Westrock Coffee Company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission File Number: 001-41485

WESTROCK COFFEE COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware		80-0977200
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

100 River Bluff Drive, Suite 210
Little Rock, Arkansas		72202
(Address of Principal Executive Offices)		(Zip Code)

(501) 320-4880

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of common stock, par value $0.01 per share	WEST	The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of common stock, par value $0.01 per share	WESTW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ◻ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	◻	Accelerated filer	◻	Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ⌧

As of November 8, 2022, the Registrant had 73,033,991 shares of common stock, par value $0.01 per share, outstanding.

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EXPLANATORY NOTE

On August 26, 2022, the registrant converted from a Delaware limited liability company, called Westrock Coffee Holdings, LLC, to a Delaware corporation called “Westrock Coffee Company” in connection with the closing of its de-SPAC merger transaction with Riverview Acquisition Corp., a special purpose acquisition vehicle and a Delaware corporation. References to “Westrock,” “we,” “us,” and “our,” prior to the effective time of the conversion, refer to the registrant when it was a Delaware limited liability company called “Westrock Coffee Holdings, LLC” and such references following the effective time of the conversion, refer to the registrant in its current corporate form as a Delaware corporation called “Westrock Coffee Company.”

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements as defined under U.S. federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and statements regarding, but not limited to, our expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to significant risks and uncertainties. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and we assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, risk related to the following:

●

our history of net losses;

●

volatility and increases in the cost of green coffee, tea and other ingredients and packaging, and our inability to pass these costs on to customers;

●

our inability to secure an adequate supply of key raw materials, including green coffee and tea, or disruption in our supply chain;

●

deterioration in general macroeconomic conditions;

●

disruption in operations at any of our production and distribution facilities;

●

climate change, which may increase commodity costs, damage our facilities and disrupt our production capabilities and supply chain;

●

failure to retain key personnel or recruit qualified personnel;

●

risks associated with operating a coffee trading business and a coffee-exporting business;

●

consolidation among our distributors and customers or the loss of any key customer;

●

complex and evolving U.S. and international laws and regulations, and noncompliance subjecting us to criminal or civil liability;

●

future acquisitions of businesses, which may divert our management’s attention, prove difficult to effectively integrate and fail to achieve their projected benefits;

●

our inability to effectively manage the growth and increased complexity of our business;

●

our inability to maintain or grow market share through continued differentiation of our product and competitive pricing;

●

our inability to secure the additional capital needed to operate and grow our business;

●

future litigation or legal disputes, which could lead us to incur significant liabilities and costs or harm our reputation;

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●

a material failure, inadequacy or interruption of our information technology systems;

●

the unauthorized access, theft, use or destruction of personal, financial or other confidential information relating to our customers, suppliers, employees or business;

●

our future level of indebtedness, which may reduce funds available for other business purposes and reduce our operational flexibility;

●

our inability to comply with the financial covenants contained in our credit agreement;

●

our inability to complete the construction of our new facility in Conway, Arkansas in time or incurring additional expenses in the process;

●

our corporate structure and organization; and

●

our being a public company;

●

the possible resurgence of COVID-19 and emergence of new variants of the virus on the foregoing; and

●

other risks, uncertainties and factors set forth in the “Risk Factors” section in the Company’s Registration Statement on Form S-1 filed with the U.S. Securities and Exchange Commission (“SEC”) on September 20, 2022 and in the “Management’s Discussion and Analysis” section of this Quarterly Report on Form 10-Q.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Registration Statement or in this Quarterly Report on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Many of the important factors that will determine these results are beyond our ability to control or predict. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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Westrock Coffee Company

FORM 10-Q

September 30, 2022

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Part I.	Financial Information	5
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Statements of Shareholders’ Equity (Deficit)	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
	1. Organization and Description of Business	11
	2. Basis of Presentation and Consolidation	11
	3. Summary of Significant Accounting Policies	12
	4. De-SPAC Merger Transaction	14
	5. Revenue	16
	6. Inventories	18
	7. Property, Plant and Equipment, Net	19
	8. Goodwill	19
	9. Intangible Assets, Net	20
	10. Leases	20
	11. Debt	22
	12. Series A Preferred Shares	24
	13. Derivatives	25
	14. Fair Value Measurements	27
	15. Accumulated Other Comprehensive Income	30
	16. Equity-Based Compensation	30
	17. Earnings per Share	31
	18. Segment Information	32
	19. Commitments and Contingencies	35
	20. Related Party Transactions	35
	21. Subsequent Events	36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
	Overview	37
	Key Business Metrics	37
	Significant Developments	40
	Results of Operations	41
	Critical Accounting Policies and Estimates	47
	Liquidity and Capital Resources	48
	Recent Accounting Pronouncements	51
Item 3.	Quantitative and Qualitative Disclosures Regarding Market Risk	52
Item 4.	Controls and Procedures	52
Part II.	Other Information	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56
Signatures		58

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Part I. Financial Information

Item 1. Financial Statements

WESTROCK COFFEE COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Thousands, except par value)	September 30, 2022		December 31, 2021
ASSETS
Cash and cash equivalents	$	90,984	$	19,344
Restricted cash		4,562		3,526
Accounts receivable, net of allowance for credit losses of $2,747 and $3,749, respectively		98,380		85,795
Inventories		162,245		109,166
Derivative assets		13,696		13,765
Prepaid expenses and other current assets		10,238		6,410
Total current assets		380,105		238,006

Property, plant and equipment, net		134,131		127,613
Goodwill		97,053		97,053
Intangible assets, net		120,949		125,914
Other long-term assets		17,850		4,434
Total Assets	$	750,088	$	593,020

LIABILITIES, CONVERTIBLE PREFERRED SHARES, REDEEMABLE UNITS, AND SHAREHOLDERS' EQUITY (DEFICIT)
Current maturities of long-term debt	$	12,011	$	8,735
Short-term debt		61,806		4,510
Short-term related party debt		—		34,199
Accounts payable		110,651		80,405
Derivative liabilities		5,357		14,021
Accrued expenses and other current liabilities		36,569		26,370
Total current liabilities		226,394		168,240

Long-term debt, net		164,671		277,064
Subordinated related party debt		—		13,300
Deferred income taxes		16,326		25,515
Warrant liabilities		32,333		—
Other long-term liabilities		11,217		3,028
Total liabilities		450,941		487,147

Commitments and contingencies (Note 19)

Series A Convertible Preferred Shares, $0.01 par value, 24,000 shares authorized, 23,588 shares issued and outstanding, $11.50 liquidation value		273,620		—
Series A Redeemable Common Equivalent Preferred Units: $0.00 par value, 222,150 units authorized, no units and 222,150 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively		—		264,729
Series B Redeemable Common Equivalent Preferred Units: $0.00 par value, 17,000 units authorized, no units and 17,000 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively		—		17,142

Shareholders' Equity (Deficit) ⁽¹⁾
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, 73,034 shares issued and outstanding at September 30, 2022; $0.00 par value, 39,389 shares authorized, 34,523 shares issued and outstanding at December 31, 2021		730		345
Additional paid-in-capital		316,537		60,628
Accumulated deficit		(296,442)		(251,725)
Accumulated other comprehensive income		1,923		12,018
Total shareholders' equity (deficit) attributable to Westrock Coffee Company		22,748		(178,734)
Noncontrolling interest		2,779		2,736
Total shareholders' equity (deficit)		25,527		(175,998)

Total Liabilities, Convertible Preferred Shares, Redeemable Units and Shareholders' Equity (Deficit)	$	750,088	$	593,020

(1) Retroactively restated for de-SPAC merger transaction as described in Note 4.

See accompanying notes to condensed consolidated financial statements.

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WESTROCK COFFEE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands, except per share data)	2022		2021		2022		2021
Net sales	$	230,308	$	181,277	$	640,149	$	507,752
Costs of sales		189,169		142,993		521,681		401,980
Gross profit		41,139		38,284		118,468		105,772

Selling, general and administrative expense		31,223		32,803		101,332		96,309
Acquisition, restructuring and integration expense		3,959		1,829		8,746		3,772
Loss (gain) on disposal of property, plant and equipment		459		(390)		748		(147)
Total operating expenses		35,641		34,242		110,826		99,934
Income from operations		5,498		4,042		7,642		5,838

Other (income) expense
Interest expense		13,404		8,614		30,265		24,283
Change in fair value of warrant liabilities		5,215		—		5,215		—
Other, net		325		114		(785)		(124)
Loss before income taxes		(13,446)		(4,686)		(27,053)		(18,321)
Income tax benefit		(428)		(796)		(3,511)		(2,239)
Net loss	$	(13,018)	$	(3,890)	$	(23,542)	$	(16,082)
Net (loss) income attributable to non-controlling interest		(22)		97		43		433
Net loss attributable to shareholders		(12,996)		(3,987)		(23,585)		(16,515)
Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net		(2,870)		—		(2,870)		—
Common equivalent preferred dividends		(4,380)		—		(4,380)		—
Accumulating preferred dividends		—		(6,109)		(13,882)		(17,957)
Net loss attributable to common shareholders	$	(20,246)	$	(10,096)	$	(44,717)	$	(34,472)

Loss per common share⁽¹⁾:
Basic	$	(0.41)	$	(0.29)	$	(1.12)	$	(1.00)
Diluted	$	(0.41)	$	(0.29)	$	(1.12)	$	(1.00)

Weighted-average number of shares outstanding⁽¹⁾:
Basic		49,795		34,523		39,819		34,455
Diluted		49,795		34,523		39,819		34,455

(1) Retroactively restated for de-SPAC merger transaction as described in Note 4.

See accompanying notes to condensed consolidated financial statements.

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WESTROCK COFFEE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2022		2021		2022		2021
Net loss	$	(13,018)	$	(3,890)	$	(23,542)	$	(16,082)
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on derivative instruments		(2,802)		2,372		(10,087)		5,882
Foreign currency translation adjustment		1		67		(8)		2
Total other comprehensive (loss) income		(2,801)		2,439		(10,095)		5,884
Comprehensive loss		(15,819)		(1,451)		(33,637)		(10,198)
Comprehensive (loss) income attributable to non-controlling interests		(22)		97		43		433
Comprehensive loss attributable to shareholders		(15,797)		(1,548)		(33,680)		(10,631)
Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net		(2,870)		—		(2,870)		—
Common equivalent preferred dividends		(4,380)		—		(4,380)		—
Accumulating preferred dividends		—		(6,109)		(13,882)		(17,957)
Comprehensive loss attributable to common shareholders	$	(23,047)	$	(7,657)	$	(54,812)	$	(28,588)

See accompanying notes to condensed consolidated financial statements.

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WESTROCK COFFEE COMPANY

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

(Unaudited)


								Accumulated
								Other
	Common Stock			Additional		Accumulated		Comprehensive		Non-Controlling		Total
(Thousands)	Shares	Amount		Paid-in Capital		Deficit		Income		Interest		Equity (Deficit)
Balance at June 30, 2021	34,523	$	345	$	60,017	$	(229,946)	$	7,265	$	2,433	$	(159,886)

Net income (loss)	—		—		—		(3,987)		—		97		(3,890)

Other comprehensive income (loss)	—		—		—		—		2,439		—		2,439

Equity-based compensation	—		—		306		—		—		—		306

Accumulating preferred dividends	—		—		—		(6,109)		—		—		(6,109)
Balance at September 30, 2021	34,523	$	345	$	60,323	$	(240,042)	$	9,704	$	2,530	$	(167,140)

Balance at June 30, 2022	34,856	$	348	$	60,627	$	(276,196)	$	4,724	$	2,801	$	(207,696)

Net income (loss)	—		—		—		(12,996)		—		(22)		(13,018)

Issuance of common shares upon closing of de-SPAC merger transaction, net of issuance costs, net of $2,469 of taxes (see Note 4)	12,868		129		805		—		—		—		934

Issuance of common shares related to PIPE financing	20,590		206		205,694		—		—		—		205,900

Issuance of common shares related to conversion of debt to equity (see Note 11)	2,500		25		24,975		—		—		—		25,000

Issuance of common shares related to conversion of Common Equivalent Preferred Units (see Note 4)	2,220		22		23,731		—		—		—		23,753

Common Equivalent Preferred Unit dividends ($0.02 per unit)	—		—		—		(4,380)		—		—		(4,380)

Loss on extinguishment of Common Equivalent Preferred Units	—		—		—		(2,870)		—		—		(2,870)

Other comprehensive income (loss)	—		—		—		—		(2,801)		—		(2,801)

Equity-based compensation	—		—		705		—		—		—		705
Balance at September 30, 2022	73,034	$	730	$	316,537	$	(296,442)	$	1,923	$	2,779	$	25,527

See accompanying notes to condensed consolidated financial statements.

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								Accumulated
								Other
	Common Stock			Additional		Accumulated		Comprehensive		Non-Controlling		Total
(Thousands)	Shares	Amount		Paid-in Capital		Deficit		Income		Interest		Equity (Deficit)
Balance at December 31, 2020	34,202	$	342	$	59,570	$	(205,570)	$	3,820	$	2,097	$	(139,741)

Net income (loss)	—		—		—		(16,515)		—		433		(16,082)

Other comprehensive income	—		—		—		—		5,884		—		5,884

Equity-based compensation	321		3		915		—		—		—		918

Net unit settlement	—		—		(162)		—		—		—		(162)

Accumulating preferred dividends	—		—		—		(17,957)		—		—		(17,957)
Balance at September 30, 2021	34,523	$	345	$	60,323	$	(240,042)	$	9,704	$	2,530	$	(167,140)

Balance at December 31, 2021	34,523	$	345	$	60,628	$	(251,725)	$	12,018	$	2,736	$	(175,998)

Net income (loss)	—		—		—		(23,585)		—		43		(23,542)