What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 256 added, 141 removed, 627 unchanged (39% of the section changed)

3 unchanged sentences

(Thousands, except par value)

March 31, 2024

June 30, 2024

December 31, 2023

25 unchanged sentences

Commitments and contingencies (Note 20)

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

Series A Convertible Preferred Shares, $ 0.01 par value, 24,000 shares authorized, 23,512 shares issued and outstanding at June 30, 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, 88,282 shares and 88,051 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Common stock, $ 0.01 par value, 300,000 shares authorized, 88,366 shares and 88,051 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Thousands, except per share data)

2 unchanged sentences

Transaction, restructuring and integration expense

Impairment charges

Loss on disposal of property, plant and equipment

16 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss), net of tax:

9 unchanged sentences

WESTROCK COFFEE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

Comprehensive

2 unchanged sentences

Income (Loss)

Equity (Deficit)

Balance at March 31, 2023

Net income (loss)

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

Accretion of Series A Convertible Preferred Shares

Other comprehensive income (loss)

Equity-based compensation

Balance at June 30, 2023

Balance at March 31, 2024

Net income (loss)

Issuance of common shares related to "at-the-market" offering program, net of issuance costs

Issuance of common shares related to stock options exercised

Accretion of Series A Convertible Preferred Shares

Other comprehensive income (loss)

Equity-based compensation

Net share settlement of equity awards

Balance at June 30, 2024

See accompanying notes to condensed consolidated financial statements.

WESTROCK COFFEE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Unaudited) (continued)

Comprehensive

Non-Controlling

Paid-in Capital

Income (Loss)

Equity (Deficit)

Balance at December 31, 2022

4 unchanged sentences

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

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

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at March 31, 2023

Balance at June 30, 2023

Balance at December 31, 2023

Net income (loss)

Issuance of common shares related to "at-the-market" offering program, net of issuance costs

Issuance of common shares related to stock options exercised

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at March 31, 2024

Balance at June 30, 2024

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Impairment charges

Equity-based compensation

12 unchanged sentences

Accrued liabilities and other

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

10 unchanged sentences

Proceeds from convertible notes payable

Proceeds from convertible notes payable - related party

Payment of debt issuance costs

Payment of convertible notes payable issuance costs

Net proceeds from (repayments of) repurchase agreements

1 unchanged sentence

Proceeds from exercise of Public Warrants

Proceeds from issuance of common stock

Payment of equity issuance costs

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 decrease in cash and cash equivalents and restricted cash

Net (decrease) increase 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

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

March 31, 2024

March 31, 2023

The total cash and cash equivalents and restricted cash at June 30, 2024 and 2023 is as follows:

June 30, 2024

June 30, 2023

Cash and cash equivalents

12 unchanged sentences

Through this segment, we utilize our proprietary technology and digitally traceable supply chain to directly impact and improve the lives of our farming partners, tangible economic empowerment and an emphasis on environmental accountability and farmer literacy.

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

Revenues primarily relate to the physical delivery and settlement of forward sales contracts for green coffee.

Basis of Presentation and Consolidation

27 unchanged sentences

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.

However, during the six months ended June 30, 2024, the Company incurred net losses of $ 41.4 million and net cash outflows from operating activities of $ 15.7 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.

As management’s ability to amend its financial covenants cannot be assured, if necessary, management has committed to 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.

As further discussed in Restructuring Activities below, the Company has recently committed to a plan to consolidate its manufacturing operations and a targeted reduction in excess workforce capacity, which are designed to improve operational efficiency.

If required, the Company will further reduce operating costs to ensure compliance with its financial covenants.

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

7 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Balance at beginning of period

3 unchanged sentences

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

For the three months ended March 31, 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.

For the three and six months ended June 30, 2024, we recognized $ 1.7 million and $ 1.0 million of net unrealized gains, respectively, on green coffee inventory associated with our forward sales and purchase contracts.

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

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 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.

For the three and six months ended June 30, 2024, we capitalized $ 4.3 million and $ 7.2 million of interest costs, respectively.

No such interest was capitalized during the three or six months ended June 30, 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.

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

At June 30, 2024 and December 31, 2023, there were $ 76.3 million and $ 78.1 million of obligations outstanding under the Program, respectively.

Accrued Expenses and Other Current Liabilities

At June 30, 2024 and December 31, 2023, there was $ 25.0 million and $ 2.1 million, respectively, of received not billed liabilities within accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

Restructuring Activities

The Company accounts for exit or disposal activities in accordance with ASC 420, Exit or Disposal Cost Obligations (“ASC 420”).

Restructuring charges may include one-time termination benefits related to employee separations, contract termination costs, long-lived asset impairments, and other related costs with exit or disposal activities.

The recognition of restructuring charges requires the Company to make certain judgements and estimates regarding the nature, timing and amount of costs associated with the planned exit activity.

To the extent the Company’s actual results differ from its estimates and assumptions, the Company may be required to revise the estimates of future liabilities, require the recognition of additional restructuring charges or the reduction of liabilities already recognized.

Such changes to previously estimated amounts may be material to the Condensed Consolidated Financial Statements.

Restructuring charges are not included in the Company’s measurement of segment profitability as discussed in Note 19.

During the second quarter of 2024, the Company committed to a plan to consolidate its manufacturing operations in its Beverage Solutions segment, which will result in the closure and sale of its West Winds manufacturing facility in Concord, NC, and the closure of its manufacturing facility in Richmond, CA.

All production from the impacted facilities will be consolidated into other facilities operated by the Company in Concord, NC and Conway, AR.

The closure of the West Winds facility was completed as of June 30, 2024, and the sale of the land and buildings is expected to be completed within the next 12 months.

Production in our Richmond, CA facility is expected to cease during the third quarter of 2024.

The Company currently estimates total charges related to the plant consolidations to be in the range of $ 5.0 million to $ 10.0 million, of which no amounts have been incurred during the three months ended June 30, 2024.

These charges primarily relate to costs to remove and re-install production equipment into other manufacturing facilities.

At June 30, 2024, the Company classified approximately $ 9.1 million of land and buildings as held-for-sale, which are reported within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.

During the three and six months ended June 30, 2024, the Company incurred impairment charges of approximately $ 0.8 million on equipment associated with the plant consolidations, which is reported within impairment charges on the Condensed Consolidated Statements of Operations.

The Company is continuing to evaluate which plant assets will be moved to other manufacturing facilities and which plant assets will be disposed of;

therefore, there may be additional impairment charges in the future related to the consolidation of our manufacturing facilities.

In addition, during the second quarter of 2024, the Company committed to targeted restructuring activities to improve operational efficiency by reducing excess workforce capacity.

As a result of this reduction, and the impacts of the consolidation of manufacturing facilities noted above, the Company recognized approximately $ 4.1 million of one-time employee severance costs during the three months ended June 30, 2024, which are recorded in transaction, restructuring and integration expense in the Condensed Consolidated Statements of Operations, of which $ 0.5 million was paid during the three months ended June 30, 2024.

At June 30, 2024, approximately $ 3.6 million of such termination benefits were accrued for within accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

On February 12, 2024, following the completion of its 530,000 square foot distribution center in Conway, AR, the Company entered into a lease termination agreement for its distribution center located in North Little Rock, AR (the “Gregory Distribution Center”).

The Gregory Distribution Center lease terminated, by mutual agreement, on June 30, 2024.

No costs were incurred as a result of the lease termination.

During the first quarter of 2024, the Company remeasured the Gregory Distribution Center lease liability, and related right-of-use asset, in accordance with ASC 842, Leases , resulting in a reduction of the lease liability and right-of-use asset of approximately $ 3.0 million.

At June 30, 2024, there was no remaining lease liability or right-of-use assets related to the Gregory Distribution Center recorded in the Condensed Consolidated Balance Sheets.

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

Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amount of assets and liabilities and their respective tax bases, using enacted income tax rates expected to apply when the deferred tax assets and liabilities are expected to be realized or settled.

The Company’s foreign subsidiaries file income tax returns and are subject to tax provisions in their respective foreign tax jurisdictions.

5 unchanged sentences

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

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

The effective income tax rates for the six months ended June 30, 2024 and 2023 were ( 2.9 %) and ( 6.4 %), 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.

The effective tax rate for the six months ended June 30, 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 and the permanent difference for changes in the fair value of warrants.

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.

Although the United States 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.

14 unchanged sentences

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 requires disclosure to include significant segment expenses that are regularly provided to the chief operating decision maker 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 are effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 31, 2024, with early adoption

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

9 unchanged sentences

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

ASU 2023-05 – Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement

In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement”.

The amendments in this update require that a joint venture recognize and initially measure assets contributed and liabilities assumed at fair value upon its formation in the joint venture’s separate financial statements.

The amendments in this update are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted.

The Company will apply the provisions of ASU 2023-05 to new joint ventures, as applicable, but does not believe the adoption of ASU 2023-05 will have a material impact on our consolidated financial statements.

The Enhancement and Standardization of Climate-Related Disclosure for Investors

12 unchanged sentences

This is upon shipment of goods or upon delivery to the customer, depending on contractual terms.

Shipping and handling costs paid by the customer to us are included in revenue and costs incurred by us for shipping and handling activities that are performed after a customer obtains control of the product are accounted for as fulfillment costs.

Shipping and handling costs paid

by the customer to us are included in revenue and costs incurred by us for shipping and handling activities that are performed after a customer obtains control of the product are accounted for as fulfillment costs.

In addition, we exclude from net revenue and cost of sales taxes assessed by governmental authorities on revenue-producing transactions.

2 unchanged sentences

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

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.

At June 30, 2024 and December 31, 2023, the Company has $ 1.0 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 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.

For the three and six months ended June 30, 2024, we recorded $ 0.1 million of net unrealized losses and $ 2.2 million of net unrealized gains, respectively, within costs of sales.

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

For the three and six months ended June 30, 2024, the Company recognized $ 44.1 million and $ 79.1 million in revenues under ASC 815, respectively, and for the three and six months ended June 30, 2023, the Company recognized $ 34.7 million and $ 59.1 million in revenues under ASC 815, respectively, which are reported within the Company’s Sustainable Sourcing & Traceability segment.

Contract Estimates

The nature of the Company’s contracts give rise to variable consideration including cash discounts, volume-based rebates, point of sale promotions, and other promotional discounts to certain customers.

The nature of the Company’s contracts gives rise to variable consideration including cash discounts, volume-based rebates, point of sale promotions, and other promotional discounts to certain customers.

For all promotional programs and discounts, the Company estimates the rebate or discount that will be granted to the customer and records an accrual upon invoicing.

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 $ 1.8 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.

Accrued sales incentives were $ 1.9 million and $ 1.5 million at June 30, 2024 and December 31, 2023, respectively.

Other accrued deductions were $ 2.7 million and $ 2.7 million at June 30, 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 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 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.

The Company does not have any material contract liabilities as of June 30, 2024 or December 31, 2023.

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

At June 30, 2024 and December 31, 2023, accounts receivable, net included $ 107.4 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 March 31, 2024 and December 31, 2023, no costs were capitalized as all arrangements were less than a year.

As of June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Flavors, extracts & ingredients

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

United States

3 unchanged sentences

(“Bixby”), a specialty-grade roaster that is a leader in the emerging influencer-led brand space.

The transaction is accounted for as a business combination in accordance with ASC 805.

The transaction is accounted for as a business combination in accordance with ASC 805, Business Combinations .

Aggregate consideration paid for Bixby included 39,778 Common Shares and approximately $ 2.2 million in cash, for total consideration of $ 2.6 million, subject to customary adjustments.

6 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.

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

March 31, 2024

The following table summarizes inventories as of June 30, 2024 and December 31, 2023:

June 30, 2024

December 31, 2023

3 unchanged sentences

Green coffee inventories represent green coffee held for resale.

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

At June 30, 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 March 31, 2024 and December 31, 2023:

The following table summarizes property, plant and equipment, net as of June 30, 2024 and December 31, 2023:

(Dollars in Thousands)

Depreciable Lives

March 31, 2024

June 30, 2024

December 31, 2023

12 unchanged sentences

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

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

Depreciation expense for the three and six months ended June 30, 2024 was $ 5.8 million and $ 11.3 million, respectively, and depreciation expense for the three and six months ended June 30, 2023 was $ 4.1 million and $ 8.0 million, respectively.

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

All assets classified as construction in progress and equipment deposits at March 31, 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:

All assets classified as construction in progress and equipment deposits at June 30, 2024 are expected to be in production use.

The following table reflects the carrying amount of goodwill as of June 30, 2024 and December 31, 2023:

Balance at December 31, 2023

Accumulated impairment loss

Balance at March 31, 2024

Balance at June 30, 2024

Accumulated impairment loss

Intangible Assets, Net

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

March 31, 2024

The following table summarizes intangible assets, net as of June 30, 2024 and December 31, 2023:

June 30, 2024

Customer relationships

5 unchanged sentences

Intangible assets, net

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 .

Amortization expense of intangible assets was $ 2.1 million and $ 4.1 million for the three and six months ended June 30, 2024, respectively, and amortization expense of intangible assets was $ 2.0 million and $ 4.0 million for the three and six months ended June 30, 2023, respectively.

As of June 30, 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.

3 unchanged sentences

Balance Sheet Location

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

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.

During the six months ended June 30, 2024 and 2023, the Company obtained approximately $ 1.0 million and $ 6.0 million of right-of-use operating lease assets in exchange for lease obligations.

The Gregory Distribution Center lease terminated, by mutual agreement, on June 30, 2024.

No costs were incurred 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 months ended March 31, 2024 and 2023, respectively, are as follows:

Three Months Ended March 31,

The components of lease costs for the three and six months ended June 30, 2024 and 2023, respectively, are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

Short-term lease cost

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

March 31, 2024

The following table presents information about the Company’s weighted average discount rate and remaining lease term as of June 30, 2024 and December 31, 2023:

June 30, 2024

December 31, 2023

1 unchanged sentence

Weighted-average remaining lease term

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,

Supplemental cash flow information about the Company’s leases as of June 30, 2024 and 2023, respectively, is as follows:

Six Months Ended June 30,

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 March 31, 2024.

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

There were no material finance leases as of June 30, 2024.

Future minimum lease payments under non-cancellable operating leases as of June 30, 2024 are as follows:

Remainder of 2024

2 unchanged sentences

Present value of minimum lease payments

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

March 31, 2024

Our long-term debt at June 30, 2024 and December 31, 2023 is as follows:

June 30, 2024

December 31, 2023

15 unchanged sentences

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, 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.

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 an applicable margin.

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.

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 United States 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 an applicable margin.

At June 30, 2024, we had $ 59.0 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 9.1 %, and we had $ 2.6 million of standby letters of credit outstanding.

At June 30, 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 %.

On February 15, 2024, the Borrower entered into Amendment No.

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

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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.

At June 30, 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.

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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 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.

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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.

At June 30, 2024, there was $ 41.7 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

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

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

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

1 unchanged sentence

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

Government Securities Business Days before the Quotation Day;

Government Securities Business Days, as defined in the facility, before the Quotation Day, as defined in the facility;

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.

At June 30, 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 March 31, 2024.

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

(a) a short-term trade finance facility with a balance of $ 8.4 million at June 30, 2024 and (b) a long-term note payable with a balance of $ 0.8 million at June 30, 2024.

Additionally, Rwanda Trading Company maintains two short-term futures contract-based lending facilities from international institutions with outstanding balances of $ 2.5 million and $ 2.0 million at June 30, 2024.

Series A Preferred Shares

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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.

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 June 30, 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.

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

For the three months ended March 31, 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.

For the three and six months ended June 30, 2024, the Company recorded $ 0.1 million and $ 0.2 million of amortization, respectively, with respect to the Westrock Series A Preferred Shares.

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

Common Stock Warrants

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

The Company has 19,144,120 common stock warrants outstanding at June 30, 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”).

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

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

The Westrock Warrants may only be exercised for a whole number of shares, and will expire on August 26, 2027, or earlier upon redemption or liquidation.

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

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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.

For the three and six months ended June 30, 2024, the Company recognized $ 1.6 million and $ 1.7 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 six months ended June 30, 2023, the Company recognized $ 11.8 million and $ 6.3 million of losses, respectively, related to the change in fair value of warrant liabilities.

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 three months ended March 31, 2024 or 2023.

We did not discontinue any cash flow hedging relationships during the six months ended June 30, 2024 or 2023.

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.

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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 16.1 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.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 15.5 million pounds and 11.5 million pounds as of June 30, 2024 and December 31, 2023, respectively.

During the three and six months ended June 30, 2024, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 20.1 million pounds and 30.0 million pounds, respectively.

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

Approximately $ 3.5 million and $ 3.6 million of net realized gains, representing the effective portion of the cash flow hedge, were subsequently reclassified from AOCI to earnings and recognized in costs of sales in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024, respectively.

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

As of June 30, 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 $ 8.7 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.

While the Company considers these contracts to be effective economic hedges, the Company does not designate or account for forward sales or forward purchase contracts as hedges as defined under current accounting standards.

While the Company considers these contracts to be effective

economic hedges, the Company does not designate or account for forward sales or forward purchase contracts as hedges as defined under current accounting standards.

See Note 4 for a description of the treatment of realized and unrealized gains and losses on forward sales and forward purchase contracts.

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Balance Sheet Location

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Derivative assets

Options contracts

Derivative assets

Derivative assets 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 months ended March 31, 2024 and 2023, respectively:

Three Months Ended March 31,

The following table presents the pre-tax net gains and losses for our derivative instruments for the three and six months ended June 30, 2024 and 2023, respectively:

Three Months Ended June 30,

Six Months Ended June 30,

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 March 31, 2024:

March 31, 2024

The following table summarizes the fair value of financial instruments at June 30, 2024:

June 30, 2024

Green coffee associated with forward contracts

Coffee futures contracts

Options contracts

Forward purchase and sales contracts

6 unchanged sentences

Change in fair value

Fair value as of March 31, 2024

Fair value as of June 30, 2024

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

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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 $ 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.

Westrock Public Warrants are valued based on their quoted market price of $ 2.22 and $ 2.30 per warrant as of June 30, 2024 and December 31, 2023, respectively.

Westrock Private Warrants price of $ 2.54 and $ 2.68 per warrant as of June 30, 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:

March 31, 2024

June 30, 2024

December 31, 2023

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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 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 June 30, 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 June 30, 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 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.

No events occurred during the three and six months ended June 30, 2024 or 2023, requiring these non-financial assets and liabilities to be subsequently recognized at fair value, with the exception of the

$ 0.8 million impairment charge on equipment related to the restructuring activities disclosed in Note 3.

The equipment is no longer in use and was determined to have no salvage value.

At June 30, 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 March 31, 2024, there have been no adjustments, upward or downward, to the carrying value.

As of June 30, 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 months ended March 31, 2024 and 2023 is as follows:

Three Months Ended March 31,

Changes in accumulated other comprehensive income (loss), net of tax by component for the three and six months ended June 30, 2024 and 2023 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Unrealized gain (loss) on derivative instruments:

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Equity-Based Compensation

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”).

During the three and six months ended June 30, 2024, the Company granted 0.1 million and 1.4 million restricted stock units (“RSUs”), respectively, under the Westrock Coffee Company 2022 Equity Incentive Plan (the “2022 Equity Plan”).

The RSUs had a grant date fair value of $ 1.0 million and $ 13.2 million, respectively, which was calculated using the closing price of the Common Shares on the applicable date of grant.

1 unchanged sentence

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.

As of June 30, 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 six months ended June 30, 2024.

Weighted-Average

1 unchanged sentence

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Outstanding at June 30, 2024

Earnings per Share

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

Westrock Series A Preferred Shares and our RSUs issued under our 2022 Equity 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”) .

2 unchanged sentences

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Restricted stock

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Thousands, except per share data)

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Segment Information

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 (loss) 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, transaction, restructuring 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, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, gains or losses on dispositions, 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 March 31, 2024

Three Months Ended June 30, 2024

Adjusted EBITDA

5 unchanged sentences

Equity-based compensation

Impairment charges

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

1 unchanged sentence

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

Net income (loss)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Adjusted EBITDA

4 unchanged sentences

Change in fair value of warrant liabilities

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

Equity-based compensation

1 unchanged sentence

Mark-to-market adjustments

Six Months Ended June 30, 2024

Adjusted EBITDA

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Transaction, restructuring and integration expense

Change in fair value of warrants

Equity-based compensation

Impairment charges

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

Mark-to-market adjustments

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

Six Months Ended June 30, 2023

Adjusted EBITDA

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Transaction, restructuring and integration expense

Change in fair value of warrants

Management and consulting fees (S&D acquisition)

Equity-based compensation

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

Mark-to-market adjustments

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

We have future purchase obligations of $ 180.3 million as of June 30, 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 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.

In addition, at June 30, 2024, we had an obligation to repurchase $ 1.0 million of inventory associated with repurchase agreements in which the Company’s Sustainable Sourcing & Traceability segment has sold inventory to a third party and from whom the Company’s Beverage Solutions segment has an obligation to repurchase.

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

Related Party Transactions

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:

March 31, 2024

In February 2024, the Company sold and issued Convertible Notes to Westrock Group, LLC (an 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 Condensed Consolidated Financial Statements reflect the following transactions with related parties:

June 30, 2024

December 31, 2023

3 unchanged sentences

HF Direct Investment Pool, LLC

March 31, 2024

June 30, 2024

December 31, 2023

4 unchanged sentences

Unamortized debt costs

Three Months Ended March 31,

Six Months Ended June 30,

Interest expense:

3 unchanged sentences

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

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.

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 $ 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.

The Company recognized no such expenses during the three or six months ended June 30, 2024.

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

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

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.

For the three and six months ended June 30, 2024, the Company recognized expenses of $ 0.3 million and $ 0.6 million, respectively, for such items, which are recorded in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

For the three and six months ended June 30, 2023, the Company recognized expenses of $ 0.5 million and $ 0.8 million, respectively, for such items.

At June 30, 2024 and December 31, 2023, we had no amounts payable 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