UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | |
(Address of Principal Executive Offices) | (Zip Code) |
(
(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 |
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.
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 | ◻ | ☒ | 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
As of November 3, 2023, the Registrant had
EXPLANATORY NOTE
On August 26, 2022, the registrant, Westrock Coffee Company, a Delaware corporation (the “Company,” “Westrock,” “we,” “us,” or “our”), 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,” “our,” and similar terms 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.”
Prior to the conversion on August 26, 2022, when the Company was a Delaware limited liability company, the Company’s equity interests consisted of common units and two series of common equivalent preferred units. In connection with the conversion of the Company to a corporation, the Company’s outstanding common units and common equivalent preferred units were converted into shares of the Company’s common stock, par value $0.01 per share (“Common Shares”) and shares of the Company’s Series A convertible preferred shares, par value $0.01 per share, respectively. See Note 4, De-SPAC Merger Transaction, to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for a discussion of the conversion of common units to Common Shares. The number of outstanding units, weighted average number of outstanding units, loss per common unit, equity-based compensation and other financial amounts previously expressed on the basis of common units have been retroactively adjusted on the basis of Common Shares to reflect the conversion of common units to Common Shares.
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 including, but not limited to, the following statements regarding our expectations, hopes, beliefs, intentions or strategies regarding the future, our expectations regarding the build-out of the Conway, Arkansas facility and when it will begin commercial production; our expectations regarding capital expenditures; our future liquidity needs and access to capital; and our expectations regarding remediation of the material weaknesses in our internal control over financial reporting. 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, risks related to the following:
| ● | our limited operating history; |
| ● | the fact that we have incurred net losses in the past, may incur net losses in the future, and may not achieve profitability; |
| ● | risks associated with operating a coffee trading business and a coffee exporting business; |
| ● | the 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 and/or decreases in consumer spending on discretionary items; |
| ● | disruption in operations at any of our, our suppliers’ or our co-manufacturers’ production, distribution or manufacturing facilities or other loss of manufacturing capacity; |
| ● | our inability to anticipate customer preferences and successfully develop new products; |
| ● | 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; |
| ● | our inability to hedge commodity risks; |
| ● | 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 therewith 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; |
| ● | our inability to successfully execute our remediation plans with regards to the material weaknesses in our internal control over financial reporting; |
| ● | future litigation or legal disputes, which could lead us to incur significant liabilities and costs or harm our reputation; |
| ● | 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 in our credit agreement; |
| ● | our inability to complete the construction of our new facility in Conway, Arkansas within the anticipated time frame or incurring additional expenses in the process; |
| ● | our corporate structure and organization, which may prevent or delay attempts to acquire a controlling interest in the Company; |
| ● | the fact that our largest shareholders (and certain members of our management team) own a significant percentage of our stock and will be able to exert significant control over matters subject to shareholder approval; |
| ● | the impact of current global economic conditions, including those caused by economic slowdowns or recessions, changes in political, economic or industry conditions, global conflicts (including the ongoing conflicts in Europe, the Middle East and Latin America, inflation, the interest rate environment, U.S. government shutdowns, downgrades to the U.S. government’s sovereign credit rating or other conditions affecting the global financial and capital markets, and epidemic, pandemic or other health issues; and |
| ● | other risks, uncertainties and factors set forth in the “Risk Factors” section in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 21, 2023 (“Annual Report”) and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of this Quarterly Report on Form 10-Q, as well as those described from time to time in our future reports filed with the SEC. |
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Annual Report 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.
Westrock Coffee Company
FORM 10-Q
September 30, 2023
Table of Contents
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Condensed Consolidated Statements of Comprehensive Income (Loss) | 7 | |
Condensed Consolidated Statements of Shareholders’ Equity (Deficit) | 8 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40 | |
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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, 2023 |
| December 31, 2022 | ||
ASSETS | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Accounts receivable, net of allowance for credit losses of $ | | | ||||
Inventories | | | ||||
Derivative assets | | | ||||
Prepaid expenses and other current assets | | | ||||
Total current assets | | | ||||
Property, plant and equipment, net | | | ||||
Goodwill | | | ||||
Intangible assets, net | | | ||||
Operating lease right-of-use assets | | | ||||
Other long-term assets | | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY | ||||||
Current maturities of long-term debt | $ | | $ | | ||
Short-term debt | | | ||||
Accounts payable | | | ||||
Supply chain finance program | | — | ||||
Derivative liabilities | | | ||||
Accrued expenses and other current liabilities | | | ||||
Total current liabilities | | | ||||
Long-term debt, net | | | ||||
Deferred income taxes | | | ||||
Warrant liabilities | | | ||||
Other long-term liabilities | | | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 20) | ||||||
Series A Convertible Preferred Shares, $ | | | ||||
Shareholders' Equity | ||||||
Preferred stock, $ | ||||||
Common stock, $ | | | ||||
Additional paid-in-capital | | | ||||
Accumulated deficit | ( | ( | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Total shareholders' equity attributable to Westrock Coffee Company | | | ||||
Non-controlling interest | — | | ||||
Total shareholders' equity | | | ||||
Total Liabilities, Convertible Preferred Shares and Shareholders' Equity | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements.
5
WESTROCK COFFEE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(Thousands, except per share data) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Net sales | $ | | $ | | $ | | $ | | ||||
Costs of sales | | | | | ||||||||
Gross profit | | | | | ||||||||
Selling, general and administrative expense | | | | | ||||||||
Acquisition, restructuring and integration expense | | | | | ||||||||
Loss on disposal of property, plant and equipment | | | | | ||||||||
Total operating expenses | | | | | ||||||||
Income (loss) from operations | ( | | ( | | ||||||||
Other (income) expense | ||||||||||||
Interest expense, net | | | | | ||||||||
Change in fair value of warrant liabilities | ( | | ( | | ||||||||
Other, net | | | | ( | ||||||||
Income (loss) before income taxes and equity in earnings from unconsolidated entities | | ( | ( | ( | ||||||||
Income tax expense (benefit) | ( | ( | ( | ( | ||||||||
Equity in (earnings) loss from unconsolidated entities | | — | | — | ||||||||
Net income (loss) | $ | | $ | ( | $ | ( | $ | ( | ||||
Net income (loss) attributable to non-controlling interest | — | ( | | | ||||||||
Net income (loss) attributable to shareholders | | ( | ( | ( | ||||||||
Participating securities' share in earnings | ( | — | — | — | ||||||||
Accretion of Series A Convertible Preferred Shares | | — | ( | — | ||||||||
Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net | — | ( | — | ( | ||||||||
Common equivalent preferred dividends | — | ( | — | ( | ||||||||
Accumulating preferred dividends | — | — | — | ( | ||||||||
Net income (loss) attributable to common shareholders | $ | | $ | ( | $ | ( | $ | ( | ||||
Earnings (loss) per common share: | ||||||||||||
Basic | $ | | $ | ( | $ | ( | $ | ( | ||||
Diluted | $ | | $ | ( | $ | ( | $ | ( | ||||
|
| |||||||||||
Weighted-average number of shares outstanding: | ||||||||||||
Basic | | | | | ||||||||
Diluted | | | | | ||||||||
See accompanying notes to condensed consolidated financial statements.
6
WESTROCK COFFEE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(Thousands) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Net income (loss) | $ | | $ | ( | $ | ( | $ | ( | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Unrealized gain (loss) on derivative instruments | | ( | | ( | ||||||||
Foreign currency translation adjustment | | | | ( | ||||||||
Total other comprehensive income (loss) | | ( | | ( | ||||||||
Comprehensive income (loss) | | ( | ( | ( | ||||||||
Comprehensive income (loss) attributable to non-controlling interests | — | ( | | | ||||||||
Comprehensive income (loss) attributable to shareholders | | ( | ( | ( | ||||||||
Participating securities' share in earnings | ( | — | — | — | ||||||||
Accretion of Series A Convertible Preferred Shares | | — | ( | — | ||||||||
Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net | — | ( | — | ( | ||||||||
Common equivalent preferred dividends | — | ( | — | ( | ||||||||
Accumulating preferred dividends | — | — | — | ( | ||||||||
Comprehensive income (loss) attributable to common shareholders | $ | | $ | ( | $ | ( | $ | ( | ||||
See accompanying notes to condensed consolidated financial statements.
7
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 (Loss) |
| Interest |
| Equity (Deficit) | ||||||
Balance at June 30, 2022 | | $ | | $ | | $ | ( | $ | | $ | | $ | ( | |||||||
Net income (loss) | — | — | — | ( | — | ( | ( | |||||||||||||
Issuance of common shares upon closing of de-SPAC merger transaction, net of issuance costs, net of $ | | | | — | — | — | | |||||||||||||
Issuance of common shares related to PIPE financing | | | | — | — | — | | |||||||||||||
Issuance of common shares related to conversion of debt to equity (see Note 12) | | | | — | — | — | | |||||||||||||
Issuance of common shares related to conversion of Common Equivalent Preferred Units (see Note 4) | | | | — | — | — | | |||||||||||||
Common Equivalent Preferred Unit dividends ( | — | — | — | ( | — | — | ( | |||||||||||||
Loss on extinguishment of Common Equivalent Preferred Units | — | — | — | ( | — | — | ( | |||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | — | ( | |||||||||||||
Equity-based compensation | — | — | | — | — | — | | |||||||||||||
Balance at September 30, 2022 | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||
Balance at June 30, 2023(2) | | $ | | $ | | $ | ( | $ | ( | $ | — | $ | ( | |||||||
Net income (loss) | — | — | — | | — | — | | |||||||||||||
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 convertible preferred stock | — | — | | — | — | — | | |||||||||||||
Other comprehensive income (loss) | — | — | — | — | | — | | |||||||||||||
Equity-based compensation | | | | — | — | — | | |||||||||||||
Net share settlement of equity awards | — | — | ( | — | — | — | ( | |||||||||||||
Balance at September 30, 2023 | | $ | | $ | | $ | ( | $ | ( | $ | — | $ | | |||||||
| (1) | Retroactively adjusted June 30, 2022 for the de-SPAC merger transaction as described in Note 4. |
| (2) | Adjusted to correct for a |
See accompanying notes to condensed consolidated financial statements.
8
WESTROCK COFFEE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)(1)
(Unaudited) (continued)
Accumulated | ||||||||||||||||||||
Other | ||||||||||||||||||||
Common Stock | Additional | Accumulated | Comprehensive | Non-Controlling | Total | |||||||||||||||
(Thousands) |
| Shares |
| Amount |
| Paid-in Capital |
| Deficit |
| Income (Loss) |
| Interest |
| Equity (Deficit) | ||||||
Balance at December 31, 2021 | | $ | | $ | | $ | ( | $ | | $ | | $ | ( | |||||||
Net income (loss) | — | — | — | ( | — | | ( | |||||||||||||
Issuance of common shares upon closing of de-SPAC merger transaction, net of issuance costs, net of $ | | | | — | — | — | | |||||||||||||
Issuance of common shares related to PIPE financing | | | | — | — | — | | |||||||||||||
Issuance of common shares related to conversion of debt to equity (see Note 12) | | | | — | — | — | | |||||||||||||
Issuance of common shares related to conversion of Common Equivalent Preferred Units (see Note 4) | | | | — | — | — | | |||||||||||||
Common Equivalent Preferred Unit dividends ( | — | — | — | ( | — | — | ( | |||||||||||||
Loss on extinguishment of Common Equivalent Preferred Units | — | — | — | ( | — | — | ( | |||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | — | ( | |||||||||||||
Equity-based compensation | | | | — | — | — | | |||||||||||||
Net share settlement of equity awards | — | — | ( | — | — | — | ( | |||||||||||||
Accumulating preferred dividends | — | — | — | ( | — | — | ( | |||||||||||||
Balance at September 30, 2022 | | $ | | $ | | $ | ( | $ | | $ | | $ | | |||||||
Balance at December 31, 2022 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||
Net income (loss) | — | — | — | ( | — | | ( | |||||||||||||
Issuance of common shares related to acquisitions | | — | | — | — | — | | |||||||||||||
Issuance of common shares related to Public Warrant exercise | | | | — | — | — | | |||||||||||||
Issuance of common shares related to stock options exercised | ||||||||||||||||||||