What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 244 added, 205 removed, 678 unchanged (40% of the section changed)

3 unchanged sentences

(Thousands, except par value)

June 30, 2024

September 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 June 30, 2024 and December 31, 2023, respectively, $ 11.50 liquidation value

Series A Convertible Preferred Shares, $ 0.01 par value, 24,000 shares authorized, 23,511 shares and 23,512 shares issued and outstanding at September 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, 88,366 shares and 88,051 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Common stock, $ 0.01 par value, 300,000 shares authorized, 94,073 shares and 88,051 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Thousands, except per share data)

3 unchanged sentences

Impairment charges

Loss on disposal of property, plant and equipment

(Gain) loss on disposal of property, plant and equipment

Total operating expenses

3 unchanged sentences

Change in fair value of warrant liabilities

Loss before income taxes and equity in earnings from unconsolidated entities

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

Income tax expense (benefit)

Equity in (earnings) loss from unconsolidated entities

Net income (loss) attributable to non-controlling interest

Net loss attributable to shareholders

Net (loss) income

Net loss attributable to non-controlling interest

Net (loss) income attributable to shareholders

Participating securities' share in earnings

Accretion of Series A Convertible Preferred Shares

Net loss attributable to common shareholders

Loss per common share:

Net (loss) income attributable to common shareholders

(Loss) earnings per common share:

Weighted-average number of shares outstanding:

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net (loss) income

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Total other comprehensive income (loss)

Comprehensive loss

Comprehensive (loss) income

Comprehensive income (loss) attributable to non-controlling interests

Comprehensive loss attributable to shareholders

Comprehensive (loss) income attributable to shareholders

Participating securities' share in earnings

Accretion of Series A Convertible Preferred Shares

Comprehensive loss attributable to common shareholders

Comprehensive (loss) income attributable to common shareholders

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Comprehensive

Non-Controlling

Paid-in Capital

1 unchanged sentence

Equity (Deficit)

Balance at March 31, 2023

Balance at June 30, 2023

Net income (loss)

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

Issuance of common shares, net of issuance costs

Issuance of common shares related to stock options exercised

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

Accretion of Series A Convertible Preferred Shares

1 unchanged sentence

Equity-based compensation

Net share settlement of equity awards

Balance at September 30, 2023

Balance at June 30, 2024

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

Issuance of common shares related to warrant exchange

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

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at June 30, 2024

Balance at September 30, 2024

See accompanying notes to condensed consolidated financial statements.

14 unchanged sentences

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

Issuance of common shares, net of issuance costs

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at June 30, 2023

Balance at September 30, 2023

Balance at December 31, 2023

2 unchanged sentences

Issuance of common shares related to stock options exercised

Issuance of common shares related to warrant exchange

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

Accretion of Series A Convertible Preferred Shares

2 unchanged sentences

Net share settlement of equity awards

Balance at June 30, 2024

Balance at September 30, 2024

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

21 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

23 unchanged sentences

Property, plant and equipment acquired but not yet paid

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

June 30, 2024

June 30, 2023

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

September 30, 2024

September 30, 2023

Cash and cash equivalents

40 unchanged sentences

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

The Company is dependent on borrowings under its Credit Agreement 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 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 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.

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

However, during the nine months ended September 30, 2024, the Company incurred net losses of $ 55.7 million and net cash outflows from operating activities of $ 16.0 million.

If we are unable to achieve our profitability growth projections and maintain our covenant leverage ratio and minimum liquidity requirements, as a result of, for example, experiencing any adverse impact of changes or further 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, 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.

As further discussed in Restructuring Activities below, the Company has recently consolidated its manufacturing operations, signed a purchase and sale agreement of its West Winds facility, and executed a targeted reduction in excess workforce capacity, which were designed to improve operational efficiency.

If required, the Company will further reduce operating costs to ensure compliance with its financial 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Balance at beginning of period

3 unchanged sentences

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

For the three and six months ended June 30, 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.

For the three and nine months ended September 30, 2024, we recognized $ 2.7 million and $ 3.7 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, 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.

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 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.

For the three and nine months ended September 30, 2024, we capitalized $ 4.0 million and $ 11.1 million of interest costs, respectively.

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

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 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.

At September 30, 2024 and December 31, 2023, there were $ 70.9 million and $ 78.1 million of obligations outstanding under the Program, respectively.

Restructuring Activities

5 unchanged sentences

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.

During the second quarter of 2024, the Company committed to a plan to consolidate its manufacturing operations in its Beverage Solutions segment, which resulted 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 was 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.

The Company is under contract to sell the land and buildings, which is expected to be completed in the fourth quarter of 2024.

Production in our Richmond, CA facility ceased during the third quarter of 2024.

The Company currently estimates total charges related to the plant consolidations of $ 5.0 million, of which $ 0.7 million have been incurred during the three and nine months ended September 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.

At September 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 nine months ended September 30, 2024, the Company incurred impairment charges of approximately $ 1.2 million and $ 2.0 million, respectively, 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;

1 unchanged sentence

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.

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 nine months ended September 30, 2024, which are recorded in transaction, restructuring and integration expense in the Condensed Consolidated Statements of Operations.

At September 30, 2024, approximately $ 1.0 million of such termination benefits were accrued for within accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

The following table summarizes the changes in the Company’s accrual for employee termination benefits:

Three Months Ended

Nine Months Ended

September 30,

Balance at beginning of period

Balance at end of the period

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”).

1 unchanged sentence

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.

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 September 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

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 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 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.

The effective income tax rates for the nine months ended September 30, 2024 and 2023 were ( 2.3 %) and 18.7 %, respectively.

The Company’s effective tax rate for the current period differs from the federal statutory rate primarily due to an increase in the valuation allowance against domestic deferred tax assets.

The effective tax rate for the nine months ended September 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.

11 unchanged sentences

Recently issued accounting pronouncements

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.

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

5 unchanged sentences

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

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.

While we do not expect the adoption of this guidance to have a material impact on our financial position, results of operations or cash flows’, we will be required to provide enhanced segment disclosures beginning in our Annual Report for the fiscal year ended December 31, 2024 and subsequent interim periods.

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

5 unchanged sentences

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.

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.

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

ASU 2024-03 – Income Statement – Reporting Comprehensive Income (Topic 220):

Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income (Topic 220):

Expense Disaggregation Disclosures”.

The amendments in this update include requirements for public business entities to provide disclosure, in the notes to the financial statements, of specified information about certain costs and expenses.

The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The amendments in this update may be applied either prospectively or retrospectively.

The Company is currently evaluating the impact that ASU 2024-03 will have 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 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.

At September 30, 2024 and December 31, 2023, the Company had $ 1.2 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 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.

For the three and nine months ended September 30, 2024, we recorded $ 3.3 million of net unrealized losses and $ 1.0 million of net unrealized losses, respectively, within costs of sales.

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, 2024, the Company recognized $ 56.6 million and $ 135.7 million in revenues under ASC 815, respectively, and 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, 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 $ 1.9 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.

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

Other accrued deductions were $ 2.5 million and $ 2.7 million at September 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 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.

The Company does not have any material contract liabilities as of September 30, 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, 2024 and December 31, 2023, accounts receivable, net included $ 107.8 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 June 30, 2024 and December 31, 2023, no costs were capitalized as all arrangements were less than a year.

As of September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Flavors, extracts & ingredients

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

United States

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.

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

June 30, 2024

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

September 30, 2024

December 31, 2023

3 unchanged sentences

Green coffee inventories represent green coffee held for resale.

At June 30, 2024 and December 31, 2023, all green coffee held for resale was included within our Sustainable Sourcing & Traceability segment.

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

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

(Dollars in Thousands)

Depreciable Lives

June 30, 2024

September 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 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.

Depreciation expense for the three and nine months ended September 30, 2024 was $ 5.8 million and $ 17.1 million, respectively, and depreciation expense for the three and nine months ended September 30, 2023 was $ 4.4 million and $ 12.4 million, respectively.

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

All assets classified as construction in progress and equipment deposits at June 30, 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:

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

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

Balance at December 31, 2023

Accumulated impairment loss

Balance at June 30, 2024

Balance at September 30, 2024

Accumulated impairment loss

Intangible Assets, Net

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

June 30, 2024

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

September 30, 2024

Customer relationships

5 unchanged sentences

Intangible assets, net

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 .

Amortization expense of intangible assets was $ 2.0 million and $ 6.1 million for the three and nine months ended September 30, 2024, respectively, and amortization expense of intangible assets was $ 2.0 million and $ 6.0 million for the three and nine months ended September 30, 2023, respectively.

As of September 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

June 30, 2024

September 30, 2024

December 31, 2023

5 unchanged sentences

Operating lease liabilities

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.

During the nine months ended September 30, 2024 and 2023, the Company obtained approximately $ 1.0 million and $ 6.0 million, respectively, 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 Gregory Distribution Center lease.

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

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

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease cost

Short-term lease cost

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

June 30, 2024

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

September 30, 2024

December 31, 2023

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Weighted-average remaining lease term

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,

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

Nine Months Ended September 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 June 30, 2024.

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

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

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

Remainder of 2024

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Present value of minimum lease payments

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

June 30, 2024

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

September 30, 2024

December 31, 2023

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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 %.

At September 30, 2024, we had $ 107.5 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 8.8 %, and we had $ 2.6 million of standby letters of credit outstanding.

At September 30, 2024, the interest rate applicable to our Term Loan Facility was 8.0 % and the interest rate applicable to our Delayed Draw Term Loan Facility was 8.9 %.

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

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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).

The Term Loan Facility and Delayed Draw Term Loan Facility require 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.

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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 June 30, 2024, the carrying value of the Convertible Notes was $71.5 million, of which $ 49.7 million was from related parties.

At September 30, 2024, the carrying value of the Convertible Notes was $71.6 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 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.

On August 21, 2024, Falcon amended its working capital trade finance facility.

The amendment increased the facility size from $ 55.0 million to $ 75.0 million.

The interest rates and maturity date were unchanged as a result of the amendment.

At September 30, 2024, there was $ 48.5 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

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

Falcon was in compliance with these financial covenants as of June 30, 2024.

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

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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 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.

At September 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 June 30, 2024.

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

(a) a short-term trade finance facility with a balance of $ 6.6 million at September 30, 2024 and (b) a long-term note payable with a balance of $ 0.8 million at September 30, 2024.

Additionally, Rwanda Trading Company maintains two short-term futures contract-based lending facilities from international institutions with outstanding balances of $ 0.6 million and $ 2.4 million at September 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 June 30, 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 23,510,527 Series A Preferred Shares outstanding at September 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 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.

For the three and nine months ended September 30, 2024, the Company recorded $ 0.1 million and $ 0.3 million of amortization, respectively,

with respect to the Westrock Series A Preferred Shares.

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

Common Stock Warrants

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”).

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, 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 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.

On August 28, 2024, the Company announced that it had commenced an exchange offer (the “Offer”) and consent solicitation (the “Consent Solicitation”) relating to its outstanding (i) public warrants to purchase Common Shares, which warrants trade on The Nasdaq Global Market (the “Nasdaq”) under the symbol “WESTW” (the “Westrock Public Warrants”), and (ii) private placement warrants to purchase common shares (the “Westrock Private Warrants” and, together with the Westrock Public Warrants, the “Westrock Warrants”).

The Company offered to all holders of the Westrock Warrants the opportunity to receive 0.290 common shares in exchange for each of the Westrock Warrants tendered pursuant to the Offer.

The Offer and Consent Solicitation expired on September 26, 2024 (the “Expiration Date”).

As of the Expiration Date, (x) 16,676,541 outstanding Westrock Public Warrants were validly tendered and not validly withdrawn in the Offer and Consent Solicitation, representing approximately 97.42 % of the Westrock Public Warrants and (y) 2,026,046 outstanding Westrock Private Warrants were validly tendered and not validly withdrawn in the Offer and Consent Solicitation, representing 100 % of the Westrock Private Warrants.

On September 30, 2024, the Company issued 5,423,681 Common Shares in exchange for the tendered Westrock Warrants.

At September 30, 2024, following the completion of the Offer, the Company had 441,522 Westrock Public Warrants and no Westrock Private Warrants outstanding.

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

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.

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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 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.

Prior to the Offer, the Westrock Private Warrants were valued using a binomial lattice valuation model.

For the three and nine months ended September 30, 2024, the Company recognized $5.5 million and $7.1 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, 2023, the Company recognized $ 25.1 million and $ 18.8 million of gains, respectively, related to the change in fair value of warrant liabilities.

Concurrently with the Offer, the Company also solicited consents from the holders of each of the Westrock Public Warrants and the Westrock Private Warrants to amend that certain Warrant Agreement, dated as of August 25, 2022, by and between the Company and Computershare Inc., a Delaware corporation, and its affiliate, Computershare Trust Company, N.A., a federally chartered trust company, as warrant agent (the “Warrant Agent”), which governs all of the Westrock Warrants (the “Warrant Agreement”), to permit the Company to require that (x) each Westrock Public Warrant that is outstanding upon the closing of the Offer be exchanged for 0.261 common shares, which is a ratio 10 % less than the exchange ratio applicable to the Offer and (y) each Westrock Private Warrant that is outstanding upon the closing of the Offer be exchanged for 0.261 common shares, which is a ratio 10 % less than the exchange ratio applicable to the Offer (such amendment, the “Warrant Amendment”).

Pursuant to the Consent Solicitation, the Company received the approval of holders of approximately 97.42 % of the outstanding Westrock Public Warrants and 100 % of the outstanding Westrock Private Warrants to adopt the Warrant Amendment, which exceeded (x) the 50 % threshold of the outstanding Westrock Public Warrants required to amend the Warrant Agreement with respect to the Westrock Public Warrants and (y) the 50 % threshold of the outstanding Westrock Private Warrants required to amend the Warrant Agreement with respect to the Westrock Private Warrants.

Accordingly, the Company and the Warrant Agent entered into the Warrant Amendment, dated September 30, 2024.

On September 30, 2024, the Company announced that it would exercise its right, in accordance with the terms of the Warrant Amendment, to exchange each Westrock Public Warrant that is outstanding following the closing of the Offer for 0.261 common shares per warrant (the “Post-Offer Exchange”).

The Company fixed the date for the Post-Offer Exchange as October 15, 2024.

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

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

We did not discontinue any cash flow hedging relationships during the nine months ended September 30, 2024 and 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 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.

The notional amount for the coffee futures contracts that were designated and qualified for our commodity cash flow hedging program was 4.8 million pounds and 11.5 million pounds as of September 30, 2024 and December 31, 2023, respectively.

During the three and nine months ended September 30, 2024, the Company purchased coffee futures contracts and coffee options contracts under our cash flow hedging program with aggregate notional amounts of 28.7 million pounds and 58.5 million pounds, 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.

Approximately $ 4.3 million and $ 7.9 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, 2024, 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.

As of September 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 $ 13.6 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.

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

June 30, 2024

September 30, 2024

December 31, 2023

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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 six months ended June 30, 2024 and 2023, respectively:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 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 June 30, 2024:

June 30, 2024

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

September 30, 2024

Green coffee associated with forward contracts

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Change in fair value

Fair value as of June 30, 2024

Warrant exchange

Fair value as of September 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 $ 2.22 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.

Westrock Public Warrants are valued based on their quoted market price of $ 1.65 and $ 2.30 per warrant as of September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024, there were no outstanding Westrock Private Warrants.

As of December 31, 2023, the Westrock Private Warrants price of $ 2.68 per warrant was valued using a binomial lattice valuation model, which is considered to be a Level 3 fair value measurement.

The primary unobservable inputs were as follows:

June 30, 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 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 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 September 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 September 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 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.

No events occurred during the three and nine months ended September 30, 2024 or 2023, requiring these non-financial assets and liabilities to be subsequently recognized at fair value, with the exception of the $ 1.2 million and $ 2.0 million of impairment charges for the three and nine months ended September 30, 2024, respectively, 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.

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

As of September 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 and six months ended June 30, 2024 and 2023 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Unrealized gain (loss) on derivative instruments:

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Equity-Based Compensation

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.

During the three and nine months ended September 30, 2024, the Company granted three thousand 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 thirty thousand and $ 13.2 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.

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 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.

As of September 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 nine months ended September 30, 2024.

Weighted-Average

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Outstanding at December 31, 2023

Outstanding at June 30, 2024

Outstanding at September 30, 2024

Earnings per Share

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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.

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.

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

Three Months Ended June 30,

Six Months Ended June 30,

Restricted stock

Three Months Ended September 30,

Nine Months Ended September 30,

Restricted stock units

If-converted securities

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Thousands, except per share data)

6 unchanged sentences

Effect of participating securities

Effect of non-participating securities

Net income (loss) attributable to common shareholders - diluted

3 unchanged sentences

Weighted-average common shares outstanding - diluted

Dilutive loss per common share

Dilutive (loss) earnings 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 (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).

Our two operating segments, Beverage Solutions and Sustainable Sourcing & Traceability, are evaluated using Segment Adjusted EBITDA, which is a segment performance measure.

We define Segment Adjusted EBITDA 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, of 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 fair value of warrant liabilities, non-cash mark-to-market adjustments, certain non-capitalizable costs necessary to place the Conway extract and ready-to-drink facility into commercial production, certain recurring operating costs related to the scale-up of operations of the Conway extract and ready-to-drink facility, 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 June 30, 2024

Adjusted EBITDA

Three Months Ended September 30, 2024

Segment Adjusted EBITDA

Interest expense

5 unchanged sentences

Impairment charges

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

Conway extract and ready-to-drink facility pre-production costs

Conway extract and ready-to-drink facility scale up operating costs

Mark-to-market adjustments

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

Three Months Ended June 30, 2023

Adjusted EBITDA

Three Months Ended September 30, 2023

Segment Adjusted EBITDA

Interest expense

4 unchanged sentences

Equity-based compensation

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

Conway extract and ready-to-drink facility pre-production costs

Mark-to-market adjustments

Six Months Ended June 30, 2024

Adjusted EBITDA

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

Nine Months Ended September 30, 2024

Segment Adjusted EBITDA

Interest expense

2 unchanged sentences

Transaction, restructuring and integration expense

Change in fair value of warrants

Change in fair value of warrant liabilities

Equity-based compensation

Impairment charges

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

Conway extract and ready-to-drink facility pre-production costs

Conway extract and ready-to-drink facility scale up operating costs

Mark-to-market adjustments

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

Six Months Ended June 30, 2023

Adjusted EBITDA

Nine Months Ended September 30, 2023

Segment Adjusted EBITDA

Interest expense

2 unchanged sentences

Transaction, restructuring and integration expense

Change in fair value of warrants

Change in fair value of warrant liabilities

Management and consulting fees (S&D acquisition)

Equity-based compensation

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

Conway extract and ready-to-drink facility pre-production costs

Mark-to-market adjustments

3 unchanged sentences

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

We have future purchase obligations of $ 180.3 million as of June 30, 2024 that consist of commitments for the purchase of inventory over the next 12 months.

We have future purchase obligations of $ 266.8 million as of September 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 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.

In addition, at September 30, 2024, we had an obligation to repurchase $ 1.2 million of inventory associated with repurchase agreements in which the Company’s Sustainable Sourcing & Traceability segment has sold inventory to a third party and from whom the Company’s Beverage Solutions segment has an obligation to repurchase.

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

2 unchanged sentences

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

June 30, 2024

September 30, 2024

December 31, 2023

3 unchanged sentences

HF Direct Investment Pool, LLC

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

Unamortized debt costs

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest expense:

7 unchanged sentences

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

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.

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

The Company recognized no expenses and $ 0.6 million of such expenses during the three and nine months ended September 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 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.

For the three and nine months ended September 30, 2024, the Company recognized expenses of $ 0.1 million and $ 0.7 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, 2023, the Company recognized expenses of $ 0.5 million and $ 1.3 million, respectively, for such items.

At September 30, 2024 and December 31, 2023, we had no amounts payable and $ 0.2 million payable to Westrock Group, respectively, related to such items.

Subsequent Events

On October 16, 2024, the Post-Offer Exchange (Note 13) related to the Westrock Public Warrants was completed, resulting in the issuance of 115,220 Common Shares in exchange for then outstanding Westrock Public Warrants.

Following the completion of the Post-Offer Exchange, no Westrock Warrants remain outstanding.

Accordingly, the Westrock Public Warrants were suspended from trading on the Nasdaq as of the close of business on October 15, 2024, and were delisted.

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