportation costs and labor.

We have also been impacted by global supply chain disruption, which has increased lead times, working capital needs and freight costs.

While we have taken steps to minimize the impact of these increased costs by working closely with our suppliers and customers, global supply chain disruption may deteriorate and inflationary pressures may increase further in 2023, which could adversely affect our business, financial condition, results of operations and cash flows.

In 2021 and 2022, the global supply chain disruptions increased lead times for obtaining raw materials coming from outside of the U.S.

for use in our Beverage Solutions segment.

Overall, we saw ocean freight voyage time increase by upwards of 15 days, with unexpected transshipment stops related to container delays.

In addition, these disruptions led to an increase in ocean freight costs as well as over-the-road haulage domestically, that impacted both our Beverage Solutions and Sustainable Sourcing & Traceability segments.

To mitigate these disruptions, we worked with vendors to increase the amount of on-hand inventory in U.S.

warehouses from 3 weeks to 10 weeks of stock levels.

In addition, we continued to purchase on a forward basis, sufficient volumes needed to compensate for ocean freight delays.

At the beginning of 2021, we signed a 3-year agreement with our largest U.S.

warehouse and over the road haulage vendor that allowed for a fuel surcharge in exchange for a dedicated fleet.

While our inbound over-the-road freight rates increased in 2022 compared to 2021, due to fuel price increases, we have not experienced any lack of available trucking assets.

We may not be able to pass all of the impact onto our customers, which will negatively impact our results.

Westrock attempts to mitigate the impacts of inflation and supply chain disruptions, wherever possible.

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At this time, it is too early to determine what impact these inflationary pressures and supply chain disruptions will have on our long-term growth strategies, as there is uncertainty in how long these risks may persist, and to what extent we will be successful in passing these increased costs to our customers.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors