What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 287 added, 440 removed, 481 unchanged (60% of the section changed)

3 unchanged sentences

(Thousands, except par value)

September 30, 2023

March 31, 2024

December 31, 2023

18 unchanged sentences

Long-term debt, net

Convertible notes payable - related party, net

Deferred income taxes

Operating lease liabilities

Warrant liabilities

2 unchanged sentences

Commitments and contingencies (Note 20)

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

Series A Convertible Preferred Shares, $ 0.01 par value, 24,000 shares authorized, 23,512 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively, $ 11.50 liquidation value

Shareholders' Equity

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

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

Common stock, $ 0.01 par value, 300,000 shares authorized, 88,282 shares and 88,051 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in-capital

Accumulated deficit

Accumulated other comprehensive loss

Total shareholders' equity attributable to Westrock Coffee Company

Non-controlling interest

Accumulated other comprehensive income

Total shareholders' equity

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Thousands, except per share data)

1 unchanged sentence

Selling, general and administrative expense

Acquisition, restructuring and integration expense

Transaction, restructuring and integration expense

Loss on disposal of property, plant and equipment

Total operating expenses

Income (loss) from operations

Loss from operations

Other (income) expense

Interest expense, net

Interest expense

Change in fair value of warrant liabilities

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

Loss before income taxes and equity in earnings from unconsolidated entities

Income tax expense (benefit)

Equity in (earnings) loss from unconsolidated entities

Net income (loss)

Net income (loss) attributable to non-controlling interest

Net income (loss) attributable to shareholders

Participating securities' share in earnings

Net loss attributable to shareholders

Accretion of Series A Convertible Preferred Shares

Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net

Common equivalent preferred dividends

Accumulating preferred dividends

Net income (loss) attributable to common shareholders

Earnings (loss) per common share:

Net loss attributable to common shareholders

Loss per common share:

Weighted-average number of shares outstanding:

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

Three Months Ended March 31,

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Total other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive loss

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive income (loss) attributable to shareholders

Participating securities' share in earnings

Comprehensive loss attributable to shareholders

Accretion of Series A Convertible Preferred Shares

Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net

Common equivalent preferred dividends

Accumulating preferred dividends

Comprehensive income (loss) attributable to common shareholders

Comprehensive loss attributable to common shareholders

See accompanying notes to condensed consolidated financial statements.

WESTROCK COFFEE COMPANY

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

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Comprehensive

2 unchanged sentences

Income (Loss)

Equity (Deficit)

Balance at June 30, 2022

Net income (loss)

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

Issuance of common shares related to PIPE financing

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

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

Common Equivalent Preferred Unit dividends ( 0.02 per unit)

Loss on extinguishment of Common Equivalent Preferred Units

Other comprehensive income (loss)

Equity-based compensation

Balance at September 30, 2022

Balance at June 30, 2023 (2)

Balance at December 31, 2022

Net income (loss)

Issuance of common shares, net of issuance costs

Issuance of common shares related to acquisitions

Issuance of common shares related to Public Warrant exercise

Issuance of common shares related to stock options exercised

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

Accretion of convertible preferred stock

Other comprehensive income (loss)

Equity-based compensation

Net share settlement of equity awards

Balance at September 30, 2023

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

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

See accompanying notes to condensed consolidated financial statements.

WESTROCK COFFEE COMPANY

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

(Unaudited) (continued)

Comprehensive

Non-Controlling

Paid-in Capital

Income (Loss)

Equity (Deficit)

Balance at December 31, 2021

Net income (loss)

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

Issuance of common shares related to PIPE financing

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

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

Common Equivalent Preferred Unit dividends ( 0.02 per unit)

Loss on extinguishment of Common Equivalent Preferred Units

Accretion of Series A Convertible Preferred Shares

Other comprehensive income (loss)

1 unchanged sentence

Net share settlement of equity awards

Accumulating preferred dividends

Balance at September 30, 2022

Balance at March 31, 2023

Balance at December 31, 2023

Net income (loss)

Issuance of common shares related to acquisitions

Issuance of common shares related to Public Warrant exercise

Issuance of common shares related to stock options exercised

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

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

Issuance of common shares, net of issuance costs

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at September 30, 2023

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

Balance at March 31, 2024

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Equity-based compensation

Paid-in-kind interest added to debt principal

Provision for credit losses

Amortization of deferred financing fees included in interest expense, net

Write-off of unamortized deferred financing fees

Loss on debt extinguishment

Amortization of deferred financing fees included in interest expense

Loss on disposal of property, plant and equipment

2 unchanged sentences

Foreign currency transactions

Deferred income tax (benefit) expense

Deferred income tax expense (benefit)

Change in operating assets and liabilities:

4 unchanged sentences

Accrued liabilities and other

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

2 unchanged sentences

Acquisition of business, net of cash acquired

Acquisition of equity method investments and non-marketable securities

Proceeds from sale of property, plant and equipment

3 unchanged sentences

Proceeds from debt

Proceeds from supply chain financing program

Payments on supply chain financing program

Proceeds from related party debt

Debt extinguishment costs

Proceeds from supply chain financing program

Proceeds from convertible notes payable

Payment of debt issuance costs

Proceeds from de-SPAC merger and PIPE financing

Proceeds from common equity issuance

Payment of common equity issuance costs

Payment of preferred equity issuance costs

Net proceeds from (repayments of) repurchase agreements

1 unchanged sentence

Proceeds from exercise of Public Warrants

Common equivalent preferred dividends

Payment for purchase of non-controlling interest

Payment for taxes for net share settlement of equity awards

1 unchanged sentence

Effect of exchange rate changes on cash

Net increase in cash and cash equivalents and restricted cash

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

2 unchanged sentences

Property, plant and equipment acquired but not yet paid

Issuance of common shares related to Public Warrant exercise

Issuance of common shares related to restricted stock units vesting

Issuance of common shares related to acquisitions

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

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

Accretion of convertible preferred shares

Accumulating preferred dividends

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

Exchange of Redeemable Common Equivalent Preferred Units for common shares

Related party debt exchanged for common shares

Loss on extinguishment of Common Equivalent Preferred Units

See accompanying notes to condensed consolidated financial statements.

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

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Cash and cash equivalents

13 unchanged sentences

Revenues primarily consist of sales from commodity contracts related to forward sales of green coffee.

On August 26, 2022 (the “Closing Date”), pursuant to the terms of the Transaction Agreement, dated April 4, 2022, by and among the Company, Riverview Acquisition Corp., a special purpose acquisition vehicle and a Delaware corporation (“Riverview”), Origin Merger Sub I, Inc.

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

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

See Note 4 for additional disclosures related to the Transaction.

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

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

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

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

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

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

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

Basis of Presentation and Consolidation

17 unchanged sentences

Accordingly, certain significant accounting policies and other disclosures normally provided have been omitted from the accompanying Condensed Consolidated Financial Statements and related notes since such items are disclosed in our audited financial statements.

Common Unit Conversion

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

For the periods prior to the Closing, the number of outstanding units, weighted average number of outstanding units, loss per common unit, equity-based compensation and other financial amounts previously expressed on the basis of Common

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

Reclassifications

Certain reclassifications of prior years’ amounts have been made to conform with the current period financial statements presentation.

These reclassifications had no impact on prior years’ net income as previously reported.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes.

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses, useful lives of property, plant and equipment, incremental borrowing rates for lease liability measurement, fair values of forward purchase and sales contracts, green coffee associated with forward contracts, warrant liabilities, share-based compensation, contingencies, and income taxes, among others.

4 unchanged sentences

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

The Company believes that proceeds from the equity issuance in August 2023, projected cash flow from operations and available borrowings under its Credit Agreement will be sufficient to fund operations for at least the next twelve months.

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

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

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

The Company believes that projected cash flow from operations, including current projections of the timing and amount of cash flows to be generated from our Conway, Arkansas extract and ready-to-drink manufacturing facility (the “Conway Facility”), and available borrowings under its Credit Agreement, as amended, will be sufficient to fund operations for at least the next twelve months.

However, during the three months ended March 31, 2024, the Company incurred net losses of $ 23.7 million.

If we are unable to achieve our profitability growth projections and maintain our minimum liquidity requirements, as a result of, for example, experiencing any adverse impact of changes or delays in the estimated timing and volume of products to be commercialized in our Conway Facility over the next twelve months, and generate sufficient cash flows from operations, it may restrict our liquidity and capital resources and our ability to maintain compliance with our financial covenants.

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

5 unchanged sentences

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

We consider our accounts

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

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Balance at beginning of period

3 unchanged sentences

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

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

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

For the three months ended March 31, 2024 and 2023, we recognized $ 0.7 million of net unrealized losses and $ 2.3 million of net unrealized gains, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

Capitalized Interest

1 unchanged sentence

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

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

For the three months ended March 31, 2024, we capitalized $ 2.8 million of interest costs.

No such interest was capitalized during the three months ended March 31, 2023.

Supply Chain Finance Program

6 unchanged sentences

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

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

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

September 30, 2023

Confirmed obligations outstanding at the beginning of the year

Invoices confirmed during the year

Confirmed invoices paid during the year

Confirmed obligations outstanding at the end of the quarter

Warrant Liabilities

We account for warrants assumed in connection with the Transaction (see Note 4) in accordance with the guidance contained in ASC 815, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.

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

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

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

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

For the three and nine months ended September 30, 2023, the Company recognized $ 25.1 million and $ 18.8 million of gains, respectively, related to the change in fair value of warrant liabilities, which is recognized in other (income) expense in the Condensed Consolidated Statements of Operations.

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

Equity Method Investments

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

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

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

Equity Investments

The Company holds strategic investments in other companies.

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

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

The Company does not exercise significant influence over these companies.

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

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

At March 31, 2024 and December 31, 2023, there were $ 78.7 million and $ 78.1 million of obligations outstanding under the Program, respectively.

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

7 unchanged sentences

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

The effective income tax rates for the nine months ended September 30, 2023 and 2022 were 18.7 % and 13.0 %, respectively.

The Company’s effective tax rate for the current period differs from the federal statutory rate primarily due

to an increase in the valuation allowance against domestic deferred tax assets and permanent differences, including nontaxable income related to a change in the fair value of warrants.

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

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

The effective income tax rates for the three months ended March 31, 2024 and 2023 were ( 32.6 )% and 50.2 %, respectively.

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

The effective tax rate for the three months ended March 31, 2024 differs from the effective tax rate for the same period in 2023 primarily due to the Company’s full year forecasted ordinary income (loss) in the periods.

On December 20, 2021, the Organization for Economic Co-operation and Development ("OECD") released Pillar Two Model Rules, which provide for a global minimum tax of 15% on multinational entities.

Although the U.S.

has not yet adopted the Pillar Two Model Rules, several foreign countries enacted Pillar Two legislation in 2023 with an initial effective date of January 1, 2024.

The impact of Pillar Two legislation on the Company's 2024 effective tax rate is expected to be minimal.

Management will continue to monitor future Pillar Two legislation in relevant jurisdictions for any impacts to the Company's effective tax rate.

Recently adopted accounting pronouncements

4 unchanged sentences

ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The Company adopted the applicable amendments within ASU 2022-04 on a retrospective basis effective January 1, 2023.

The Company adopted the amendments within ASU 2022-04 on a retrospective basis effective January 1, 2023.

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

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

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

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

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

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

ASU 2021-08 was effective for years beginning after December 15, 2022.

The adoption of ASU 2021-08 did not have a significant impact on the Company’s financial position or results of operations .

De-SPAC Merger Transaction

On the Closing Date, the Company completed the Transaction with Riverview.

At Closing, the Company issued 12,868,151 Common Shares to public and class B shareholders of Riverview, receiving $ 49.8 million of the cash held in the trust account of Riverview, which is net of $ 17.1 million of Riverview transaction expenses that were either paid by Riverview prior to Closing or offset against proceeds received by the Company at Closing.

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

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

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

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

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

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

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

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

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

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

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

Accordingly, for accounting purposes, the Transaction is treated similar to an equity contribution in exchange for the issuance of Common Shares.

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

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

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

The Company and Riverview incurred $ 24.0 million and $ 17.1 million, respectively, of expenses related to the Transaction.

These expenses consist of underwriting fees, professional services (legal, accounting, advisory, etc.) and other direct expenses associated with the Transaction.

Costs incurred by Westrock were initially capitalized as incurred in the other assets on the Condensed Consolidated Balance Sheets.

As a result of the Transaction, $ 24.0 million of transaction costs incurred by the Company related to the issuance of shares were recognized in additional paid-in capital as a reduction of proceeds.

The $ 17.1 million of expenses incurred by Riverview were either paid by Riverview prior to Closing or netted against proceeds received by the Company at Closing.

Common Stock Warrants

The Company assumed 12,500,000 publicly-traded Riverview Warrants (“Public Warrants”) and 7,400,000 private placement Riverview Warrants (“Private Warrants”), which were originally issued by Riverview in connection with its initial public offering and, as a result of the assumption by the Company, became Westrock Warrants.

The Public Warrants assumed by Westrock are referred to as the “Westrock Public Warrants” and the Private Warrants assumed by Westrock are referred to as the “Westrock Private Warrants”.

The Westrock Warrants are included in warrant liabilities on the Company’s Condensed Consolidated Balance Sheet.

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

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

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

(ii) at a price of $ 0.01 per warrant;

(iii) upon not less than 30 days ’ prior written notice of redemption to each warrant holder;

and (iv) if, and only if, the reported last sale price of the Common Shares for any 20 trading days within a 30 -trading day period ending three business days before Westrock sends the notice of redemption to the warrant holders equals or exceeds $ 18.00 per share.

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

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

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

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

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

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

Recently issued accounting pronouncements

ASU 2023-07 – Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The amendments in the update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.

ASU 2023-07 requires disclosure to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and a description of other segment items by reportable segment.

ASU 2023-07 also requires all annual disclosures currently required by Topic 280 to be included in interim periods.

The amendments in the update are effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 31, 2024, with early adoption permitted.

The amendments in the update require retrospective application to all prior periods presented in the financial statements.

The Company is currently evaluating the impact that ASU 2023-07 will have on our consolidated financial statements.

ASU 2023-09 – Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The amendments in the update relate to the rate reconciliation and income taxes paid disclosure and are intended to improve transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the tax reconciliation and (2) income taxes paid disaggregated by jurisdiction.

The other amendments in the update are intended to improve comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) and (2) removing disclosures that no longer are considered cost beneficial or relevant.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance.

The amendments in the update should be applied on a prospective basis, with retrospective application permitted.

The Company is currently evaluating the impact that ASU 2023-09 will have on our consolidated financial statements.

The Enhancement and Standardization of Climate-Related Disclosure for Investors

In March 2024, the SEC adopted final rules requiring registrants to provide certain climate-related disclosures, including Scope 1 and Scope 2 greenhouse gas emissions to the extent they are material.

These rules require certain disclosures related to severe weather events and other natural conditions in the notes to audited financial statements.

These disclosures are required to phase-in over multiple years beginning with fiscal 2025 for large accelerated filers and fiscal 2026 for accelerated filers.

On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges.

The Company is currently evaluating the impact of the new rules.

Revenue from Contracts with Customers (ASC 606)

2 unchanged sentences

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

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

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

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

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

6 unchanged sentences

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

At September 30, 2023, the Company has $ 6.0 million of such repurchase agreement obligations, collateralized by the corresponding inventory, that are recorded within accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

At March 31, 2024 and December 31, 2023, the Company has $ 3.4 million and $ 8.3 million, respectively, of such repurchase agreement obligations, collateralized by the corresponding inventory, that are recorded within accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

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

7 unchanged sentences

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

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

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

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

For the three months ended March 31, 2024 and 2023, we recorded $ 2.3 million of net unrealized gains and $ 1.0 million of net unrealized losses, respectively, within costs of sales.

For the three months ended March 31, 2024 and 2023, the Company recognized $ 35.0 million and $ 24.4 million in revenues under ASC 815, respectively, which are reported within the Company’s Sustainable Sourcing & Traceability segment.

Contract Estimates

2 unchanged sentences

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

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

Accrued sales incentives were $ 1.8 million and $ 1.5 million at March 31, 2024 and December 31, 2023, respectively.

Other accrued deductions were $ 3.4 million and $ 2.7 million at March 31, 2024 and December 31, 2023, respectively, and are included as a reduction to accounts receivable, net in the Condensed Consolidated Balance Sheets.

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

1 unchanged sentence

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

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

The Company does not have any material contract liabilities as of March 31, 2024 or December 31, 2023.

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

At September 30, 2023 and December 31, 2022, accounts receivable, net included $ 102.9 million and $ 104.7 million in receivables from contracts with customers, respectively.

At March 31, 2024 and December 31, 2023, accounts receivable, net included $ 96.1 million and $ 104.8 million in receivables from contracts with customers, respectively.

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

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

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

As of March 31, 2024 and December 31, 2023, no costs were capitalized as all arrangements were less than a year.

Disaggregated Revenue

1 unchanged sentence

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Flavors, extracts & ingredients

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

United States

12 unchanged sentences

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

Kohana Coffee, LLC

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

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

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

Aggregate consideration paid for Kohana Coffee included 1,852,608 Common Shares and approximately $ 15.7 million in cash, subject to customary adjustments.

The fair value of the stock consideration was based on the closing price of the Company’s common stock on the date of acquisition.

The total consideration paid in the Kohana Acquisition is summarized below:

Cash consideration

Fair value of stock consideration

Total Consideration

The assets and liabilities acquired in the Kohana Acquisition are recorded at their estimated fair values.

Acquired Value

Cash and cash equivalents

Accounts receivable

Property, plant and equipment

Intangible assets

Accounts payable and accrued liabilities

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

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

The goodwill arising from the transaction is

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

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

September 30, 2023

The following table summarizes inventories as of March 31, 2024 and December 31, 2023:

March 31, 2024

December 31, 2023

3 unchanged sentences

Green coffee inventories represent green coffee held for resale.

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

At March 31, 2024 and December 31, 2023, all green coffee held for resale was included within our Sustainable Sourcing & Traceability segment.

Property, Plant and Equipment, Net

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

The following table summarizes property, plant and equipment, net as of March 31, 2024 and December 31, 2023:

Depreciable Lives

September 30, 2023

March 31, 2024

December 31, 2023

Buildings (4)

10 - 40 years

11 unchanged sentences

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

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

Amounts presented above reflect the corrected amounts.

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

Depreciation expense for the three months ended March 31, 2024 and 2023 was $ 5.5 million and $ 3.9 million, respectively.

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

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

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

All assets classified as construction in progress and equipment deposits at March 31, 2024 are expected to be in production use.

The following table reflects the carrying amount of goodwill as of March 31, 2024 and December 31, 2023:

Balance at December 31, 2023

Accumulated impairment loss

Changes during the period:

Measurement period adjustments

Balance at September 30, 2023

Balance at March 31, 2024

Accumulated impairment loss

Intangible Assets, Net

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

September 30, 2023

The following table summarizes intangible assets, net as of March 31, 2024 and December 31, 2023:

March 31, 2024

Customer relationships

5 unchanged sentences

Intangible assets, net

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

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

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

Amortization expense of intangible assets was $ 2.0 million and $ 2.0 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the weighted average useful life for definite-lived intangibles is approximately 20 years .

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

Some of our lease agreements have renewal options, tenant improvement allowances, rent holidays and rent escalation clauses.

1 unchanged sentence

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

September 30,

Balance Sheet Location

March 31, 2024

December 31, 2023

Right-of-use operating lease assets

3 unchanged sentences

Operating lease liabilities - noncurrent

Other long-term liabilities

Operating lease liabilities

During the three months ended March 31, 2024 and 2023, the Company obtained $ 1.0 million and $ 6.0 million of right-of-use operating lease assets in exchange for lease obligations.

On February 12, 2024, following the completion of its 530,000 square foot distribution center in Conway, Arkansas, the Company entered into a lease termination agreement for the premises located at 1601 Gregory Street, North Little Rock, Arkansas, 72114, originally entered into on October 24, 2018.

The lease will terminate by mutual agreement, effective June 30, 2024.

As of the date of this Quarterly Report on Form 10-Q, no costs have been incurred, and no costs are

expected to be incurred, by the Company as a result of the lease termination.

This lease termination event does not significantly alter the Company’s operational capabilities or its financial position.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The components of lease costs for the three months ended March 31, 2024 and 2023, respectively, are as follows:

Three Months Ended March 31,

Operating lease cost

Short-term lease cost

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

September 30, 2023

September 30, 2022

The following table presents information about the Company’s weighted average discount rate and remaining lease term as of March 31, 2024 and December 31, 2023:

March 31, 2024

December 31, 2023

Weighted-average discount rate

Weighted-average remaining lease term

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

Nine Months Ended September 30,

Operating cash flows from operating leases

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

Supplemental cash flow information about the Company’s leases as of March 31, 2024 and 2023, respectively, is as follows:

Three Months Ended March 31,

Cash paid related to operating lease liabilities

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

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

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

There were no material finance leases as of March 31, 2024.

Future minimum lease payments under non-cancellable operating leases as of March 31, 2024 are as follows:

Remainder of 2024

2 unchanged sentences

Present value of minimum lease payments

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

September 30, 2023

Our long-term debt at March 31, 2024 and December 31, 2023 is as follows:

March 31, 2024

December 31, 2023

Term loan facility

Delayed draw term loan facility

Revolving credit facility

Convertible notes payable

International trade finance lines

2 unchanged sentences

Current maturities of long-term debt

Convertible notes payable - related party, net

Short-term debt

1 unchanged sentence

Credit Agreement

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

Proceeds from the Term Loan Facility were used for paying off existing indebtedness.

The Revolving Credit Facility and the Term Loan Facility will mature on August 29, 2027.

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

The Credit Agreement includes (a) a senior secured first lien revolving credit facility in an initial aggregate principal amount of $ 175.0 million (the “Revolving Credit Facility”), (b) a senior secured first lien term loan facility in an initial aggregate principal amount of $ 175.0 million (the “Term Loan Facility”), and (c) incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $ 50.0 million.

The Revolving Credit Facility, the Term Loan Facility and the Delayed Draw Term Loan Facility will mature on August 29, 2027.

All obligations under the Credit Agreement are guaranteed by the Company and each of the Borrower’s domestic subsidiaries, which comprise our Beverage Solutions segment, and are secured by substantially all of the Company’s assets.

Borrowings under the Revolving Credit Facility and the Term Loan Facility will bear interest, at the Borrower’s option, initially at an annual rate equal to (i) Term SOFR plus a credit spread adjustment of 0.10 % for loans with an interest period of one month , 0.15 % for loans with an interest period of three months and 0.25 % for loans with an interest period of six months , as applicable, (the “Adjusted Term SOFR”) or (ii) the base rate (determined by reference to the greatest of (i) the rate of interest last quoted by The Wall Street Journal in the U.S.

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

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

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

At September 30, 2023, we had $ 45.0 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 9.0 %, and the interest rate applicable to our Term Loan Facility was 9.2 %, and we had $ 2.6 million of standby letters of credit outstanding.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Borrowings under the Revolving Credit Facility, the Term Loan Facility and the Delayed Draw Term Loan Facility will bear interest, at the Borrower’s option, initially at an annual rate equal to (a) Term SOFR plus a credit spread adjustment of 0.10 % for loans with an interest period of one month , 0.15 % for loans with an interest period of three months and 0.25 % for loans with an interest period of six months , as applicable, (the “Adjusted Term SOFR”) or (b) the base rate (determined by reference to the greatest of (i) the rate of interest last quoted by The Wall Street Journal in the U.S.

At March 31, 2024, the interest rate applicable to our Term Loan Facility was 9.2 %, and the interest rate applicable to our Delayed Draw Term Loan Facility was 8.7 %.

At March 31, 2024, no amounts were outstanding under the Revolving Credit Facility and we had $ 2.6 million of standby letters of credit outstanding.

On February 15, 2024, Westrock Beverage Solutions, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (the “Borrower”), entered into Amendment No.

3 (the “Third Amendment”) to the Credit Agreement.

The Third Amendment modified the existing covenant relief period (the “Covenant Relief Period”), which commenced on June 30, 2023 and will end on the earlier to occur of (i) April 1, 2026 and (ii) any date following June 30, 2024, on which the borrower elects to terminate the Covenant Relief Period subject to satisfaction of certain conditions.

During the Covenant Relief Period, the Company’s ability to incur additional indebtedness and make investments, restricted payments and junior debt restricted payments will be more limited.

The Third Amendment permits the Company to issue convertible notes, including the Convertible Notes (as defined below).

During the Covenant Relief Period, the Applicable Margin for any term SOFR rate loan will range from 3.00 % to 4.00 % and for any ABR loan will range from 2.00 % to 3.00 %, in each case depending on the secured net leverage ratio.

After the Covenant Relief Period, the Applicable Margin for any term SOFR rate loan will range from 2.00 % to 3.00 % and for any ABR loan will range from 1.00 % to 2.00 %, in each case depending on the secured net leverage ratio.

The Credit Agreement, as amended, requires the Borrower to maintain compliance with (i) a secured net leverage ratio at levels ranging from 4.50 :1.00 to 6.25 :1.00 and stepping down to 4.50 :1.00 by April 2026 and (ii) an interest coverage ratio of at least 1.50 :1.00 on and prior to September 30, 2025 and at least 2.00 :1.00 on December 31, 2025 and thereafter.

The Credit Agreement, as amended, also includes (i) a minimum liquidity covenant requiring the Borrower not to permit its liquidity, measured as of the last business day of each calendar month commencing March 29, 2024, to be less than $ 15 million and (ii) an anti-cash hoarding covenant, which shall be effective only during the Covenant Relief Period, requiring the Borrower to have no more than $ 20 million of unrestricted cash on the last day of each calendar month when revolving loans or letters of credit are outstanding or on the date of borrowing of a revolving loan.

As of the date of this Quarterly Report on Form 10-Q, the Company was in compliance with its financial covenants.

The Term Loan Facility and Delayed Draw Term Loan Facility requires quarterly principal payments totaling approximately $ 2.8 million ( 1.25 % of the original principal balance).

Quarterly payments increase to approximately $ 4.2 million and $ 5.6 million ( 1.875 % and 2.5 % of the original principal balance) during the final two years of the agreements, respectively.

We incurred a total of $ 2.4 million in financing fees in connection with the Third Amendment.

Approximately $ 1.3 million of the fees were allocated to the Term Loan Facility and are being amortized over the remaining term of the Term Loan Facility utilizing the frozen effective yield method based on the interest rate in place at the issuance of the Term Loan Facility.

Approximately $ 1.0 million of the fees were allocated to the Revolving Credit Facility, are reported within other long-term assets on the Condensed Consolidated Balance Sheets and are being amortized ratably over the remaining term of the Revolving Credit Facility.

Convertible Notes

On February 15, 2024, the Company sold and issued in a private placement $ 72.0 million in aggregate principal amount of 5.00 % convertible senior notes due 2029 (the “Convertible Notes”), of which $ 50.0 million was from related parties (See Note 21).

The Convertible Notes are unsecured, senior obligations of the Company and accrue interest at a rate of 5.00 % per annum.

The Convertible Notes are carried at amortized cost and are recorded in long-term debt, net and convertible notes payable – related party, net on the Condensed Consolidated Balance Sheets.

At March 31, 2024, the carrying value of the Convertible Notes was $71.5 million, of which $ 49.7 million was from related parties.

We incurred a total of $ 0.5 million of financing fees in connection with the Convertible Notes, which were ratably allocated to the convertible notes payable and the convertible notes payable – related party, respectively, and are being amortized into interest expense over the remaining term of the Convertible Notes utilizing the effective interest rate method.

Pursuant to the terms of the Convertible Notes, noteholders may convert their Convertible Notes at their option only in the following circumstances:

(i) during the period commencing on August 15, 2024, and prior to the close of business on the trading day immediately preceding August 15, 2028, if the closing price for at least 20 trading days (whether or not consecutive) during the period of any 30 consecutive trading days in the immediately preceding calendar quarter is equal to or greater than 130 % of the conversion price;

(ii) during the period commencing on August 15, 2028, and prior to the close of business on the second scheduled trading day immediately preceding February 15, 2029, at any time;

and (iii) during the 35 trading days following the effective date of certain fundamental change transactions that occur prior to the close of business on the trading day immediately preceding August 15, 2028.

The Company will settle conversions by paying or delivering, as applicable, at the Company’s election, cash, Common Shares, or a combination of cash and Common Shares.

The Company may not issue more than 19.99 % of the issued and outstanding Common Shares immediately prior to the issuance of the Convertible Notes in respect of the conversion of the Convertible Notes.

The initial conversion price of the Convertible Notes is $ 12.84 , which corresponds to an initial

conversion rate of approximately 77.88 Common Shares per $ 1,000 principal amount of Convertible Notes.

The conversion price and conversion rate are subject to customary adjustments.

International Debt and Lending Facilities

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

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

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

The facility was set to mature one year from inception.

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

On March 8, 2024, Falcon renewed its working capital trade finance facility with multiple institutions.

The facility size was reduced from $ 70.0 million to $ 55.0 million and remains uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

The facility will mature one year from inception.

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

At September 30, 2023, there was $ 42.5 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

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

At March 31, 2024, there was $ 27.8 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

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

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

Falcon was in compliance with these financial covenants as of March 31, 2024.

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

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Government Securities Business Days before the Quotation Day;

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

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

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

or (b) the most recent applicable Term SOFR (as of the Quotation Day) for the shortest period (for which Term SOFR is available) which exceeds the applicable interest period of that loan, in each case plus the applicable margin.

At March 31, 2024, there was $ 5.0 million of outstanding borrowings under the facility, of which $ 4.5 million and $ 0.5 million, is recorded in long-term debt, net and current maturities of long-term debt, respectively, on the Condensed Consolidated Balance Sheets.

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

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

Falcon was in compliance with these financial covenants as of March 31, 2024.

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

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

Additionally, Rwanda Trading Company maintains three short-term futures contract-backed lending facilities from international institutions with outstanding balances of $ 0.8 million, $ 0.7 million and $ 0.6 million at September 30, 2023.

(a) a short-term trade finance facility with a balance of $ 6.7 million at March 31, 2024 and (b) a long-term note payable with a balance of $ 1.0 million at March 31, 2024.

Series A Preferred Shares

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

The Company has 23,511,922 Westrock Series A Preferred Shares outstanding, which rank senior to the Common Shares with respect to dividend rights and/or distribution rights upon the liquidation, winding up or dissolution, as applicable, of Westrock.

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

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The initial conversion price of $ 11.50 per Westrock Series A Preferred Share is subject to customary adjustments for the issuance of Common Shares as a dividend or distribution to the holders of Common Shares, a subdivision or combination of the Common Shares, reclassification of the Common Shares into a greater or lesser number of Common Shares, certain tender or exchange offers for the Common Shares, and issuances of Common Shares below a specified price.

After February 26, 2028 (i.e., the five -and-a-half-year anniversary of the Closing), any holder of Westrock Series A Preferred Shares may require Westrock to redeem all or any whole number of such holder’s Westrock Series A Preferred Shares in cash, subject to applicable law and the terms of any credit agreement or similar arrangement pursuant to which a third-party lender provides debt financing to Westrock or its subsidiaries, at a redemption price per share equal to the greater of (a) the liquidation preference and (b) the product of (i) the number of Common Shares that would have been obtained from converting one Westrock Series A Preferred Share on the redemption notice date and (ii) the simple average of the daily volume weighted average price per Common Share for the ten trading days ending on and including the trading day immediately preceding the redemption notice date.

At any time after February 26, 2028 (i.e., the five and a half year anniversary of the date of Closing), Westrock may redeem, ratably, in whole or, from time to time in part, the Westrock Series A Preferred Shares of any holder then outstanding at the redemption price in cash, equal to the greater of (i) the liquidation preference and (ii) the product of (x) the number of Common Shares that would have been obtained from converting one Westrock Series A Preferred Share on the date of the exercise of such call is notified by Westrock (including fractional shares for this purpose) and (y) the simple average of the daily volume weighted average price per Common Share for the ten trading days ending on and including the trading day immediately preceding the date of the exercise of such call by Westrock.

After February 26, 2028, any holder of Westrock Series A Preferred Shares may require Westrock to redeem all or any whole number of such holder’s Westrock Series A Preferred Shares in cash, subject to applicable law and the terms of any credit agreement or similar arrangement pursuant to which a third-party lender provides debt financing to Westrock or its subsidiaries, at a redemption price per share equal to the greater of (a) the liquidation preference and (b) the product of (i) the number of Common Shares that would have been obtained from converting one Westrock Series A Preferred Share on the redemption notice date and (ii) the simple average of the daily volume weighted average price per Common Share for the ten trading days ending on and including the trading day immediately preceding the redemption notice date.

Assuming that the liquidation preference of the Series A Preferred Shares remains $ 11.50 per share and all 23,511,922 Series A Preferred Shares outstanding at March 31, 2024 remain outstanding after February 26, 2028, we estimate an aggregate redemption payment of at least approximately $ 270.4 million.

At any time after February 26, 2028, Westrock may redeem, ratably, in whole or, from time to time in part, the Westrock Series A Preferred Shares of any holder then outstanding at the redemption price in cash, equal to the greater of (i) the liquidation preference and (ii) the product of (x) the number of Common Shares that would have been obtained from converting one Westrock Series A Preferred Share on the date of the exercise of such call is notified by Westrock (including fractional shares for this purpose) and (y) the simple average of the daily volume weighted average price per Common Share for the ten trading days ending on and including the trading day immediately preceding the date of the exercise of such call by Westrock.

The redemption price for the Westrock Series A Preferred Shares held by controlled affiliates of Brown Brothers Harriman & Co.

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Upon issuance, the Westrock Series A Preferred Shares were recorded on our Condensed Consolidated Balance Sheets at fair value.

Subsequently, the Company will accrete changes in the redemption value from the date of issuance to the earliest redemption date (i.e., the five -and-a-half-year anniversary of the date of Closing) using the effective interest rate method.

Subsequently, the Company will accrete changes in the redemption value from the date of issuance to the earliest redemption date using the effective interest rate method.

The accretion will be recorded as a deemed dividend, which adjusts retained earnings (or in the absence of retained earnings, additional paid-in capital) and earnings attributable to common shareholders in computing basic and diluted earnings per share.

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

For the three and nine months ended September 30, 2023, the Company recorded $ 0.1 million of amortization and $ 0.2 million of accretion, respectively, with respect to the Westrock Series A Preferred Shares.

For the three months ended March 31, 2024 and 2023, the Company recorded $ 0.1 million of amortization and $ 0.4 million of accretion, respectively, with respect to the Westrock Series A Preferred Shares.

Common Stock Warrants

The Company has 19,144,120 common stock warrants outstanding at March 31, 2024.

17,118,074 of the warrants are publicly-traded (the “Westrock Public Warrants”) and 2,026,046 of the warrants are private placements warrants (the “Westrock Private Warrants” and together with the Westrock Public Warrants, the “Westrock Warrants”).

The Westrock Warrants are included in warrant liabilities on the Company’s Condensed Consolidated Balance Sheet.

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

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

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

(ii) at a price of $ 0.01 per warrant;

(iii) upon not less than 30 days ’ prior written notice of redemption to each warrant holder;

The Westrock Private Warrants are generally identical to the Westrock Public Warrants, except they cannot be redeemable by Westrock so long as they are held by the existing holders or its permitted transferees.

Furthermore, the existing holders, or their permitted transferees, have the option to exercise the Westrock Private Warrants on a cashless basis.

We account for the Westrock Warrants in accordance with the guidance contained in ASC 815, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.

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

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

The Company re-measures the fair value of the Westrock Public Warrants based on the quoted market price of the Westrock Public Warrants.

The Westrock Private Warrants are valued using a binomial lattice valuation model.

For the three months ended March 31, 2024 and 2023, the Company recognized less than $0.1 million and $ 5.5 million of gains, respectively, related to the change in fair value of warrant liabilities, which is recognized in other (income) expense in the Condensed Consolidated Statements of Operations.

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

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For derivatives that will be accounted for as hedging instruments, we formally designate and document, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction.

In addition, we formally assess both at the inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are highly effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

In addition, we formally assess both at the inception and at least quarterly thereafter,

whether the financial instruments used in hedging transactions are highly effective at offsetting changes in either the fair values or cash flows of the related underlying exposures.

We use cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in commodity prices.

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

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

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

three to twelve months in length.

We did not discontinue any cash flow hedging relationships during the three months ended March 31, 2024 or 2023.

These derivative instruments have been designated as cash flow hedges.

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

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

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

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

Approximately $ 3.1 million and $ 5.2 million of net realized losses, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, respectively.

Approximately $ 4.3 million and $ 11.1 million of net realized gains, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, the estimated amount of net losses reported in AOCI that is expected to be reclassified to the Condensed Consolidated Statements of Operations within the next twelve months is $ 0.1 million.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 16.1 million pounds and 11.5 million pounds as of March 31, 2024 and December 31, 2023, respectively.

During the three months ended March 31, 2024 and 2023, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 9.9 million pounds and 8.4 million pounds, respectively.

Approximately $ 0.1 million of net realized gains and $ 0.7 million of net realized losses, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the estimated amount of net gains reported in AOCI that is expected to be reclassified to the Condensed Consolidated Statements of Operations within the next twelve months is $3.6 million.

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

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Balance Sheet Location

September 30, 2023

March 31, 2024

December 31, 2023

Derivative assets designated as cash flow hedging instruments:

Coffee futures contracts (1)

Derivative assets

Derivative assets not designated as cash flow hedging instruments:

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Total derivative assets

Derivative liabilities designated as cash flow hedging instruments:

Coffee futures contracts (1)

Derivative liabilities

Derivative liabilities not designated as cash flow hedging instruments:

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The following table presents the pre-tax net gains and losses for our derivative instruments for the three months ended March 31, 2024 and 2023, respectively:

Three Months Ended March 31,

Statement of Operations Location

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

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

September 30, 2023

The following table summarizes the fair value of financial instruments at March 31, 2024:

March 31, 2024

Green coffee associated with forward contracts

Forward purchase and sales contracts

Coffee futures contracts

Forward purchase and sales contracts

Westrock Public Warrants

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The following table presents the change in fair value of Level 3 Westrock Private Warrant liabilities:

Westrock Private Warrants

Private Warrants

Fair value as of December 31, 2023

Transfer out of Level 3

Change in fair value

Fair value as of September 30, 2023

Fair value as of March 31, 2024

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

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Green coffee associated with forward contracts

Forward purchase and sales contracts

Coffee futures contracts

Forward purchase and sales contracts

Westrock Public Warrants

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

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

Westrock Private Warrants price of $ 2.14 and $ 3.83 per warrant as of September 30, 2023 and December 31, 2022, respectively, are valued using a binomial lattice valuation model, which is considered to be a Level 3 fair value measurement.

Westrock Public Warrants are valued based on their quoted market price of $ 2.30 per warrant as of March 31, 2024 and December 31, 2023, respectively.

Westrock Private Warrants price of $ 2.66 and $ 2.68 per warrant as of March 31, 2024 and December 31, 2023, respectively, are valued using a binomial lattice valuation model, which is considered to be a Level 3 fair value measurement.

The primary unobservable inputs were as follows:

September 30, 2023

March 31, 2024

December 31, 2023

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

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

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

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

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

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

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

The Term Loan Facility, Revolving Credit Facility and Delayed Draw Term Loan Facility are carried on the Condensed Consolidated Balance Sheets at amortized cost and are estimated by management to approximate fair value as of March 31, 2024 as the interest rate on these facilities is adjusted for changes in the market rates.

The Convertible Notes are carried on the Condensed Consolidated Balance Sheets at amortized cost and are estimated by management to approximate fair value as of March 31, 2024, as the Convertible Notes were issued on February 15, 2024.

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

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

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

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

No events occurred during the three months ended March 31, 2024 or 2023, requiring these non-financial assets and liabilities to be subsequently recognized at fair value.

At March 31, 2024, the Company had an equity investment with a carrying value of approximately $ 1.0 million, for which there is no readily determinable fair value.

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

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

As of March 31, 2024, there have been no adjustments, upward or downward, to the carrying value.

Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

Changes in accumulated other comprehensive income (loss), net of tax by component for the three months ended March 31, 2024 and 2023 is as follows:

Three Months Ended March 31,

Unrealized gain (loss) on derivative instruments:

Balance at beginning of period

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Amounts reclassified from accumulated comprehensive income

Net other comprehensive income

Net accumulated other comprehensive income

Other comprehensive income attributable to non-controlling interests

Balance at end of period

Foreign currency translation gain

Foreign currency translation adjustment

Balance at beginning of period

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Amounts reclassified from accumulated comprehensive income

Net other comprehensive income

Net accumulated other comprehensive income

Other comprehensive income attributable to non-controlling interests

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Equity-Based Compensation

During the three and nine months ended September 30, 2023, the Company granted 0.1 million and 1.3 million restricted stock units (“RSUs”), respectively, under the Westrock Coffee Company 2022 Equity Incentive Plan (the “2022 Equity Plan”).

During the three months ended March 31, 2024 and 2023, the Company granted 1.3 million and 1.1 million restricted stock units (“RSUs”), respectively, under the Westrock Coffee Company 2022 Equity Incentive Plan (the “2022 Equity Plan”).

The RSUs had a grant date fair value of $ 12.3 million and $ 13.0 million, respectively, which was calculated using the closing price of the Common Shares on the applicable date of grant.

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

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

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

The RSUs are amortized on a straight-line basis to expense over the vesting period.

For RSUs issued during 2024, the vesting period is four year s, and for RSUs issued prior to 2024, the vesting period is three years .

As of March 31, 2024, there were 2.7 million shares available for future issuance under the 2022 Equity Plan.

The following table sets forth the RSU activity under the 2022 Equity Plan for the three months ended March 31, 2024.

Weighted-Average

Fair Value at

Outstanding at December 31, 2023

Outstanding at September 30, 2023

Outstanding at March 31, 2024

Earnings per Share

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

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

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

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

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

However, undistributed earnings are allocated to the participating securities.

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

This assumed an add-back of dividends on the CEP Units to net income attributable to shareholders as if the securities were converted to common shares at the beginning of the reporting period (or at the time of issuance, if later), and the resulting common shares were included in the number of weighted-average units outstanding.

The dilutive effect of Westrock Series A Preferred Shares is calculated using the if-converted method, which assumes an add-back of any accretion on preferred shares to net income attributable to shareholders as if the securities were converted to common shares at the beginning of the reporting period (or at the time of issuance, if later), and the resulting common shares being included in the number of weighted-average units outstanding.

The dilutive effect of Westrock Series A Preferred Shares and the Convertible Notes is calculated using the if-converted method, which assumes an add-back of any accretion on preferred shares and interest expense associated with the Convertible Notes to net income attributable to shareholders as if the securities were converted to common shares at the beginning of the reporting period (or at the time of issuance, if later), and the resulting common shares being included in the number of weighted-average units outstanding.

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

The following potentially dilutive securities were excluded from the computation of diluted shares for the periods indicated because their inclusion would have an anti-dilutive effect on dilutive earnings (loss) per common share.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Restricted stock

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Thousands, except per share data)

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Weighted-average common shares outstanding - diluted

Dilutive earnings (loss) per common share

Dilutive loss per common share

Segment Information

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

Our two operating segments, Beverage Solutions and Sustainable Sourcing & Traceability, are evaluated using Adjusted EBITDA, which is a segment performance measure we define as net income determined in accordance with GAAP, before interest expense, provision for income taxes, depreciation and amortization, equity-based compensation expense and the impact, which may be recurring in nature, of acquisition, transaction and integrations costs, including management services and consulting agreements entered into in connection with the acquisition of S&D Coffee, Inc., impairment charges, changes in the fair value of warrant liabilities, non-cash mark-to-market adjustments, certain costs

specifically excluded from the calculation of EBITDA under our material debt agreements, such as facility start-up costs, and other similar or infrequent items (although we may not have had such charges in the periods presented).

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

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Adjusted EBITDA

Interest expense, net

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Acquisition, restructuring and integration expense

Transaction, restructuring and integration expense

Change in fair value of warrant liabilities

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Mark-to-market adjustments

Loss on disposal of property, plant and equipment

Net income (loss)

Three Months Ended September 30, 2022

Adjusted EBITDA

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

Acquisition, restructuring and integration expense

Change in fair value of warrant liabilities

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

Equity-based compensation

Mark-to-market adjustments

Loss on disposal of property, plant and equipment

Loss (gain) on disposal of property, plant and equipment

Net income (loss)

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2023

Adjusted EBITDA

Interest expense, net

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Acquisition, restructuring and integration expense

Transaction, restructuring and integration expense

Change in fair value of warrant liabilities

3 unchanged sentences

Mark-to-market adjustments

Loss on disposal of property, plant and equipment

Net income (loss)

Nine Months Ended September 30, 2022

Adjusted EBITDA

Interest expense, net

Income tax expense (benefit)

Depreciation and amortization

Acquisition, restructuring and integration expense

Change in fair value of warrant liabilities

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

Equity-based compensation

Mark-to-market adjustments

Loss on disposal of property, plant and equipment

Net income (loss)

Loss (gain) on disposal of property, plant and equipment

Commitments and Contingencies

1 unchanged sentence

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

We have future purchase obligations of $ 234.0 million as of September 30, 2023 that consist of commitments for the purchase of inventory over the next 12 months.

We have future purchase obligations of $ 160.1 million as of March 31, 2024 that consist of commitments for the purchase of inventory over the next 12 months.

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

In addition, at September 30, 2023, we had an obligation to repurchase $ 6.0 million of inventory associated with repurchase agreements in which the Company’s Sustainable Sourcing & Traceability segment has sold inventory to a third party and from whom the Company’s Beverage Solutions segment has an obligation to repurchase.

In addition, at March 31, 2024, we had an obligation to repurchase $ 3.4 million of inventory associated with repurchase agreements in which the Company’s Sustainable Sourcing & Traceability segment has sold inventory to a third party and from whom the Company’s Beverage Solutions segment has an obligation to repurchase.

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

Related Party Transactions

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

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

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

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

In February 2024, the Company sold and issued Convertible Notes to Westrock Group, LLC (a holder of more than 5 % of the outstanding Common Shares and affiliate of Scott Ford, the Company’s Chief Executive Officer and a member of the board of directors of the Company, “Westrock Group”), Wooster Capital, LLC (an affiliate of Joe Ford, chairman of the board of directors) and HF Direct Investments Pool, LLC (a holder of more than 10 % of the outstanding Common Shares), each a related party.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Interest expense, net:

Brown Brothers Harriman

Wooster Capital, LLC

Jo Ellen Ford

March 31, 2024

December 31, 2023

Accrued expenses and other current liabilities

Westrock Group

Wooster Capital

HF Direct Investment Pool, LLC

March 31, 2024

December 31, 2023

Convertible notes payable - related party, net:

Westrock Group

Wooster Capital

HF Direct Investment Pool, LLC

Unamortized debt costs

Three Months Ended March 31,

Interest expense:

Westrock Group

Wooster Capital

HF Direct Investment Pool, LLC

In connection with the acquisition of S&D Coffee, Inc.

in February 2020, the Company entered into a Management Services Agreement with Westrock Group, LLC (“Westrock Group”), whose controlling manager and controlling member, Greenbrier Holdings, LLC, is owned and controlled by our co-founder and Chief Executive Officer Scott Ford.

in February 2020, the Company entered into a Management Services Agreement with Westrock Group, whose controlling manager and controlling member, Greenbrier Holdings,

LLC, is owned and controlled by our co-founder and Chief Executive Officer Scott Ford.

Under the terms of the agreement, which expired in February 2023, Westrock Group was paid $ 10.0 million in return for financial, managerial, operational, and strategic services.

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

The Company recognized no expenses and $ 0.6 million of such expenses during the three and nine months ended September 30, 2023, respectively, and $ 0.8 million and $ 2.5 million of such expenses during the three and nine months ended September 30, 2022, respectively.

The Company recognized $ 0.6 million of such expenses during the three months ended March 31, 2023 and no such expenses during the three months ended March 31, 2024.

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

For the three and nine months ended September 30, 2023, the Company recognized expenses of $ 0.5 million and $ 1.3 million, respectively, for such items, which are recorded in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

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

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

For the three months ended March 31, 2024 and 2023, the Company recognized expenses of $ 0.3 million and $ 0.3 million, respectively, for such items, which are recorded in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

At March 31, 2024 and December 31, 2023, we had $ 0.1 million and $ 0.2 million payable to Westrock Group, respectively, related to such items.

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

What changed 10-Q

Item 1. Financial Statements