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What changed in Westrock Coffee Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Westrock Coffee Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+339 added−468 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-21)

Top changes in Westrock Coffee Co's 2023 10-K

339 paragraphs added · 468 removed · 253 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

51 edited+2 added−27 removed27 unchanged
Biggest changeWe have a highly experienced leadership team anchored by a growth-oriented culture and a deep bench of talent with strong business and operational experience. Our employees at all levels of our organization are passionate about addressing the needs of our stakeholders — from our farmer partners, to our customers, to our stockholders.
Biggest changeThe segment comes with a significant channel diversification opportunity within the varied ingredients and cross-selling options driven by cold brew and RTD beverages. ​ Exceptional and highly experienced management team and culture of commitment. We have a highly experienced leadership team anchored by a growth-oriented culture and a deep bench of talent with strong business and operational experience.
We do this to provide smallholder farmers and their families in developing countries the ability to advance their quality of life and economic well-being. ​ Our platform is built upon four fundamental pillars that position us as a leading provider of value-added beverage solutions and enable us to positively impact the coffee, tea, flavors, extracts, and ingredients ecosystems from crop to cup: (i) operate a fully transparent supply chain, (ii) develop innovative beverage solutions tailored to our customers’ specific needs, (iii) deliver a high quality and comprehensive set of products to our customers, and (iv) leverage our scaled international presence to serve our blue-chip customer base.
We do this to provide smallholder farmers and their families in developing countries the ability to advance their quality of life and economic well-being. ​ Our platform is built upon four fundamental pillars that position us as a leading provider of value-added beverage solutions and enable us to positively impact the coffee, tea, flavors, extracts, and ingredients ecosystems from crop to cup: (i) operate a transparent supply chain, (ii) develop innovative beverage solutions tailored to our customers’ specific needs, (iii) deliver a high quality and comprehensive set of products to our customers, and (iv) leverage our scaled international presence to serve our blue-chip customer base.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with the SEC.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with, or furnish to, the SEC.
The pricing structure set up by Fairtrade offers the exporter price floor on an FOB Origin basis of $1.60 per pound for Washed processed coffees and $1.55 per pound for Natural processed coffees.
The pricing structure set up by Fairtrade USA offers the exporter price floor on an FOB Origin basis of $1.60 per pound for Washed processed coffees and $1.55 per pound for Natural processed coffees.
Due to significant demand and limited supply, some origins, such as Sumatra and Ethiopia, will price their top grades of export beans on a flat price that is mostly divorced from the C-Price. We purchase raw materials through importers who source green coffee and tea from multiple countries of origin around the world.
Due to significant demand and limited supply, some origins, such as Sumatra and Ethiopia, will price their top grades of export beans on a flat price that is mostly divorced from the C-Price. We purchase raw materials through importers and exporters who source green coffee and tea from multiple different countries of origin around the world.
Pepper Inc., Mother Parkers, Trilliant Food and Nutrition, TreeHouse Foods, Finlays, and Harris Tea Company. ● In the flavors, extracts, and ingredients industry, our products compete with Kerry Foods, Finlays, Javo Beverage Company, Givaudan, Symrise, International Flavors & Fragrances, Inc., and Treatt. ● In the international coffee and tea industry, our products compete with JDE Peet’s, Massimo Zanetti, and UCC Ueshima Coffee Company. ​ We seek to differentiate ourselves from other providers by (i) sourcing coffee via traceable and transparent supply chains, (ii) providing our customers best-in-class product development and consumer insights across broad product offerings, and (iii) maintaining a large manufacturing footprint in varied geographic locations both in the U.S. and abroad which drives cost efficiencies due to scale and customer proximity to our products.
Pepper Inc., Mother Parkers, Trilliant Food and Nutrition, TreeHouse Foods, Finlays, and Harris Tea Company. ● In the flavors, extracts, and ingredients industry, our products compete with Kerry Foods, Finlays, Javo Beverage Company, Givaudan, Symrise, International Flavors & Fragrances, Inc., and Treatt. ● In the international coffee and tea industry, our products compete with JDE Peet’s, Massimo Zanetti, and UCC Ueshima Coffee Company. ​ 9 Table of Contents We seek to differentiate ourselves from other providers by (i) sourcing coffee via traceable and transparent supply chains, (ii) providing our customers best-in-class product development and consumer insights across broad product offerings, and (iii) maintaining a large manufacturing footprint in varied geographic locations both in the U.S. and abroad which drives cost efficiencies due to scale and customer proximity to our products.
In addition to regulatory compliance, our comprehensive compliance program is designed to assure that our business is conducted in accordance with the highest ethical standards. We regularly conduct training on such matters as the Foreign Corrupt Practices Act so that our employees understand what is expected of them and how to raise issues of concern.
In addition to regulatory compliance, our corporate compliance program is designed to assure that our business is conducted in accordance with the highest ethical standards. We regularly conduct training on such matters as the Foreign Corrupt Practices Act so that our employees understand what is expected of them and how to raise issues of concern.
As of December 31, 2022, our operating structure consists of two reportable segments: Beverage Solutions and Sustainable Sourcing and Traceability (“SS&T”). Beverage Solutions : Through this segment, we combine our product innovation and customer insights to provide value-added beverage solutions, including coffee, tea, flavors, extracts and ingredients.
As of December 31, 2023, our operating structure consists of two reportable segments: Beverage Solutions and Sustainable Sourcing & Traceability (“SS&T”). Beverage Solutions : Through this segment, we combine our product innovation and customer insights to provide value-added beverage solutions, including coffee, tea, flavors, extracts and ingredients.
We are registered with the FDA, and we satisfy all legal and compliance requirements under the Food Safety Modernization Act (FSMA) and applicable state regulations. Our facilities are certified under the GFSI schemes and operate under a Quality Management System to assure that we comply with all regulatory and customer requirements.
We are registered with the FDA, and we satisfy all legal and compliance requirements under the Food Safety Modernization Act (FSMA) and applicable state regulations. Our facilities are certified under the Global Food Safety Initiative (GFSI) schemes and operate under a Quality Management System to assure that we comply with all regulatory and customer requirements.
We are uniquely positioned to support innovation demand from extract development through RTD fulfillment. Liquid Extracts is our highest growth product category that includes iced coffees, cold brew coffee, and RTD mixes, with cold coffee products experiencing the most significant growth.
We are well positioned to support innovation demand from extract development through RTD fulfillment. Liquid Extracts is our highest growth product category that includes iced coffees, cold brew coffee, and RTD mixes, with cold coffee products experiencing the most significant growth.
Our non-U.S. workforce of 314 employees was employed in Rwanda, Germany, Malaysia, South Korea, Peru, England and Ethiopia. Total Compensation and Rewards. We provide competitive compensation and benefits which include market-based pay that is competitive for our geographies and our industry.
Our non-U.S. workforce of 315 employees was employed in Rwanda, Germany, Malaysia, South Korea, Peru, England and Ethiopia. Total Compensation and Rewards. We provide competitive compensation and benefits which include market-based pay that is competitive for our geographies and our industry.
Our comprehensive solutions offering and strategic partnership approach make us a unique “brand-behind-the-brand,” which allow us to deliver value-added beverage solutions across multiple product categories and platforms to our customers.
Our comprehensive solutions offering and strategic partnership approach make us a unique “brand-behind-the-brand,” which allows us to deliver value-added beverage solutions across multiple product categories and platforms to our customers.
Customer Channels ​ Westrock Coffee seeks to supply the world’s most iconic brands with the world’s most innovative coffee, tea, flavors, extracts, and ingredients products. As the brand-behind-the brands, our long-tenured customers include blue-chip market leaders across the retail, restaurant and food service, convenience store and travel center, non-commercial account, CPG, and hospitality industries.
Customer Channels ​ We seek to supply the world’s most iconic brands with the world’s most innovative coffee, tea, flavors, extracts, and ingredients products. As the brand-behind-the-brand, our long-tenured customers include blue-chip market leaders across the retail, restaurant and food service, convenience store and travel center, non-commercial account, CPG, and hospitality industries.
Regulatory Environment As a leading manufacturer of coffee, tea, flavors, extracts, and ingredients, we comply with the Good Manufacturing Practices promulgated by the FDA as part of our commitment to produce safe and high-quality beverage products.
Regulatory Environment As a leading manufacturer of coffee, tea, flavors, extracts, and ingredients, we comply with the Good Manufacturing Practices promulgated by the Food and Drug Administration (FDA) as part of our commitment to produce safe and high-quality beverage products.
Therefore, when the average price of green coffee per pound, or C-Price, plus the differential for the conventional quality in question is below the Fairtrade minimum pricing, then we pay a flat price equal to the Fairtrade minimum price.
Therefore, when the average price of green coffee per pound, or “C-Price,” plus the differential for the conventional quality in question is below the Fairtrade minimum pricing, then we pay a flat price equal to the Fairtrade minimum price.
The ability to serve global foodservice operators through our scaled international presence, best-in-class sustainable sourcing capabilities, and vertically integrated supply chain positions us as a global full-menu beverage solutions provider. ​ Our comprehensive line of products allows us to create any product platform in a multitude of packaging sizes and formats.
The ability to serve global foodservice operators through our international presence, responsible sourcing capabilities, and vertically integrated supply chain positions us as a global full-menu beverage solutions provider. ​ Our comprehensive line of products allows us to create any product platform in a multitude of packaging sizes and formats.
Business ​ General ​ Westrock Coffee Company, a Delaware corporation (the “Company,” “Westrock,” “we,” “us,” or “our), is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States, providing coffee sourcing, supply chain management, product development, roasting, packaging, and distribution services to the retail, food service and restaurant, convenience store and travel center, non-commercial account, CPG, and hospitality industries around the world.
Business ​ General ​ Westrock Coffee Company, a Delaware corporation (the “Company,” “Westrock,” “we,” “us,” or “our”), is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States, providing coffee sourcing, supply chain management, product development, roasting, packaging, and distribution services to the retail, food service and restaurant, convenience store and travel center, non-commercial account, consumer packaged goods (“CPG”), and hospitality industries around the world.
The mix of industries we serve provides a balance of in-home and out-of-home consumption. This diversification brings opportunities to leverage various products across industries and ensure that, regardless of shifting consumer patterns driving consumption at home or away, we remain stable and balanced as a provider of the brand-behind-the-brands.
The mix of industries we serve provides a balance of in-home and out-of-home consumption. This diversification brings opportunities to leverage various products across industries and help us, regardless of shifting consumer patterns driving consumption at home or away, remain stable and balanced as a provider of the brand-behind-the-brand.
We have begun the build-out of a 524,000 square-foot extract and ready-to-drink facility (“RTD”) in Conway, Arkansas, which will be our ninth manufacturing facility, and one of the largest of its type in the United States. The Conway facility is expected to begin commercial production in 2024.
We continue the build-out of our 524,000 square-foot extract and ready-to-drink facility (“RTD”) in Conway, Arkansas, which will be our eighth manufacturing facility, and one of the largest of its type in the United States. The Conway facility is expected to begin commercial production in 2024.
As the brand-behind-the-brand, we expect to continue to create new categories while innovating current products and formats at scale. We believe the liquid extracts category is the best near-term product expansion opportunity as customer tastes continue to shift to cold brew and RTD offerings. ​ Expand our customer base.
Product innovation is paramount to our success. As the brand-behind-the-brand, we expect to continue to create new categories while innovating current products and formats at scale. We believe the liquid extracts category is one of the best near-term product expansion opportunities as customer tastes continue to shift to cold brew and RTD offerings. ​ Expand our customer base.
Our technology and commitment to responsible sourcing enables us to transform anonymous, disjointed supply chains into transparent, connected systems. Traceability is a fundamental pillar of the value proposition we offer our customers, and is key to driving the industry shift that will positively impact small hold coffee farmers throughout the world. ​ Innovative, value-added, and scalable beverage solutions provider.
Our technology and commitment to responsible sourcing enables us to transform anonymous, disjointed supply chains into transparent, connected systems. Traceability is a fundamental pillar of the value proposition we offer our customers, and is key to driving the industry shift that will positively impact small hold coffee farmers throughout the world. ​ Significant customer value proposition.
In addition, the growing trend to “more than hot black coffee” is regulating seasonal variances. ​ Human Capital Management As of December 31, 2022, we had 1,327 employees located around the globe, of which 1,013 employees were located in the United States. Of our employees located in the United States, 579 were hourly production employees.
In addition, the growing trend to “more than hot black coffee” is regulating seasonal variances. ​ Human Capital Management As of December 31, 2023, we had 1,399 employees located around the globe, of which 1,084 employees were located in the United States. Of our employees located in the United States, 546 were hourly production employees.
Our end-to-end solutions are based on a cross-functional sales team approach that starts with insights and innovation, leads to product and taste profile development, on to sourcing and risk management, production, final packaging and logistics delivery, and is supported with marketing and continued process and program refinement. ​ Culture of commitment.
Our end-to-end solutions are based on a cross-functional sales team approach that starts with insights and innovation, leads to product and taste profile development, on to sourcing and risk management, production, final packaging and logistics delivery, and is supported with marketing and continued process and program refinement. ​ Growth Strategies ​ Extend and enhance product offerings through innovation.
The Company operates eight manufacturing facilities, three of which are located in Concord, North Carolina, two in North Little Rock, Arkansas, one in Richmond, California, one in Kigali, Rwanda, and one in Johor Bahru, Malaysia.
The Company operates three manufacturing facilities in Concord, North Carolina, one in North Little Rock, Arkansas, one in Richmond, California, one in Kigali, Rwanda, and one in Johor Bahru, Malaysia.
Through economic empowerment and environmental accountability, we directly improve the lives of the people who bring our products to life. Paying fair prices, training farmers, and connecting them to customers with full transparency leads to reinvestment in more sustainable, profitable farms.
Through economic empowerment and environmental accountability, we directly improve the lives of the people who bring our products to life. Paying fair prices, training farmers, and connecting them to customers with transparency leads to reinvestment in more sustainable, profitable farms. The value we create to improve lives accelerates symbiotically with our revenue and profits. ​ Proprietary, digitally traceable technology.
We define responsible sourcing as the purchase and processing of coffee and tea in a manner that is fair to the people who grow and handle it, their employees, peers, and environments. As of December 31, 2022, approximately 69% of our coffee and tea is responsibly sourced globally.
We define responsible sourcing as the purchase and processing of coffee and tea in a manner that is fair to the people who grow and handle it, their employees, peers, and environments. We are committed to continuing to increase our responsibly sourced coffee and tea purchases.
Raíz farmers receive training, services, and a $0.05 premium that makes their farms more environmentally sustainable and profitable. 9 Table of Contents Raíz farmers also comply with internationally recognized standards for labor conditions, human rights, and environmental protection.
Raíz Sustainability is a proprietary third party-verified sustainable farming program. Raíz farmers receive training, services, and a $0.05 premium that makes their farms more environmentally sustainable and profitable. Raíz farmers also comply with internationally recognized standards for labor conditions, human rights, and environmental protection.
Our skilled team has extensive experience of success working in blend matching and taste profiling, which demonstrates our ability to match any coffee or tea blend or ready-to-drink beverage desired and ensure consistency in every cup. This, along with our partnership approach with our customers, enhances our ability to drive beverage program profitability.
Our skilled team has extensive experience working in blend matching and taste profiling, which allows us to match any coffee or tea blend or ready-to-drink beverage desired and maintain consistency of our products. This, along with our partnership approach with our customers, enhances our ability to drive beverage program profitability. ​ High growth and compelling liquid extract business.
We combine IBM Food Trust® blockchain, Oracle NetSuite®, and other technologies to create traceability and connectivity on a global scale. ​ Beginning with the farmer transactions, data is captured at every stage of the supply chain.
We are capable of tracing individual lots from the farm, through the roaster, to the finished good. We combine IBM Food Trust® blockchain, Oracle NetSuite®, and other technologies to create traceability and connectivity on a global scale. 6 Table of Contents Beginning with the farmer transactions, data is captured at every stage of the supply chain.
Our new customer pipeline is organized and quantified through a detailed process that engages our cross-functional team to ensure we are always working to grow our customer base. ​ Follow our customers with geographic expansion. Many of our blue-chip customers operate restaurants, hotels, convenience stores, and retail stores globally.
We seek to expand our blue-chip customer base to further penetrate our existing channels. Our new customer pipeline is organized and quantified through a detailed process that facilitates our cross-functional team’s efforts to grow our customer base. ​ Follow our customers with geographic expansion. Many of our blue-chip customers operate restaurants, hotels, convenience stores, and retail stores globally.
Consumer and market insights comprise the foundation of our product innovation process and customer program recommendations. As a research-driven organization, we utilize our industry and consumer insights across our product development and sales processes.
Our value proposition enables us to develop successful beverage solutions roadmaps, to provide product innovation, and to grow with our customers. Consumer and market insights comprise the foundation of our product innovation process and customer program recommendations. As a research-driven organization, we utilize our industry and consumer insights across our product development and sales processes.
We 7 Table of Contents consider everyone who touches Westrock coffee — from crop to cup — to be an equal contributor in our mission to produce great coffee and improve the industry as a whole. ​ Robust financial growth and performance underpinned by on-the-ground operating initiatives.
We consider everyone who touches Westrock coffee — from crop to cup — to be an equal contributor in our mission to produce great coffee and improve the industry as a whole.
Supply chain programs like Raíz show just how imbedded we are with many of our unrelated supply partners, which allows us to spread sourcing risk across multiple partners, origins, quality types and farmer groups without giving up influence over matters material to our sourcing goals such as farmer livelihoods, yield improvements, and transparent data.
Supply chain programs like Raíz allow us to spread sourcing risk across multiple partners, origins, quality types and farmer groups without giving up influence over matters material to our sourcing goals such as farmer livelihoods, yield improvements, and transparent data. 8 Table of Contents Raw Materials ​ Our primary raw materials are green coffee and tea.
We are focused on delivering a fully traceable and transparent supply chain for our customers. We have multiple programs and strategies designed to meet customers’ varying needs, including the following: Responsible Sourcing Strategy.
These strategic holdings provide exceptional insight into each segment of the supply chain that allows us to better understand and manage risk. We are focused on delivering a fully traceable and transparent supply chain for our customers. We have multiple programs and strategies designed to meet customers’ varying needs, including the following: Responsible Sourcing Strategy.
We maintain a qualified staff of professionals to oversee, manage and apply all standards related to food safety, environment safety, and workplace safety standards by agencies that audit our facilities throughout the United States. COVID-19 Mitigation. We have a COVID-19 response committee that monitors the impact of COVID-19 on the workforce’s health and on Company production.
We maintain a qualified staff of professionals to oversee, manage and apply all standards related to food safety, environment safety, and workplace safety standards by agencies that audit our facilities throughout the United States. We believe our workforce is prepared to meet the needs of our customers and further the growth of our Company.
Our supplier approval and monitoring programs ensure that we can consistently deliver and exceed our customers’ expectations. 10 Table of Contents Competition ​ The coffee, tea, flavors, extracts, and ingredients industry is highly competitive.
Our supplier approval and monitoring programs ensure that we can consistently deliver and exceed our customers’ expectations. Competition ​ The coffee, tea, flavors, extracts, and ingredients industry is highly competitive. We generally view our competition based on product lines and geography. ● In the U.S. coffee and tea industry, our products compete with Keurig Dr.
Raw Materials ​ Our primary raw materials are green coffee and tea. Green coffee is an exchange-traded commodity subject to price fluctuations. There are certain instances when specific types of green coffee are not traded on a commodities exchange, and instead are traded on a negotiated flat-price basis. The most common flat-priced coffee in our portfolio is Fairtrade-certified coffees.
Green coffee is an exchange-traded commodity subject to price fluctuations. We purchase green coffee on a differential basis against the exchange price and on a negotiated flat-price basis. The most common flat-priced coffee in our portfolio is Fairtrade USA-certified coffees.
Our quality management systems are periodically reviewed using an internal audit system to assure that our employees understand our commitment to food safety and high quality. We are also subject to the general industry requirements applicable to manufacturers, including the safety standards of the Occupational Safety and Health Administration and the environmental standards of the Environmental Protection Agency.
Our quality management systems are periodically reviewed using an internal audit system to assure that our employees understand our commitment to food safety and high quality.
We actively recruit for diverse talent and seek to build a culture reflective of the desires and the needs of the customers we partner with and serve. We actively support equal opportunity employment, enjoy stable labor relations, and provide a working environment of equity and inclusion for all members of our workforce. 11 Table of Contents Employee Health and Safety.
We actively recruit for diverse talent and seek to build a culture reflective of the desires and the needs of the customers we partner with and serve. Employee Health and Safety.
This turnkey approach makes us a valuable partner for our global customers to feed a constant pipeline of 8 Table of Contents innovation into their business planning process. Using this same platform, we are also able to toll produce for our customers. We believe our ability to be flexible distinguishes us in the market.
This approach makes us a valuable partner for our global customers to feed a constant pipeline of innovation into their business planning process, gives us a multi-year outlook far ahead of product launches and enables us to plan and deploy human resources and capital expenditures. Using this same platform, we are also able to toll produce for our customers.
Intellectual Property ​ We own several U.S. trademarks and service marks that have been registered with the United States Patent and Trademark Office. We also own other trademarks and service marks for which we have filed applications for U.S. registration.
Intellectual Property ​ We own several U.S. trademarks and service marks that have been registered (or for which applications have been filed) with the United States Patent and Trademark Office. The duration of trademark registrations varies; however, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.
Our company is full of people looking to make a difference in countless lives around the world.
Our employees at all levels of our organization are passionate about addressing the needs of our stakeholders — from our farmer partners, to our customers, to our stockholders. Our company is full of people looking to make a difference in countless lives around the world.
Most of our customers define “coffee season” as mid-September through April. However, sales of cold brew, iced tea and extract products during the summer months helps mitigate the impact of this seasonality.
However, sales of cold brew, iced tea and extract products from March through August helps mitigate the impact of this seasonality.
Communicating supply chain realities allows our customers to make the informed decisions for their brands and leads to reinvestment in sustainable farms. Raíz Sustainability . Raíz Sustainability is a proprietary third party-verified sustainable farming program.
This, combined with multi-year trade relationships, enables deeper collaboration, enforces ethical practices in the supply chain, and lay a foundation to solve the sustainability issues of tomorrow. Communicating supply chain realities allows our customers to make informed decisions for their brands and leads to reinvestment in sustainable farms. Raíz Sustainability .
We are committed to continuing to increase our responsibly sourced coffee and tea by building a global supplier assurance framework in partnership with assurance experts, and we will audit our entire supplier network for compliance with our Responsible Sourcing Policy.
We have built a global supplier assurance framework in partnership with assurance experts, and we audit our coffee supplier network for compliance with our Responsible Sourcing Policy. Additionally, all tea purchases are third-party certified and we are increasing purchases of second party verified and third party certified coffee. Farmer Direct Verified®.
We collaborate with customers from the consumer insights and product design phase of development through extract manufacture and end-of-the-line packaging, which enables Westrock to capture profitability at every stage of the value chain.
These products reside in our Beverage Solutions segment. 7 Table of Contents We collaborate with customers from the consumer insights and product design phase of development through extract manufacture and end-of-the-line packaging.
Additionally, we plan to deploy more personnel in key supply chains to further quantify the social, environmental, and entrepreneurial impact of coffee and tea in the countries of origin. Farmer Direct Verified®. Westrock is the largest private label service provider in the world to enable digital traceability at scale from farm gate to the finished products across all beverage offerings.
We seek to be the largest private label service provider in the world to enable digital traceability at scale from farm gate to the finished products across all beverage offerings. Our transparent sourcing program, Farmer Direct Verified® (“FDV”), provides transactional data throughout the supply chain.
In addition, we own numerous registered domain names, and copyrights, trade secrets, proprietary technology, know-how, and other proprietary rights that are not registered. Seasonality ​ The coffee and tea market is subject to some seasonal variations. Sales of hot coffee products are typically higher during the winter months compared to the summer months.
We believe our trademarks and service marks are integral to customer identification of our products. It is not possible to assess the impact of the loss of such identification. In addition, we own numerous registered domain names, and copyrights, trade secrets, proprietary technology, know-how, and other proprietary rights that are not registered.
Capitalizing on growing beverage categories and innovation, we offer an array of on-trend, highly differentiated and innovative products that allow our customers to satisfy their customers changing tastes and preferences.
Capitalizing on growing beverage categories and innovation, we offer a wide array of products that allow our customers to satisfy their customers’ changing tastes and preferences. Our diversified product offering includes whole bean roast and ground coffee, as well as single service cups, food service iced tea, retail and food service hot tea, extract-based products, and our RTD beverage platform.
The capacity to deliver an ethically-sourced bespoke product, around the world, in a timely manner differentiates us from our competition. ​ High growth and compelling liquid extract business. As Millennials and Generation Z enter their prime spending age, they will continue to drive major change within the coffee industry.
As Millennials and Gen Z enter their prime spending age, they will continue to drive major change within the coffee industry, with increased demand for cold coffee, liquid extracts, and premium away-from-home beverages compared to hot coffee beverages and carbonated soft drinks.
Competitive Strengths ​ In order to achieve our mission, we will utilize our competitive strengths and we will drive continued, sustainable growth and strong financial performance by executing on our growth strategies. ​ Exceptional and highly experienced management team.
Recent Developments Refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Significant Developments”, of this Annual Report on Form 10-K for information regarding significant developments in our business. 5 Table of Contents Competitive Strengths ​ In order to achieve our mission, we will utilize our competitive strengths and we will drive continued, sustainable growth and strong financial performance by executing on our growth strategies. ​ Innovative, value-added, and scalable beverage solutions provider.
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Recent Developments On August 26, 2022, pursuant to the terms of the Transaction Agreement, dated April 4, 2022, by and among the Company, Riverview Acquisition Corp., a special purpose acquisition vehicle and a Delaware corporation (“Riverview”), Origin Merger Sub I, Inc.
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Seasonality ​ The coffee and tea market is subject to some seasonal variations. Sales of hot coffee products are typically higher during the winter months compared to the summer months. Most of our customers define “coffee season” as September through February.
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(“Merger Sub I”), and Origin Merger Sub II, LLC (“Merger Sub II”) (as amended, modified or supplemented, the “Transaction Agreement”), the Company completed its de-SPAC merger transaction with Riverview (the “Transaction”).
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We are also subject to the general industry requirements applicable to manufacturers, including the safety standards of the 10 Table of Contents Occupational Safety and Health Administration and the environmental standards of the Environmental Protection Agency.
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In connection with the closing of the Transaction (the “Closing”), the Company converted from a Delaware limited liability company to a Delaware corporation (the “Conversion”) and changed its corporate name from “Westrock Coffee Holdings, LLC” (the “Converting Company”) to “Westrock Coffee 5 Table of Contents Company.” Pursuant to the Transaction Agreement, Merger Sub I merged with and into Riverview, with Riverview surviving the merger as a direct wholly owned subsidiary of Westrock (such merger, the “SPAC Merger”) and immediately following the consummation of such merger, Riverview merged with and into Merger Sub II, with Merger Sub II surviving the merger as a direct wholly owned subsidiary of Westrock.
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At Closing, the Company issued 12,868,151 shares of common stock of the Company, par value $0.01 (“Common Shares”), to public and Class B shareholders of Riverview, receiving $49.8 million of the cash held in the trust account of Riverview, which is net of $17.1 million of Riverview transaction expenses offset against proceeds received by the Company at Closing.
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The 12,868,151 Common Shares include 1,910,000 shares issued to PIPE investors who elected to satisfy their PIPE commitments through the purchase of shares of Class A common stock of Riverview (“Riverview Class A Shares”) on the public market, pursuant to the terms of their respective subscription agreements.
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Substantially concurrently with the Closing, the Company received $205.9 million in cash proceeds from common stock PIPE investments (the “PIPE Financing”), issued 20,590,000 Common Shares to the PIPE investors and entered into a credit agreement (the “Credit Facility”) that includes (a) a senior secured first lien revolving credit facility in an initial aggregate principal amount of $175.0 million (the “Revolving Credit Facility”) and (b) a senior secured first lien term loan facility in an initial aggregate principal amount of $175.0 million (the “Term Loan Facility”).
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On November 14, 2022, Westrock Beverage Solutions, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company, acquired one hundred percent (100%) of the equity securities of Kohana Coffee, LLC (“Kohana Coffee”), a Texas limited liability company.
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Kohana Coffee is an extract and RTD focused business, based in Richmond, California, serving customers in the retail and CPG industries. Aggregate consideration paid for Kohana Coffee included 1,852,608 Common Shares and approximately $15.7 million in cash, subject to customary adjustments.
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On February 14, 2023, the Company entered into an Incremental Assumption Agreement and Amendment No. 1 (the “Amendment”) to its Credit Agreement, which establishes a new class of incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $50.0 million, proceeds of which may be used to fund capital expenditures related to our extract and ready-to-drink facility in Conway, Arkansas, or for general corporate purposes. ​ On February 28, 2023, the Company completed the acquisition of Bixby Roasting Co.
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(“Bixby”), a specialty-grade roaster that is a leader in the emerging influencer-led brand space. The acquisition includes Bixby’s roasting facility in Los Angeles, California.
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The value we create to improve lives accelerates symbiotically with our revenue and profits. ​ 6 Table of Contents Proprietary, digitally traceable technology. We are capable of tracing individual lots from the farm, through the roaster, to the finished good.
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Instead of hot coffee beverages and carbonated soft drinks, millennials are consuming cold coffee, liquid extracts, and premium away-from-home beverages. These trends are trickling down into Generation Z as well.
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The segment comes with a significant channel diversification opportunity within the varied ingredients and cross-selling options, with tailwinds driven by cold brew and RTD beverages. ​ Unparalleled customer value proposition. Our value proposition enables us to develop successful beverage solutions roadmaps, to provide product innovation, and to grow with our customers.
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Our strong topline growth in recent years combined with more streamlined operations have delivered continued improvement in our financial profile. ​ Growth Strategies ​ Extend and enhance product offerings through innovation. We are relentlessly focused on product innovation as it is paramount to our success.
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While we take the privilege of serving our current customers very seriously, we are actively and aggressively working to expand our blue-chip customer base to further penetrate our existing channels.
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Our diversified product offering combines a strong earnings foundation in whole bean roast and ground coffee with high-growth product offerings in single service cups, food service iced tea, retail and food service hot tea, extract-based products, and our RTD beverage platform. These products reside in our Beverage Solutions segment.
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From an innovation perspective, we recently launched multiple cold brew coffee and tea concentrate product lines, chai tea and other functional health beverage concentrates, an infused-beverages platform for agua frescas and other blended juice-based products, coffee extracts designed for indulgent dairy-based products, and further expanded into core RTD products.
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One element of Westrock’s platform is to integrate our consumer insights, omni-channel product marketing and product development resources into the strategic planning process of our key global accounts, providing us with a multi-year stream of product innovation and new product introductions far ahead of the product launch cycle.
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This yields repeatable, forecastable, and consistent growth and the platform enables us to more efficiently deploy human resources and capital expenditures as compared to our competition due to our integration with the growth and product innovation plans of our key global customers.
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These strategic holdings provide exceptional insight into each segment of the supply chain that allows us to better understand and manage risk. Although we do not own any farms, we source our coffee and tea from over 1.5 million farmer partners spread across 35 different countries, spreading our supply risk across multiple importers and exporters and countries of origin.
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Our transparent sourcing program, Farmer Direct Verified® (“FDV”), provides unprecedented transactional data throughout the supply chain. This, combined with multi-year trade relationships enables deeper collaboration, enforces ethical practices in the supply chain, and lays the foundation to solve the sustainability issues of tomorrow.
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For the year ended December 31, 2022, approximately 21% of our green coffee and none of our tea was sourced from Falcon and RTC. No other importer accounted for more than 10% of our coffee raw materials purchases. Related to tea raw materials purchases, one importer accounted for approximately 50% of our tea raw materials purchases.
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As a scaled global beverage solutions provider with capabilities across several product categories and industries served, we generally view our competition based on product lines and geography. ● In the U.S. coffee and tea industry, our products compete with Keurig Dr.
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The duration of trademark registrations varies; however, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained. We believe our trademarks and service marks are integral to customer identification of our products. It is not possible to assess the impact of the loss of such identification.
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We responded to the pandemic by following generally accepted COVID-19 mitigation guidelines intended to ensure that personal protective equipment and distancing protocols are used in our production facilities across the entire enterprise.
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As a result, we have not experienced a material impact in workforce attendance, nor have we experienced a material impact on our ability to safely manufacture and deliver products to our customers. To abate the spread of COVID-19 when individual cases are identified, employees are required to quarantine at home if there is contact, positive testing, and/or confirmed infection.
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To meet our production needs we schedule unaffected healthy employees to work overtime to cover staffing needs. Overtime is used primarily to cover increased product orders. We believe we are prepared to address and follow government mandates that might become law in the future.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+15 added−108 removed95 unchanged
Biggest changeThese provisions include, among others, those establishing: ● the division of our board of directors until the 2028 meeting of our stockholders into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time-consuming and difficult; ● the inability of our stockholders to call a special meeting; ● rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; ● the right of our board of directors to issue preferred stock without stockholder approval; ● the inability of stockholders to remove directors without cause until the class to which such directors belong is declassified; ● the ability of our directors, not our stockholders, to fill vacancies on the board of directors; and ● certain terms of the Series A Preferred Shares, including the (i) rights of the holders of the Series A Preferred Shares to vote as a separate class with respect to certain matters, including amendments to the certificate of incorporation and bylaws of Westrock that would adversely affect the rights, preferences, privileges, voting power or special rights of the Series A Preferred Shares and, for so long as the BBH Investors own at least sixty percent (60%) of the Series A Preferred Shares that they owned as of August 26, 2022, any Fundamental Change in which the holders of Series A Preferred Shares would receive less than $18.50 per share (subject to customary adjustments), and (ii) the rights of the Preferred Shares in a Fundamental Change to receive at least a specified amount. ​ On April 4, 2022, Westrock entered into the Investor Rights Agreement with (i) Westrock Group, LLC, The Stephens Group, LLC, Sowell Westrock, L.P. and any affiliate of Joe T.
Biggest changeThese provisions include, among others, our classified board structure, the inability of our stockholders to call a special meeting, rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings, the right of our board of directors to issue preferred stock without stockholder approval, the inability of stockholders to remove directors without cause until the class to which such directors belong is declassified , the ability of our directors, not our stockholders, to fill vacancies on the board of directors and certain rights of the Series A Preferred shareholders.
Section 203 of the DGCL provides that, subject to limited exceptions, a person that acquires, or is affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) must not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder. ​ Westrock is an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make the Common Shares less attractive to investors.
Section 203 of the DGCL provides that, subject to limited exceptions, a person that acquires, or is affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) must not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder. ​ 20 Table of Contents Westrock is an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make the Common Shares less attractive to investors.
Our ability, including specified material subsidiaries, to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and could result in a default and acceleration under other agreements containing cross-default provisions.
Our ability, including specified material subsidiaries, to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants or make payments could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and could result in a default and acceleration under other agreements containing cross-default provisions.
Our operations in foreign countries may place us in contact with persons who may be considered “foreign officials” under the FCPA, resulting in greater risk of potential violations of the FCPA (or other applicable public corruption regimes). We also have activities in jurisdictions that are perceived to present heightened risks of public corruption.
We have activities in jurisdictions that are perceived to present heightened risks of public corruption, and our operations in foreign countries may place us in contact with persons who may be considered “foreign officials” under the FCPA, resulting in greater risk of potential violations of the FCPA (or other applicable public corruption regimes).
Our total addressable market in the United States is calculated based on an estimated percentage of households that purchase coffee products at least once per year, which we generally estimate based on internal and third-party market research, historical surveys and interviews with market participants.
Our total addressable market in the United States is calculated based on an estimated percentage of households that purchase coffee products at least once per year, which we generally estimate based on internal and third-party market research, historical surveys and interviews with market participants, which is inherently imprecise.
These price fluctuations can adversely affect the business of each of Falcon and RTC. 31 Table of Contents We are exposed to risks associated with the interruption of supply and increased costs as a result of our reliance on third-party transportation carriers for shipment of our products.
These price fluctuations can adversely affect the business of each of Falcon and RTC. 22 Table of Contents We are exposed to risks associated with the interruption of supply and increased costs as a result of our reliance on third-party transportation carriers for shipment of our products.
Instances or reports of food safety issues involving our products, whether or not accurate, such as unclean water supply, food or beverage-borne illnesses, tampering, contamination, mislabeling, or other food or beverage safety issues, including due to the failure of our third-party co-packers to maintain the quality of our products and to comply with our product specifications, could damage the value of our brands, negatively impact sales of our products, and potentially lead to product recalls, production interruptions, product liability claims, litigation or damages.
Instances or reports of food safety issues involving our products, whether or not accurate, such as unclean water supply, food or beverage-borne illnesses, tampering, contamination, mislabeling, or other food or beverage safety issues, including due to the failure of our third-party co-packers to maintain the quality of our products and to comply with our product specifications, could damage the value of our brands, negatively impact sales of our products, and potentially lead to product recalls, production interruptions, product liability claims, litigation 23 Table of Contents or damages.
As a result, if future events differ significantly from the judgments, assumptions and estimates in Westrock’s critical accounting policies, those events or assumptions could have a material impact on Westrock’s consolidated financial statements and related disclosures. In addition, changes in accounting interpretations or assumptions could impact Westrock’s financial statements and Westrock’s ability to timely prepare Westrock’s financial statements.
If future events differ significantly from the judgments, assumptions and estimates in Westrock’s critical accounting policies, those events or assumptions could have a material impact on Westrock’s consolidated financial statements and related disclosures. In addition, changes in accounting interpretations or assumptions could impact Westrock’s financial statements and Westrock’s ability to timely prepare Westrock’s financial statements.
Violations of these laws or regulations could have a material adverse effect on us, by imposing substantial financial penalties or significant operational limitations, diverting management’s attention and resources and incurring significant defense costs and other professional fees.
Violations of these laws or regulations could have a material adverse effect on us, by imposing substantial financial penalties, significant operational limitations and reputational harm, diverting management’s attention and resources and incurring significant defense costs and other professional fees.
In addition to these impacts, more frequently occurring or longer-duration extreme weather events or increased severity of such conditions could disrupt our supply chain, damage our production capabilities and reduce demand for our products. As a result, the changing global climate could adversely affect our long-term performance. 33 Table of Contents Our business may fluctuate as a result of seasonality.
In addition to these impacts, more frequently occurring or longer-duration extreme weather events or increased severity of such conditions could disrupt our supply chain, damage our production capabilities and reduce demand for our products. As a result, the changing global climate could adversely affect our long-term performance. Our business may fluctuate as a result of seasonality.
Further, nonperformance by suppliers could expose us to supply risk under coffee purchase commitments for delivery in the future. Additionally, supply is affected by many factors in the coffee-growing countries including 32 Table of Contents weather, pest damage, economic conditions, acts of terrorism, as well as efforts by coffee growers to expand or form cartels or associations.
Further, nonperformance by suppliers could expose us to supply risk under coffee purchase commitments for delivery in the future. Additionally, supply is affected by many factors in the coffee-growing countries including weather, pest damage, economic conditions, acts of terrorism, as well as efforts by coffee growers to expand or form cartels or associations.
As further discussed in Item 9A of this Annual Report on Form 10-K, Westrock has taken and is taking certain measures to remediate the material weaknesses. 26 Table of Contents Notwithstanding these measures or efforts, there is no assurance that any remediation efforts will ultimately have the intended effects.
As further discussed in Item 9A of this Annual Report on Form 10-K, Westrock has taken and is taking certain measures to remediate the material weaknesses. Notwithstanding these measures or efforts, there is no assurance that any remediation efforts will ultimately have the intended effects.
If we seek to raise funds through equity or debt financing, those funds may 24 Table of Contents prove to be unavailable, may only be available on terms that are not acceptable to us or may result in significant dilution to our then-existing stockholders or higher levels of leverage.
If we seek to raise funds through equity or debt financing, those funds may prove to be unavailable, may only be available on terms that are not acceptable to us or may result in significant dilution to our then-existing stockholders or higher levels of leverage.
For the fiscal years ended December 31, 2022, 2021 and 2020, our top five customers accounted for approximately 37%, 35% and 34%, respectively, of our net sales. To the extent that we do not have written contracts with customers, they can stop purchasing our products at any time without penalty and are free to purchase products from our competitors.
For the fiscal years ended December 31, 2023, 2022 and 2021, our top five customers accounted for approximately 39%, 37% and 35%, respectively, of our net sales. To the extent that we do not have written contracts with customers, they can stop purchasing our products at any time without penalty and are free to purchase products from our competitors.
Although we have implemented policies and procedures designed to ensure that we, our employees and our intermediaries comply with the FCPA, other applicable anti-corruption or anti-bribery laws, and applicable trade control laws, there is no assurance that such policies or procedures will prevent illegal acts by our employees or intermediaries, or protect us against liability under the FCPA, other anti-corruption regimes, or trade sanctions laws.
Although we have implemented policies and procedures designed to ensure that we, our employees and our intermediaries comply with these laws, there is no assurance that such policies or procedures will prevent illegal acts by our employees or intermediaries, or protect us against liability under the FCPA, other anti-corruption regimes, or trade sanctions laws.
There is no assurance that the IRS, any other tax authorities, or a court will agree with the positions taken by us, in which case tax penalties and interest may be imposed that could adversely affect our business, cash flows or financial performance.
There is no assurance that the IRS, any other tax authorities, or a court will agree with the positions taken by us, in 18 Table of Contents which case tax penalties and interest may be imposed that could adversely affect our business, cash flows or financial performance.
Ford, Scott T. Ford, Witt Stephens, Jim Sowell or their respective families that becomes an owner of any shares of Westrock’s common stock from another WCC Investor and 28 Table of Contents becomes a party to the Investor Rights Agreement, so long as such person remains an affiliate of Joe T. Ford, Scott T.
Ford, Witt Stephens, Jim Sowell or their respective families that becomes an owner of any shares of Westrock’s common stock from another WCC Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains an affiliate of Joe T. Ford, Scott T.
Our primary raw material green coffee is an exchange-traded agricultural commodity that is subject to price fluctuations, depending on a variety of factors, including outside speculative influences such as indexed and algorithmic commodity funds, climate patterns in coffee-producing countries, economic and political conditions affecting coffee-producing countries such as unrest and armed conflict, foreign currency fluctuations, real or perceived supply shortages, crop disease (such as coffee rust) and pests, general increase in farm inputs and costs of production, an increase in green coffee purchased and sold on a negotiated basis rather than directly on commodity markets in response to higher production costs relative to “C” market prices, acts of terrorism, pandemics or other disease outbreaks (including the COVID-19 pandemic), government actions and trade barriers or tariffs, and the actions of producer organizations that have historically attempted to influence green coffee prices through agreements establishing export quotas or by otherwise limiting coffee supplies.
Our primary raw material green coffee is an exchange-traded agricultural commodity that is subject to price fluctuations, depending on a variety of factors, including outside speculative influences such as indexed and algorithmic commodity funds, climate patterns in coffee-producing countries, economic and political conditions affecting coffee-producing countries such as unrest and armed conflict, foreign currency fluctuations, real or perceived supply shortages, crop disease (such as coffee rust) and pests, general increase in farm inputs and costs of production, an increase in green coffee purchased and sold on a negotiated basis rather than directly on commodity markets in response to higher production costs relative to “C” market prices, acts of terrorism, pandemics or other disease outbreaks, government actions and trade barriers or tariffs, and the actions of producer organizations that have historically attempted to influence green coffee prices through agreements establishing export quotas or by otherwise limiting coffee supplies. 21 Table of Contents Additionally, specialty green coffees tend to trade on a negotiated basis at a premium above the “C” market price.
At this time, it is too early to determine what impact these inflationary pressures and supply chain disruptions will have on our long-term growth strategies, as there is uncertainty in how long these risks may persist, and to what extent we will be successful in passing these increased costs to our customers. ​
At this time, it is too early to determine what impact these inflationary pressures and supply chain disruptions will have on our long-term growth strategies, as there is uncertainty in how long these risks may persist, and to what extent we will be successful in passing these increased costs to our customers. ​ Item 1B. Unresolved Staff Comments None. ​
In this competitive environment, our business could be adversely affected by increased labor costs, including wages and benefits, cost increases triggered by compensation-related regulatory actions concerning wages, worktime scheduling and benefits; increased healthcare and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high quality employees with the appropriate skill sets and increased wages, benefits and costs related to any COVID-19 resurgence.
In this competitive environment, our business could be adversely affected by increased labor costs, including wages and benefits, cost increases triggered by compensation-related regulatory actions concerning wages, worktime scheduling and benefits; increased healthcare and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high quality employees with the appropriate skill sets and increased wages, benefits and costs related to any public health issues (such as the COVID-19 pandemic).
A significant portion of our trade accounts receivable are from five customers, which represented approximately 54% and 35% of our trade accounts receivable for the years ended December 31, 2022 and 2021, respectively.
A significant portion of our trade accounts receivable are from five customers, which represented approximately 44% and 54% of our trade accounts receivable for the years ended December 31, 2023 and 2022, respectively.
Impairment may result from significant changes in the manner of use of the acquired assets, negative industry, or economic trends, and/or any changes in key assumptions regarding our fair value. At December 31, 2022, we had $114.0 million of goodwill on our Consolidated Balance Sheet.
Impairment may result from significant changes in the manner of use of the acquired assets, negative industry, or economic trends, and/or any changes in key assumptions regarding our fair value. At December 31, 2023, we had $116.1 million of goodwill on our Consolidated Balance Sheets.
Assuming that the liquidation preference of the Series A Preferred Shares remains $11.50 per share and all 23,587,952 Series A Preferred Shares remain outstanding after February 26, 2028, we estimate an aggregate redemption payment of at least approximately $271.3 million.
Assuming that the liquidation preference of the Series A Preferred Shares remains $11.50 per share and all 23,511,922 Series A Preferred Shares remain outstanding after February 26, 2028, we estimate an aggregate redemption payment of at least approximately $270.4 million.
Investigations of potential violations of these laws by local, state, federal or foreign authorities could also harm our reputation and have an adverse impact on our business, financial condition and results of operations.
Investigations of potential violations of these laws by local, state, federal or foreign authorities could also harm our reputation and have an adverse impact on our business, financial condition and results of operations. Future litigation or disputes could lead us to incur significant liabilities or harm our reputation.
There can be no assurance that we will ever achieve or sustain profitability. ​ Any failure to retain key personnel or recruit qualified personnel could adversely impact our financial condition, results of operations and cash flow. ​ Our success depends on the contributions of key personnel and a consistent workforce, including production workers, support staff and executive team members.
Any failure to retain key personnel or recruit qualified personnel could adversely impact our financial condition, results of operations and cash flow. ​ Our success depends on the contributions of key personnel and a consistent workforce, including production workers, support staff and executive team members.
As of December 31, 2022, Westrock’s directors and executive officers beneficially own, directly or indirectly, in the aggregate, approximately 41,573,543 shares of Common Shares, representing an aggregate of approximately 42.0% of the combined voting power of Westrock’s outstanding capital stock (excluding any Warrants, options or other securities exercisable for Common Shares).
As of December 31, 2023, Westrock’s directors and executive officers beneficially own, directly or indirectly, in the aggregate, approximately 33,210,832 shares of Common Shares, representing an aggregate of approximately 29.8% of the combined voting power of Westrock’s outstanding capital stock (excluding any Warrants, options or other securities exercisable for Common Shares).
Further, any unplanned turnover or failure to develop or implement an adequate succession plan for our senior management and other key employees, could deplete our institutional knowledge, erode our competitive advantage, and negatively affect our business, financial condition and operating results.
Further, any unplanned turnover or failure to develop or implement an adequate succession plan for our senior management and other key employees, could deplete our institutional knowledge, erode our competitive advantage, and negatively affect our business, financial condition and operating results. We do not maintain key person life insurance policies on any of our executive officers.
Projected growth opportunities could also require a greater-than-anticipated amount of trade and promotional spending. There can be no assurance that we will successfully or efficiently integrate any businesses that we may acquire in the future, and the failure to do so could have a material adverse effect on our business, financial condition and operating results.
There can be no assurance that we will successfully or efficiently integrate any businesses that we may acquire in the future, and the failure to do so could have a material adverse effect on our business, financial condition and operating results.
Outcomes from these audits could have a material and adverse effect on our operating results, financial condition and prospects. Changes in tax laws may adversely affect us, and the IRS, other tax authorities, or a court may disagree with our tax positions, which may result in adverse effects on our financial condition or the value of our Common Shares.
Changes in tax laws may adversely affect us, and the IRS, other tax authorities, or a court may disagree with our tax positions, which may result in adverse effects on our financial condition or the value of our Common Shares.
Fluctuations in other commodity prices and in the availability of certain of our ingredients and packaging materials could negatively affect our margins and profitability. In addition to green coffee, our other commodity inputs are also exposed to the risk of cost fluctuations. These inputs include tea, spices, and the materials used in our packaging, such as carton board and plastic.
In addition to green coffee, our other commodity inputs are also exposed to the risk of cost fluctuations. These inputs include tea, spices, sugar, dairy and the materials used in our packaging, such as carton board and plastic.
We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations.
Furthermore, such actions, even if successful, may not result in an adequate remedy or protection. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations.
We have technology security initiatives and disaster recovery plans in place to mitigate our risk to these vulnerabilities, but these measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that data security breaches do not occur.
Further, breaches experienced by other companies may also be leveraged against us. We have technology security initiatives and disaster recovery plans in place to mitigate 15 Table of Contents our risk to these vulnerabilities, but these measures may not be adequately designed or implemented to ensure that our operations are not disrupted or that data security breaches do not occur.
Our Warrants that are not listed on the NASDAQ (the “Private Placement Warrants”) are not redeemable so long as they are held by Riverview Sponsor or its permitted transferees (except as otherwise set forth herein). As such, it is possible that we may never generate any or only very limited cash proceeds from the exercise of our Warrants.
Our Westrock Private Placement Warrants are not redeemable so long as they are held by the Riverview Sponsor Partners, LLC or its permitted transferees. As such, it is possible that we may never generate any or only very limited cash proceeds from the exercise of our warrants.
Additionally, these remediation measures will be time consuming, will result in Westrock incurring significant costs, and will place significant demands on our financial and operational resources.
Additionally, these remediation measures, as well as testing and maintaining controls, are time consuming, result in Westrock incurring significant costs, and place significant demands on our financial and operational resources.
Additionally, specialty green coffees tend to trade on a negotiated basis at a premium above the “C” market price. Such premium, depending on the supply and demand at the time of purchase, may be significant. Depending on contractual limitations, we may be unable to pass these costs on to our customers by increasing the price of products.
Such premium, depending on the supply and demand at the time of purchase, may be significant. Depending on contractual limitations, we may be unable to pass these costs on to our customers by increasing the price of products.
We have in the past and/or may in the future become subject to legal proceedings, disputes, claims, investigations, regulatory proceedings, or similar actions that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial matters, or employment claims brought by our employees.
We have in the past and/or may in the future become subject to legal proceedings (including class actions), disputes, claims, investigations, regulatory proceedings, or similar actions that arise in the ordinary course of business, such as claims brought by our customers in connection with commercial matters, employment claims brought by our employees, product liability, product labeling, public statements and disclosures under securities laws, antitrust, advertising, consumer protection and wage and hour laws.
We may be presented with opportunities that we want to pursue, and unforeseen challenges may present themselves, any of which could cause us to require additional capital.
Operating and growing our business is expected to require further investments in our capabilities and operations. We may be presented with opportunities that we want to pursue, and unforeseen challenges may present themselves, any of which could cause us to require additional capital.
Increased indebtedness may also limit our ability to adjust to rapidly changing market conditions, making us more vulnerable to general adverse industry and economic conditions, which could create a competitive disadvantage relative to our competitors. In addition, outstanding indebtedness under the Credit Agreement bears interest at a variable rate, making us vulnerable to increases in the market rate of interest.
Increased indebtedness may also limit our ability to adjust to rapidly changing market conditions, making us more vulnerable to general adverse industry and economic conditions, which could create a competitive disadvantage relative to our competitors.
Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take a significant time to start production, which would have an adverse impact on our financial condition, results of operations and cash flows.
Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take significant time to start production, which would have an adverse impact on our financial condition, results of operations and cash flows. 11 Table of Contents In addition, we use a significant amount of electricity, gasoline, diesel and oil, natural gas and other energy sources to operate our production and distribution facilities.
Any new laws and regulations or changes in existing laws or their interpretations could result in 17 Table of Contents increased compliance costs, capital expenditures, incremental investments and other financial obligations for us and our business partners, which could affect our profitability.
Any new laws and regulations or changes in existing laws or their interpretations, changes in international tax treaties or international trade policy, or the imposition of increased or new tariffs, quotas or trade barriers on key commodities, could result in increased compliance costs, capital expenditures, incremental investments and other financial obligations for us and our business partners, which could affect our profitability.
Additionally, if we are unable to purchase sufficient quantities of green coffee due to any of the factors described herein or a worldwide or regional shortage, we may not be able to fulfill the demand for our products, which could have an adverse impact on our business and financial results. 30 Table of Contents We have historically utilized, and expect to continue to utilize, various types of derivative instruments, including forward contracts, futures contracts, and option contracts to hedge our exposure to the commodities price variability of green coffee.
Additionally, if we are unable to purchase sufficient quantities of green coffee due to any of the factors described herein or a worldwide or regional shortage, we may not be able to fulfill the demand for our products, which could have an adverse impact on our business and financial results.
Any further deterioration in our business related to the COVID-19 pandemic, rising costs due to persistent inflationary impacts, continued increases in interest rates, or other market, industry, or operational trends, could result in further impairment of our goodwill, which would negatively impact our financial conditions and results of operations.
Any negative industry or economic trends, such as rising costs due to persistent inflationary impacts, continued increases in interest rates, or other market, industry, or operational trends, and/or any changes in key assumptions could result in further impairment of our goodwill, which would negatively impact our reported results of operations.
If we are not successful, this could have a material adverse effect on our business, financial condition and results of operations. We are subject to U.S. and international laws and regulations that could adversely affect our business, including anti-corruption laws and trade controls laws, and noncompliance with such laws could subject us to criminal or civil liability.
We are subject to U.S. and international laws and regulations that could adversely affect our business, including anti-corruption laws and trade controls laws, and noncompliance with such laws could subject us to criminal or civil liability.
A product liability judgment against us or a product recall or the damage to our reputation resulting therefrom could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity. Exposure to additional income tax liabilities could negatively affect our future profitability.
A significant product liability claim (whether or not successful), a product liability judgment against us or a widespread product recall or the damage to our reputation resulting therefrom could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.
The rainy and dry seasons are becoming unpredictable in their start and length, which is affecting the development of coffee cherries.
Coffee growing countries have been dramatically affected by these climate changes. The rainy and dry seasons are becoming unpredictable in their start and length, which is affecting the development of coffee cherries.
The preparation of financial statements and related disclosure in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in Westrock’s consolidated financial statements and related notes.
The accuracy of Westrock’s financial statements and related disclosures could be adversely affected if the judgments, assumptions or estimates used in Westrock’s critical accounting policies are inaccurate. The preparation of financial statements and related disclosure in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in Westrock’s consolidated financial statements and related notes.
If we fail to complete the remediation of these material weaknesses, or after having remediated such material weakness, thereafter fail to maintain the effectiveness of our internal control over financial reporting or our disclosure controls and procedures, we could be subjected to regulatory scrutiny, civil or criminal penalties or shareholder litigation, the defense of any of which could cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, and we could be required to pay damages to settle such actions if any such actions were not resolved in our favor.
If we (i) fail to complete the remediation of these material weaknesses, or after having remediated such material weakness, thereafter fail to maintain the effectiveness of our internal control over financial reporting or our disclosure controls and procedures, (ii) identify additional material weaknesses (iii) if Westrock’s independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting once it is no longer an emerging growth company or (iv) if Westrock is unable to conclude in our quarterly and annual reports that our disclosure controls and procedures are effective, we could be subjected to regulatory scrutiny, civil or criminal penalties or shareholder litigation, the defense of any of which could cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, and we could be required to pay damages to settle such actions if any such actions were not resolved in our favor.
Any adverse publicity resulting from allegations made in litigation claims or legal proceedings may also adversely affect our reputation, which in turn could adversely affect our operating results. Our failure to comply with applicable transfer pricing and similar regulations may harm our business and financial results.
Any adverse publicity resulting from allegations made in litigation claims or legal proceedings may also adversely affect our reputation, which in turn could adversely affect our operating results.
We may not complete the construction of our new production facility in Conway, Arkansas in time or at all and may incur additional expenses in the process, which could hamper our ability to satisfy demand and meet revenue targets.
This Annual Report on Form 10-K is qualified in its entirety by all these risk factors. ​ Risks Related to Our Business ​ We may not complete the construction of our new production facility in Conway, Arkansas in time or at all and may incur additional expenses in the process, which could hamper our ability to satisfy demand and meet revenue targets.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives, to grow both organically and through acquisitions, and to respond to business opportunities, challenges or unforeseen circumstances, could be significantly limited, and our business, operating results, financial condition and prospects could be materially and adversely affected.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to pursue our business objectives, to grow both organically and through acquisitions, and to respond to business opportunities, challenges or unforeseen circumstances, could be significantly limited, and our business, operating results, financial condition and prospects could be materially and adversely affected. 17 Table of Contents Exercise of redemption rights by the holders of our Series A Preferred Shares may adversely affect the cash that we have available for other purposes and our ability to execute our business strategy.
As of December 31, 2022, we have 19,372,916 outstanding warrants to purchase our Common Shares (the “Warrants”), which expire on the earliest to occur of August 26, 2027 (i.e. the five year anniversary of the Closing), redemption or liquidation.
As of December 31, 2023, we had 19,144,120 outstanding warrants to purchase 19,144,120 Common Shares (the “Warrants”), exercisable at an exercise price of $11.50 per share, which expire on the earliest to occur of August 26, 2027 (i.e. the five year anniversary of the Closing), redemption or liquidation.
Our revenue and profits depend on the level of customer spending for discretionary items, which is sensitive to general economic conditions and other factors. Our products are discretionary items for end-use customers. Therefore, the success of our business depends significantly on economic factors and trends in consumer spending.
Risks Related to General Economic and Other Conditions ​ Our business, revenue and profits and the businesses of our suppliers and our customers depend on the level of customer spending for discretionary items, which is sensitive to general economic conditions and other factors.
Our rapid growth has placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, supply chain, quality control, regulatory support, customer service, sales force management and general and financial administration. Further, we have a limited history of operating our legacy business and the acquired S&D business as a combined company.
Our rapid growth has placed, and may continue to place, significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, supply chain, distribution capabilities, quality control, product development, regulatory support, customer service, sales force management and general and financial administration.
If our customers do not continue purchasing our products, our revenues would decline, and we may not realize improved operating results from our customer base. 16 Table of Contents Our accounts receivable represents a significant portion of our current assets and a substantial portion of our trade accounts receivables relate principally to a limited number of customers, increasing our exposure to bad debts and counterparty risk, which could potentially have a material adverse result on our results of operations.
Our accounts receivable represents a significant portion of our current assets and a substantial portion of our trade accounts receivables relate principally to a limited number of customers, increasing our exposure to bad debts and counterparty risk, which could potentially have a material adverse effect on our results of operations.
As a result, management has concluded that, because of these material weaknesses, our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2022.
As further described in Item 9A of this Annual Report on Form 10-K, Westrock has identified material weaknesses in its internal control over financial reporting. As a result, management has concluded that, because of these material weaknesses, our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2023.
Such claims could subject us to significant liability for damages and could result in our having to stop selling a product or service found to be in violation of a third party’s rights. Further, we might be required to seek a license for third-party intellectual property, which may not be available on reasonable royalty or other terms.
Such claims could subject us to significant liability for damages and could result in our having to stop selling a product or service found to be in violation of a third party’s rights.
Increasing concentrations of carbon dioxide and other greenhouse gases in the atmosphere will continue to have an adverse effect on global temperatures, weather patterns, and the frequency and severity of extreme weather events and natural disasters. Coffee growing countries have been dramatically affected by these climate changes.
Climate change, severe weather patterns, and water scarcity could have a material adverse effect on our business and results of operations. Increasing concentrations of carbon dioxide and other greenhouse gases in the atmosphere will continue to have an adverse effect on global temperatures, weather patterns, and the frequency and severity of extreme weather events and natural disasters.
Westrock has identified material weaknesses in its internal control over financial reporting, which may result in material misstatements of Westrock’s consolidated financial statements or cause Westrock to fail to meet its periodic reporting obligations. As further described in Item 9A of this Annual Report on Form 10-K, Westrock has identified material weaknesses in its internal control over financial reporting.
Westrock has identified, and may in the future identify additional, material weaknesses in its internal control over financial reporting or fail to maintain effective internal control over financial reporting, which may result in material misstatements of Westrock’s consolidated financial statements or cause Westrock to fail to meet its periodic reporting obligations.
Any of these results would harm our business, operating results, financial condition and prospects. 23 Table of Contents Our future levels of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.
The covenants in our Credit Facilities and our future levels of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility.
Any subsequent additions to our indebtedness could impact our financial flexibility due to increased cash flows required to make required interest and principal payments. Greater demands on our funds may limit our ability to invest in our growth, including inhibiting our ability to meet working capital requirements, make capital expenditures or fund acquisitions.
Greater demands on our funds may limit our ability to invest in our growth, including inhibiting our ability to meet working capital requirements, make capital expenditures or fund acquisitions.
In addition, our reputation within the business community and with our customers and suppliers may be affected, which could result in our customers and suppliers ceasing to do business with us, which could adversely affect our business and results of operations.
In addition, our reputation within the business community and with our customers and suppliers may be affected, which could result in our customers and suppliers ceasing to do business with us, which could adversely affect our business and results of operations. 16 Table of Contents We may become subject to intellectual property disputes or be forced to defend our intellectual property rights, which can be costly and may subject us to significant liability and increase our costs of doing business.
Our Warrants that are listed on the NASDAQ (the “Public Warrants”), under certain conditions as described in their warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or exercised on a cashless basis.
Even if our warrants are in the money, there can be no assurance that warrant holders will exercise their warrants prior to their expiration. Our Westrock Public Warrants under certain conditions, as described in their warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis.
As a result, in addition to their day-to-day management roles, Westrock’s executive officers and directors are able to exercise significant influence on Westrock’s business as stockholders, including influence over election of members of the board of directors and the authorization of other corporate actions requiring stockholder approval.
As a result, in addition to their day-to-day management roles, Westrock’s executive officers and directors are able to exercise significant influence on Westrock’s business as stockholders, including influence over election of members of the board of directors and the authorization of other corporate actions requiring stockholder approval. 19 Table of Contents Certain provisions in Westrock’s certificate of incorporation and bylaws, the Investor Rights Agreement and of Delaware law may prevent or delay attempts to acquire a controlling interest in Westrock, which could decrease the trading price of Common Shares.
Additionally, industry consolidation has generally led to our customers becoming larger and more sophisticated buyers of our products, leveraging their buying power and negotiating strength to improve their profitability through more favorable contractual terms. To the extent we provide contractual concessions such as lower prices or more favorable trade terms, our margins would be reduced.
Our customers may also take actions that we cannot control or anticipate, such as changing their business strategy or introducing products that may compete with ours. Additionally, industry consolidation has generally led to our customers becoming larger and more sophisticated buyers of our products, leveraging their buying power and negotiating strength to improve their profitability through more favorable contractual terms.
(the “BBH Investors”) that becomes an owner of any shares of Westrock’s common stock or the Series A Convertible Preferred Stock from another BBH Investor and becomes a party to the Investor Rights Agreement, so long as such person remains a controlled affiliate of Brown Brothers Harriman & Co. and (iii) Riverview Sponsor Partners, LLC (“Riverview Sponsor”), which also contains certain provisions that may prevent or delay attempts to acquire a controlling interest in Westrock.
(the “BBH Investors”) that becomes an owner of any shares of Westrock’s common stock or the Series A Convertible Preferred Stock from another BBH Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains a controlled affiliate of Brown Brothers Harriman & Co., (iii) Riverview Sponsor Partners, LLC and any controlled affiliate of Brad Martin that becomes an owner of any shares of Westrock’s common stock from another RVAC Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains an affiliate of Brad Martin (the “RVAC Investors”) and (iv) HF Direct Investments Pool, LLC and any controlled affiliate of HF Capital, LLC that becomes an owner of any shares of Westrock’s common stock from another HF Investor and becomes a party to the Amended and Restated Investor Rights Agreement, so long as such person remains an affiliate of HF Capital, LLC (the “HF Investors” together with the WCC Investors, BBH Investors and RVAC Investors, the “Investor Parties”).
This could increase our exposure to losses from bad debts and have a materially adverse effect on our business, financial condition and results of operations. Our estimated addressable market is subject to inherent challenges and uncertainties. If we have overestimated the size of our addressable market, our future growth opportunities may be limited.
This could increase our exposure to losses from bad debts and have a materially adverse effect on our business, financial condition and results of operations.
We have in the past and may in the future acquire companies, which can divert our management’s attention and we may also be unable to integrate such businesses or identify and achieve their projected benefits. Our future success will depend, in part, on our ability to grow in the face of changing customer demands and competition.
If we are not successful, this could have a material adverse effect on our business, financial condition and results of operations. We have in the past and may in the future acquire companies, which can divert our management’s attention and we may also be unable to integrate such businesses or identify and achieve their projected benefits.
There can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as they have in the past. Our customers may also take actions that we cannot control or anticipate, such as changing their business strategy or introducing products that may compete with ours.
There can be no assurance that our customers will 12 Table of Contents continue to purchase our products in the same mix or quantities or on the same terms as they have in the past.
This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
If we are unable to anticipate customer preferences and successfully develop new products, or if we fail to effectively manage the introduction of new products, our business will suffer. Our business depends on our ability to satisfy our customers with our beverage products.
Our customers may also face financial difficulties, bankruptcy or other business disruptions that may affect their ability to pay for our products, which could adversely affect our sales and profitability. If we are unable to anticipate customer preferences and successfully develop new products, or if we fail to effectively manage the introduction of new products, our business will suffer.
In addition, competitors may be able to develop roasting or blending methods that are more advanced than our production methods, which may also harm our competitive position. Increased competition in coffee or other beverage channels may adversely affect sales of our products.
In addition, competitors may be able to develop roasting or blending methods that are more advanced than our production methods, which may also harm our competitive position. Quality control problems or food safety issues could adversely affect our sales and brand reputation, lead to product recalls or result in product liability claims.
As we continue to grow and potentially acquire other businesses, we will need to continue building our operational, financial and management controls as well as our reporting systems and procedures.
We could also experience challenges in obtaining sufficient raw materials and manufacturing capacity to produce the products we sell, along with delays in production and shipments. As we continue to grow and potentially acquire other businesses, we will need to continue building our operational, financial and management controls as well as our reporting systems and procedures.
It is unclear whether investors will find Common Shares less attractive because Westrock may rely on these exemptions.
It is unclear whether investors will find Common Shares less attractive because Westrock may rely on these exemptions. If some investors find Common Shares less attractive as a result, there may be a less active trading market for Common Shares, and Westrock’s stock price may be more volatile.
Our inability to secure an adequate supply of key raw materials, including green coffee and tea, or disruption in our supply chain, could result in increased costs and adversely affect our business. Our business depends on our relations with key suppliers to maintain a steady supply of green coffee and tea.
Our business depends on our relations with key suppliers to maintain a steady supply of green coffee and tea.
U.S. trade control laws prohibit certain transactions and dealings involving sanctioned countries, governments, persons, without a license or other appropriate authorization. As we increase our international sales and business, our risks of non-compliance with the FCPA and U.S. trade control laws may increase.
As we increase our international sales and business, our risks of non-compliance with the FCPA, other applicable anti-corruption or anti-bribery laws, and applicable trade control laws may increase.
Our security measures may not be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse consequences. No security solution, strategy or measures can address all possible security threats.
Despite our efforts to protect our information technology networks, systems and information, we may not be able to anticipate or to implement effective preventive and remedial measures against all data security and privacy threats. Our security measures may not be adequate to prevent or detect service interruption, system failure data loss or theft, or other material adverse consequences.
Our applications, systems, networks, software and physical facilities could have material vulnerabilities, be breached or personal or confidential information could be otherwise compromised due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our personnel or our customers to disclose information or usernames and/or passwords, or otherwise compromise the security of our applications, systems, networks, software and/or physical facilities.
No security solution, strategy or measures can address all possible security threats. Our applications, systems, networks, software and physical facilities could have material vulnerabilities, be breached or personal or confidential information could be otherwise compromised due to employee error or malfeasance.
These losses could continue for the next several years as we expand our product offering and continue to scale our commercial operations.
These losses could continue for the next several years as we expand our product offering and continue to scale our commercial operations by hiring additional personnel to improve the operations of our business and support public company compliance requirements, increasing our sales and marketing functions and expanding our manufacturing and distribution capabilities.
These estimates, as well as the estimates relating to the size and expected growth of the markets in which we operate, and our penetration of those markets, may change or prove to be inaccurate. While we believe that the information on which we base our addressable market estimates is generally reliable, such information is inherently imprecise.
As a result, our addressable market, as well as our estimates relating to the size and expected growth of the markets in which we operate, our penetration of those markets and our expectations regarding future opportunities, are based on assumptions and estimates that may prove inaccurate and are subject to significant uncertainty.
Such acquisitions may 18 Table of Contents disrupt our ongoing business operations, divert management from their primary responsibilities, increase our expenses and subject us to increased regulatory requirements.
Furthermore, the identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not complete acquisitions on favorable terms, if at all. Such acquisitions may disrupt our ongoing business operations, divert management from their primary responsibilities, increase our expenses and subject us to increased regulatory requirements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeManagement believes that the Company’s sites are adequate to support the business and that the properties have been well maintained.
Biggest change(2) - The accounting lease commencement date occurred in January 2024. Management believes that the Company’s sites are adequate to support the business and that the properties have been well maintained. 26 Table of Contents
Properties The following table summarizes the principal properties used by Westrock in connection with its roasting, manufacturing, and distribution operations, by segment as of December 31, 2022. ​ ​ ​ ​ ​ ​ Approximate Size ​ ​ ​ Location in Square Feet Purpose Owned / Leased Segment Concord, NC (Main) 256,000 Roasting, Manufacturing, Distribution Owned Beverage Solutions Concord, NC (West Winds) 49,000 Manufacturing Owned Beverage Solutions Concord, NC (Commercial Park) 110,000 Manufacturing Owned Beverage Solutions North Little Rock, AR (Gregory) 133,000 Distribution Leased Beverage Solutions North Little Rock, AR (Collins) 86,000 Roasting, Manufacturing Owned Beverage Solutions North Little Rock, AR (Boulevard) 29,000 Manufacturing Leased Beverage Solutions Conway, AR 524,000 Manufacturing, Distribution (1) Owned Beverage Solutions Richmond, CA 48,530 Manufacturing, Distribution Leased Beverage Solutions Kigali, Rwanda 64,000 Manufacturing, Export Owned SS&T Johor Bahru, Malaysia 92,000 Roasting, Manufacturing Leased Beverage Solutions (1) - The Company is currently completing the build-out of this facility, which is expected to begin commercial production in 2024.
Properties The following table summarizes the principal properties used by Westrock in connection with its roasting, manufacturing, and distribution operations, by segment as of December 31, 2023. ​ ​ ​ ​ ​ ​ Approximate Size ​ ​ ​ Location in Square Feet Purpose Owned / Leased Segment Concord, NC (Main) 256,000 Roasting, Manufacturing, Distribution Owned Beverage Solutions Concord, NC (West Winds) 49,000 Manufacturing Owned Beverage Solutions Concord, NC (Commercial Park) 110,000 Manufacturing Owned Beverage Solutions North Little Rock, AR (Gregory) 133,000 Distribution Leased Beverage Solutions North Little Rock, AR (Collins) 85,000 Roasting, Manufacturing Owned Beverage Solutions Conway, AR 524,000 Manufacturing, Distribution (1) Owned Beverage Solutions Conway, AR 530,000 Distribution (2) Leased Beverage Solutions Richmond, CA 48,530 Manufacturing, Distribution Leased Beverage Solutions Kigali, Rwanda 64,000 Manufacturing, Export Owned SS&T Johor Bahru, Malaysia 92,000 Roasting, Manufacturing Leased Beverage Solutions (1) - The Company is currently completing the build-out of this facility, which is expected to begin commercial production in 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. ​ ​ 36 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. ​ ​ 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes $100 was invested in the Company’s Common Shares and each of the indices listed above on August 29, 2022 (and all dividends, if any, were reinvested). ​ ​ 37 Table of Contents Issuer Purchases of Equity Securities ​ During the quarter ended December 31, 2022, there was no share repurchase activity made by or on behalf of the Company. ​ Item 6. [Reserved]
Biggest changeThe graph assumes $100 was invested in the Company’s Common Shares and each of the indices listed above on August 29, 2022 (and all dividends, if any, were reinvested). ​ ​ ​ ​ 28 Table of Contents Cumulative Total Stockholder Returns Based on Investment of $100.00 Beginning on August 29, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8/29/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Westrock Coffee Company ​ $ 100.00 ​ $ 89.75 ​ $ 116.07 ​ $ 106.33 ​ $ 94.43 ​ $ 76.97 ​ $ 88.69 NASDAQ Composite ​ ​ 100.00 ​ ​ 88.06 ​ ​ 87.37 ​ ​ 102.26 ​ ​ 115.61 ​ ​ 111.06 ​ ​ 126.37 S&P 500 ​ ​ 100.00 ​ ​ 89.11 ​ ​ 95.85 ​ ​ 103.04 ​ ​ 112.04 ​ ​ 108.38 ​ ​ 121.05 S&P Food & Beverage Select Industry Index ​ ​ 100.00 ​ ​ 88.89 ​ ​ 96.87 ​ ​ 99.38 ​ ​ 98.53 ​ ​ 92.82 ​ ​ 98.96 ​ ​ Issuer Purchases of Equity Securities ​ During the quarter ended December 31, 2023, there was no share repurchase activity made by or on behalf of the Company. ​ Item 6. [Reserved] ​
Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. ​ Stock Performance Graph ​ The following graph shows the cumulative total shareholder returns for our Common Shares from August 29, 2022 through December 31, 2022, relative to the performance of the Nasdaq Composite Total Return (broad market comparison), the S&P 500 (broad market comparison) and the S&P Food and Beverage Select Industry Index (line of business comparison).
Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. ​ Stock Performance Graph ​ The following graph shows the cumulative total shareholder returns for our Common Shares from August 29, 2022 through December 31, 2023, relative to the performance of the Nasdaq Composite Total Return (broad market comparison), the S&P 500 (broad market comparison) and the S&P Food and Beverage Select Industry Index (line of business comparison).
As of December 31, 2022, there were 81 holders of record of our Common Shares and 2 holders of record of our Public Warrants, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions. ​ Dividend Policy ​ We have not declared or paid any dividends on our Common Shares as of December 31, 2022.
As of March 1, 2024, there were 22 holders of record of our Common Shares and 1 holder of record of our Public Warrants, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions. ​ Dividend Policy ​ We have not declared or paid any dividends on our Common Shares as of December 31, 2023.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ​ Market Information ​ Westrock’s Common Shares and Public Warrants are listed on the Nasdaq Global Market under the symbols “WEST” and “WESTW”, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ Market Information ​ The Company’s common stock and publicly traded warrants are listed on the Nasdaq Global Market under the symbols “WEST” and “WESTW”, respectively.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Financial Statements and Supplementary Data 60 ​ Report of Independent Registered Public Accounting Firm 61
Biggest changeItem 6. [Reserved] 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51 Item 8. Financial Statements and Supplementary Data 52 ​ Report of Independent Registered Public Accounting Firm 53

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFurther, our computations of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies that define EBITDA and Adjusted EBITDA differently than we do. 39 Table of Contents The reconciliation of our net loss to EBITDA and Adjusted EBITDA for the year ended December 31, 2022, 2021 and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ (Thousands) 2022 2021 2020 ​ Net loss ​ $ (55,461) ​ $ (21,308) ​ $ (128,865) ​ Interest expense ​ 35,497 ​ 32,549 ​ 25,229 ​ Income tax expense (benefit) ​ 111 ​ (3,368) ​ (17,545) ​ Depreciation and amortization ​ 24,210 ​ 25,501 ​ 23,838 ​ EBITDA ​ 4,357 ​ 33,374 ​ (97,343) ​ Acquisition, restructuring and integration expense ​ 13,169 ​ 8,835 ​ 22,355 ​ Change in fair value of warrant liabilities ​ ​ 29,675 ​ ​ — ​ ​ — ​ Management and consulting fees (S&D Coffee, Inc. acquisition) ​ 3,868 ​ 6,382 ​ 5,317 ​ Equity-based compensation ​ 2,631 ​ 1,223 ​ 1,553 ​ Impairment charges ​ ​ — ​ ​ — ​ ​ 82,083 ​ Inventory write-offs ​ ​ — ​ ​ — ​ ​ 5,432 ​ Mark-to-market adjustments ​ 3,502 ​ (3,585) ​ (217) ​ Loss (gain) on disposal of property, plant and equipment ​ 935 ​ 243 ​ 7,750 ​ Other ​ 1,916 ​ 702 ​ 6,665 (1) ​ Adjusted EBITDA ​ $ 60,053 ​ $ 47,174 ​ $ 33,595 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beverage Solutions ​ 53,951 ​ 41,468 ​ 28,802 ​ Sustainable Sourcing & Traceability ​ 6,102 ​ 5,706 ​ 4,793 ​ Total of Reportable Segments ​ $ 60,053 ​ $ 47,174 ​ $ 33,595 ​ (1) - $6.3 million relates to net unrealized gains, representing the effective portion of cash-flow hedges, that were recorded in accumulated other comprehensive income of S&D immediately prior to its acquisition by Westrock, which were to be reclassified into earnings over the next twelve months when inventory was sold.
Biggest changeFurther, our computations of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies that define EBITDA and Adjusted EBITDA differently than we do. 30 Table of Contents The reconciliation of our net income (loss) to EBITDA and Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ (Thousands) 2023 2022 2021 ​ Net loss ​ $ (34,567) ​ $ (55,461) ​ $ (21,308) ​ Interest expense ​ 29,157 ​ 35,497 ​ 32,549 ​ Income tax expense (benefit) ​ (6,358) ​ 111 ​ (3,368) ​ Depreciation and amortization ​ 26,584 ​ 24,210 ​ 25,501 ​ EBITDA ​ 14,816 ​ 4,357 ​ 33,374 ​ Transaction, restructuring and integration expense ​ 14,557 ​ 13,169 ​ 8,835 ​ Change in fair value of warrant liabilities ​ ​ (10,207) ​ ​ 29,675 ​ ​ — ​ Management and consulting fees (S&D Coffee, Inc. acquisition) ​ 556 ​ 3,868 ​ 6,382 ​ Equity-based compensation ​ 8,708 ​ 2,631 ​ 1,223 ​ Conway extract and ready-to-drink facility start-up costs ​ ​ 11,698 ​ ​ — ​ ​ — ​ Mark-to-market adjustments ​ (104) ​ 3,502 ​ (3,585) ​ Loss on disposal of property, plant and equipment ​ 1,153 ​ 935 ​ 243 ​ Other ​ 3,904 ​ 1,916 ​ 702 ​ Adjusted EBITDA ​ $ 45,081 ​ $ 60,053 ​ $ 47,174 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beverage Solutions ​ 41,624 ​ 53,951 ​ 41,468 ​ Sustainable Sourcing & Traceability ​ 3,457 ​ 6,102 ​ 5,706 ​ Total of Reportable Segments ​ $ 45,081 ​ $ 60,053 ​ $ 47,174 ​ ​ Significant Developments Select Milk Joint Venture ​ On February 15, 2024, the Company entered a non-binding letter of intent with Select Milk Producers (“Select Milk”) to establish a joint venture that will construct and operate an extended shelf life and aseptic multi-serve bottle line facility to be co-located at Select Milk’s factory in Littlefield, Texas.
While we believe that net (loss) income, as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA and Adjusted EBITDA are important non-GAAP supplemental measures of operating performance as they contribute to a meaningful evaluation of the Company’s future operating performance and comparisons to the Company’s past operating performance.
While we believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA and Adjusted EBITDA are important non-GAAP supplemental measures of operating performance as they contribute to a meaningful evaluation of the Company’s future operating performance and comparisons to the Company’s past operating performance.
The Company believes that providing these non-GAAP financial measures to investors helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such performance. We define “EBITDA” as net (loss) income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization.
The Company believes that providing these non-GAAP financial measures to investors helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such performance. We define “EBITDA” as net income (loss), as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization.
Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should be viewed in addition to, and not be considered as alternatives for, net (loss) income determined in accordance with GAAP.
Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should be viewed in addition to, and not be considered as alternatives for, net income (loss) determined in accordance with GAAP.
We define “Adjusted EBITDA” as EBITDA before equity-based compensation expense and the impact, which may be recurring in nature, of acquisition, restructuring and integration related 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).
We define “Adjusted EBITDA” as EBITDA before equity-based compensation expense and the impact, which may be recurring in nature, of transaction, restructuring and integration related 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).
Even if our Warrants are in the money, there can be no assurance that Warrant holders will exercise their Warrants prior to their expiration. Our Public Warrants under certain conditions, as described in their warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis.
Even if our warrants are in the money, there can be no assurance that warrant holders will exercise their warrants prior to their expiration. Our Westrock Public Warrants under certain conditions, as described in their warrant agreement, are redeemable by the Company at a price of $0.01 per warrant or on a cashless basis.
Costs of sales for the year ended December 31, 2022 included $3.5 million of net unrealized losses on forward sales and purchase contracts and mark-to-market adjustment on green coffee inventory compared to $3.6 million of net unrealized gains on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory for the year ended December 31, 2021. 43 Table of Contents Selling, General and Administrative Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ % of Segment ​ ​ % of Segment (Thousands) ​ Amount ​ Revenues ​ Amount ​ Revenues Beverage Solutions ​ $ 119,938 17.5 % $ 119,787 21.7 % Sustainable Sourcing & Traceability ​ 10,047 5.5 % 8,719 5.9 % Total selling, general and administrative expense ​ $ 129,985 15.0 % $ 128,506 18.4 % ​ Total selling, general and administrative expenses in our Beverage Solutions segment increased $0.2 million to $119.9 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Costs of sales for the year ended December 31, 2022 included $3.5 million of net unrealized losses on forward sales and purchase contracts and mark-to-market adjustment on green coffee inventory compared to $3.6 million of net unrealized gains on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory for the year ended December 31, 2021. 39 Table of Contents Selling, General and Administrative Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ % of Segment ​ ​ % of Segment (Thousands) ​ Amount ​ Revenues ​ Amount ​ Revenues Beverage Solutions ​ $ 119,938 17.5 % $ 119,787 21.7 % Sustainable Sourcing & Traceability ​ 10,047 5.5 % 8,719 5.9 % Total selling, general and administrative expense ​ $ 129,985 15.0 % $ 128,506 18.4 % ​ Total selling, general and administrative expenses in our Beverage Solutions segment increased $0.2 million to $119.9 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Overview Westrock Coffee Company, a Delaware corporation (the “Company,” “Westrock,” “we,” “us,” or “our”), is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States, providing coffee sourcing, supply chain management, product development, roasting, packaging, and distribution services to the retail, food service and restaurant, convenience store and travel center, noncommercial account, CPG, and hospitality industries around the world. ​ In connection with the closing of our previously announced de-SPAC merger transaction (the “Transaction”) with Riverview Acquisition Corp.
Overview Westrock Coffee Company, a Delaware corporation (the “Company,” “Westrock,” “we,” “us,” or “our”), is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States, providing coffee sourcing, supply chain management, product development, roasting, packaging, and distribution services to the retail, food service and restaurant, convenience store and travel center, noncommercial account, CPG, and hospitality industries around the world. ​ In connection with the closing of our de-SPAC merger transaction (the “Transaction”) with Riverview Acquisition Corp.
A key component of our long-term growth strategy will be to complete the build-out of our extract and ready-to-drink manufacturing facility in Conway, Arkansas, which will utilize state-of-the-art equipment specifically designed to efficiently manufacture and package a wide range of beverages, such as canned or bottled cold brew coffees, lattes, assorted teas, and juice-based products.
A key component of our long-term growth strategy is to complete the build-out of our extract and ready-to-drink manufacturing facility in Conway, Arkansas, which will utilize state-of-the-art equipment specifically designed to efficiently manufacture and package a wide range of beverages, such as canned or bottled cold brew coffees, lattes, assorted teas, and juice-based products.
(“Riverview”), the Company converted (the “Conversion”) from a Delaware limited liability company to a Delaware corporation and changed its name from “Westrock Coffee Holdings, LLC” (the “Converting Company”) to “Westrock Coffee Company.” Our platform is built upon four fundamental pillars that enable us to positively impact the coffee, tea, flavors, extracts, and ingredients ecosystems from crop to cup: (i) we operate a fully transparent supply chain, (ii) we develop innovative beverage solutions tailored to our customers’ specific needs, (iii) we deliver a high quality and comprehensive set of products to our customers, and (iv) we leverage our scaled international presence to serve our blue-chip customer base.
(“Riverview”), the Company converted from a Delaware limited liability company to a Delaware corporation (the “Conversion”) and changed its corporate name from “Westrock Coffee Holdings, LLC” to “Westrock Coffee Company.” Our platform is built upon four fundamental pillars that enable us to positively impact the coffee, tea, flavors, extracts, and ingredients ecosystems from crop to cup: (i) we operate a fully transparent supply chain, (ii) we develop innovative beverage solutions tailored to our customers’ specific needs, (iii) we deliver a high quality and comprehensive set of products to our customers, and (iv) we leverage our scaled international presence to serve our blue-chip customer base.
Our significant accounting policies are discussed in Note 3 to the Consolidated Financial Statements. Certain accounting estimates involve a significant level of estimation and uncertainty and require management to make difficult, subjective or complex judgements about matters that are uncertain and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.
Our significant accounting policies are discussed in Note 3 to the Consolidated Financial Statements. Certain accounting estimates involve a significant level of estimation and uncertainty and require management to make difficult, subjective or complex judgments about matters that are uncertain and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations.
The increase is primarily due to a $4.3 million write off of unamortized deferred financing fees 44 Table of Contents associated with the termination of the Prior Term Loan Facility and Prior ABL Facility and $1.6 million of early termination payments associated with the Prior Term Loan Facility. No such costs were incurred in the year ended December 31, 2021.
The increase is primarily due to a $4.3 million write off of unamortized deferred financing fees 40 Table of Contents associated with the termination of the Prior Term Loan Facility and Prior ABL Facility and $1.6 million of early termination payments associated with the Prior Term Loan Facility. No such costs were incurred in the year ended December 31, 2021.
Acquisition, Restructuring and Integration Expense Acquisition, restructuring and integration expenses for the year ended December 31, 2022 were $13.2 million, $5.3 million of which related to the continued integration of the acquired S&D business onto our enterprise resource planning system and $5.6 million of which related to public-company preparedness costs.
Transaction, Restructuring and Integration Expense ​ Transaction, restructuring and integration expenses for the year ended December 31, 2022 were $13.2 million, $5.3 million of which related to the continued integration of the acquired S&D business onto our enterprise resource planning system and $5.6 million of which related to public-company preparedness costs.
When performing a quantitative assessment, we estimate the fair value of our reporting unit using a combination of an income approach based on the present value of estimated future cash flows, and a market approach based on market data of comparable businesses and acquisitions multiples paid in recent transactions.
When performing a quantitative assessment, we estimate the fair value of our reporting unit using a combination of an income approach based on the present value of estimated future cash flows, and a market approach based on market data of comparable businesses and acquisition multiples paid in recent transactions.
Management determines fair value under ASC Topic 820 using the appropriate valuation technique of market, income or cost approach. ​ Estimating cash flows for the purposes of the recoverability test is subjective and requires significant judgement and are sensitive to changes in the underlying assumptions, such as estimates regarding revenue growth rates, cost structure, economic and market trends and cash flows expected to result in the disposition of the asset group.
Management determines fair value under ASC Topic 820 using the appropriate valuation technique of market, income or cost approach. ​ Estimating cash flows for the purposes of the recoverability test is subjective and requires significant judgment and is sensitive to changes in the underlying assumptions, such as estimates regarding revenue growth rates, cost structure, economic and market trends and cash flows expected to result in the disposition of the asset group.
Because of the uncertainty involved in these estimates, materially different amounts could be reported under different conditions or using different assumptions. We make certain judgements and use certain estimates and assumptions when applying accounting principles in the preparation of our financial statements.
Because of the uncertainty involved in these estimates, materially different amounts could be reported under different conditions or using different assumptions. We make certain judgments and use certain estimates and assumptions when applying accounting principles in the preparation of our financial statements.
If Westrock was required by the holders to redeem a significant number of Series A Preferred Shares, Westrock may not have enough cash available (including through draws on its credit facility) for other purposes such as paying dividends on the Common 57 Table of Contents Shares, repurchases of Common Shares, financing acquisitions or other expansions, paying employee incentives and executing its business strategy.
If Westrock was required by the holders to redeem a significant number of Series A Preferred Shares, Westrock may not have enough cash available (including through draws on its credit facility) for other purposes such as paying dividends on the Common Shares, repurchases of Common Shares, financing acquisitions or other expansions, paying employee incentives and executing its business strategy.
If the Step Zero analysis indicates that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we will perform a quantitative assessment of goodwill impairment. 49 Table of Contents Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit.
If the Step Zero analysis indicates that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we will perform a quantitative assessment of goodwill impairment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit.
Failure to meet our financial targets may restrict our liquidity and capital resources and may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions, which could have a material adverse effect on our business, operating results, financial condition, covenant compliance and ability to achieve our intended business objectives.
Failure to meet our financial targets may restrict our liquidity and capital resources and our ability to maintain compliance with our financial covenants and may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions, which could have a material adverse effect on our business, operating results, financial condition, covenant compliance and ability to achieve our intended business objectives.
The increase in costs of sales is primary due to a $116.7 million increase in green coffee and tea, driven by higher single serve cup sales volume and commodity price increases, specifically related to green coffee.
The increase in costs of sales is primarily due to a $116.7 million increase in green coffee and tea, driven by higher single serve cup sales volume and commodity price increases, specifically related to green coffee.
Redemptions of Series A Preferred Shares After February 26, 2028 (i.e. the five-and-half year anniversary of the Closing), any holder of Series A Preferred Shares may require Westrock to redeem all or any whole number of such holder’s 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 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 (10) trading days ending on and including the trading day immediately preceding the redemption notice date.
Redemptions of Series A Preferred Shares After February 26, 2028, any holder of Series A Preferred Shares may require Westrock to redeem all or any whole number of such holder’s 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 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 (10) trading days ending on and including the trading day immediately preceding the redemption notice date.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our financial condition at December 31, 2022 and December 31, 2021 and our results of operations for each of the years in the three-year period ended December 31, 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our financial condition at December 31, 2023 and 2022 and our results of operations for each of the years in the three-year period ended December 31, 2023.
Application of the goodwill impairment test requires significant judgment, including the identification of reporting units; assignment of assets and liabilities to reporting units; and assignment of goodwill to reporting units. As of December 31, 2022, all of our goodwill is assigned to our Beverage Solutions reporting unit.
Application of the goodwill impairment test requires significant judgment, including the identification of reporting units; assignment of assets and liabilities to reporting units; and assignment of goodwill to reporting units. As of December 31, 2023, all of our goodwill is assigned to our Beverage Solutions reporting unit.
All obligations under the Credit Agreement are guaranteed by the Company and each of the Borrower’s domestic subsidiaries, which comprise our Beverage Solutions segment, and are secured by substantially all of the Company’s assets. ​ Borrowings under the Revolving Credit Facility and the Term Loan Facility will bear interest, at the Borrower’s option, initially at an annual rate equal to (i) Term SOFR plus a credit spread adjustment of 0.10% for loans with an interest period of one month, 0.15% for loans with an interest period of three months and 0.25% for loans with an interest period of six months, as applicable, (the “Adjusted Term SOFR Rate”) or (ii) the base rate (determined by reference to the greatest of (i) the rate of interest last quoted by The Wall Street Journal in the U.S. as the prime rate in effect, (ii) the NYFRB Rate from time to time plus 0.50% and (iii) the Adjusted Term SOFR Rate for a one month interest period plus 1.00%, (the “Base Rate”)), in each case plus the Applicable Margin.
All obligations under the 45 Table of Contents Credit Agreement are guaranteed by the Company and each of the Borrower’s domestic subsidiaries, which comprise our Beverage Solutions segment, and are secured by substantially all of the Company’s assets. ​ Borrowings under the Revolving Credit Facility, the Term Loan Facility and the Delayed Draw Term Loan Facility will bear interest, at the Borrower’s option, initially at an annual rate equal to (a) Term SOFR plus a credit spread adjustment of 0.10% for loans with an interest period of one month, 0.15% for loans with an interest period of three months and 0.25% for loans with an interest period of six months, as applicable, (the “Adjusted Term SOFR”) or (b) the base rate (determined by reference to the greatest of (i) the rate of interest last quoted by The Wall Street Journal in the U.S. as the prime rate in effect, (ii) the NYFRB Rate from time to time plus 0.50% and (iii) the Adjusted Term SOFR for a one month interest period plus 1.00%, (the “Base Rate”)), in each case plus the applicable margin.
As a result, there can be no assurance that the estimates and ssumptions made for the purpose of the recoverability test prove to be an accurate prediction of future results.
As a result, there can be no assurance that the estimates and assumptions made for the purpose of the recoverability test prove to be an accurate prediction of future results.
We have future obligations to repurchase $14.6 million of inventory associated with repurchase agreements in which the Company’s SS&T segment has sold inventory to a third party and from whom the Company’s Beverage Solution segment has an obligation to repurchase. ​ Capital Expenditures We categorize our capital expenditures as (i) growth, (ii) maintenance, (iii) customer beverage equipment, or (iv) other.
We have future obligations to repurchase $8.3 million of inventory associated with repurchase agreements in which the Company’s SS&T segment has sold inventory to a third party and from whom the Company’s Beverage Solution segment has an obligation to repurchase. ​ Capital Expenditures We categorize our capital expenditures as (i) growth, (ii) maintenance, (iii) customer beverage equipment, or (iv) other.
We provide products in a variety of packaging, including branded and private label coffee in bags, fractional packs, and single serve cups, as well as extract solutions to be used in products such as cold brew and ready-to-drink offerings.
We provide products in a variety of packaging, including branded and private label coffee in bags, fractional packs, and single serve cups, as well as extract 29 Table of Contents solutions to be used in products such as cold brew and ready-to-drink offerings.
If the carrying amount of the reporting unit is greater than the fair value of the reporting unit, an impairment loss must be recognized for the excess and recorded in the Consolidated Statements of Operations not to exceed the carrying value of goodwill.
If the carrying amount of the reporting unit is greater than the fair value of the reporting unit, an impairment loss must be 42 Table of Contents recognized for the excess and recorded in the Consolidated Statements of Operations not to exceed the carrying value of goodwill.
Prior to settlement, these forward sales contracts are recognized at fair value with the unrealized gains or losses recorded within cost of sales on our Consolidated Statements of Operations. Goodwill and Indefinite Lived Intangible Assets Goodwill represents the excess purchase price of acquired businesses over the fair value of the net assets acquired.
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 Consolidated Statements of Operations. Goodwill and Indefinite Lived Intangible Assets Goodwill represents the excess purchase price of acquired businesses over the fair value of the net assets acquired.
If the carrying amount of an asset group is not recoverable, an impairment loss is recognized in the amount of the excess of the carrying value of the asset 50 Table of Contents group over its fair value.
If the carrying amount of an asset group is not recoverable, an impairment loss is recognized in the amount of the excess of the carrying value of the asset group over its fair value.
The purpose of this management’s discussion and analysis of financial condition and results of operations is to focus on material information relevant to an assessment of our financial condition and results of operations that is not otherwise apparent from the consolidated financial statements and footnotes.
The purpose of this Item 7 is to focus on material information relevant to an assessment of our financial condition and results of operations that is not otherwise apparent from the consolidated financial statements and footnotes.
At December 31, 2022, a 10% change in the price of coffee would have had an approximately $4.0 million impact on the value of our green coffee inventory.
At December 31, 2023, a 10% change in the price of coffee would have had an approximately $3.3 million impact on the value of our green coffee inventory.
The conclusions reached as a result of our qualitative assessment are highly subjective. If our conclusions are proven to be incorrect, we may be required to perform a quantitative goodwill analysis in the future, and there can be no assurances that such analysis would not result in an impairment loss.
If our conclusions are proven to be incorrect, we may be required to perform a quantitative goodwill analysis in the future, and there can be no assurances that such analysis would not result in an impairment loss.
This discussion should be read in conjunction with the disclosure regarding “Forward-Looking Information” in Part I, as well as the risks discussed under Part I, Item 1A Risk Factors, and our consolidated financial statements and notes thereto included under Item 8 Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
This discussion should be read in conjunction with the disclosure regarding “Forward-Looking Statements” as well as the risks discussed under Part I, Item 1A “Risk Factors”, and our consolidated financial statements and notes thereto included under Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Assuming that the liquidation preference of the Series A Preferred Shares remains $11.50 per share and all 23,587,952 Series A Preferred Shares remain outstanding after February 26, 2028, we estimate an aggregate redemption payment of at least approximately $271.3 million.
Assuming that the liquidation preference of the Series A Preferred Shares remains $11.50 per share and all 23,511,922 Series A Preferred Shares remain outstanding after February 26, 2028, we estimate an aggregate redemption payment of at least approximately $270.4 million.
Borrowings under the new facility will bear interest at the borrower’s option at a rate equal to i) Term SOFR plus a margin of 4.00% plus a liquidity premium set by the lender at the time of borrowing or ii) the Base Rate (determined by reference to the greatest of i) the Prime Rate at such time, ii) ½ of 1% in excess of the Federal Funds Effective Rate at such time, and iii) Term SOFR for a one-month tenor in effect at such time plus 1%. ​ Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended % of ​ Year Ended % of (Thousands) ​ December 31, 2022 ​ Revenues ​ December 31, 2021 ​ Revenues Net Sales ​ $ 867,872 ​ 100.0 % ​ $ 698,144 ​ 100.0 % Costs of sales ​ 715,107 82.4 % ​ 552,721 79.2 % Gross profit ​ 152,765 17.6 % ​ 145,423 20.8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expense ​ 129,985 15.0 % ​ 128,506 18.4 % Acquisition, restructuring and integration expense ​ 13,169 1.5 % ​ 8,835 1.3 % Loss on disposal of property, plant and equipment ​ 935 0.1 % ​ 243 0.0 % Total operating expenses ​ 144,089 16.6 % ​ 137,584 19.7 % Income from operations ​ 8,676 1.0 % ​ 7,839 1.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (income) expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ​ 35,497 ​ 4.1 % ​ ​ 32,549 ​ 4.7 % Change in fair value of warrant liabilities ​ 29,675 3.4 % ​ — 0.0 % Other, net ​ (1,146) (0.1) % ​ (34) (0.0) % Loss before income taxes ​ (55,350) (6.4) % ​ (24,676) (3.5) % Income tax expense (benefit) ​ 111 0.0 % ​ (3,368) (0.5) % Net loss ​ $ (55,461) (6.4) % ​ $ (21,308) (3.1) % Net (loss) income attributable to non-controlling interest ​ (276) (0.0) % ​ 639 0.1 % Net loss attributable to shareholders ​ (55,185) (6.4) % ​ (21,947) (3.1) % Accretion of convertible preferred stock ​ ​ (1,316) ​ (0.2) % ​ ​ — ​ 0.0 % Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net ​ ​ (2,870) ​ (0.3) % ​ ​ — ​ 0.0 % Common equivalent preferred dividends ​ ​ (4,380) ​ (0.5) % ​ ​ — ​ 0.0 % Accumulating preferred dividends ​ (13,882) (1.6) % ​ (24,208) (3.5) % Net loss attributable to common shareholders ​ $ (77,633) (8.9) % ​ $ (46,155) (6.6) % ​ 42 Table of Contents The following table sets forth selected financial information of our reportable segments for the year ended December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sustainable ​ ​ Total of ​ ​ Beverage ​ Sourcing & ​ Intersegment ​ Reportable (Thousands) ​ Solutions ​ Traceability ​ Revenues (1) ​ Segments Segment Revenues: ​ ​ ​ ​ ​ 2022 ​ $ 685,303 ​ $ 207,579 ​ $ (25,010) ​ $ 867,872 ​ 2021 ​ ​ 551,013 ​ ​ 170,035 ​ ​ (22,904) ​ ​ 698,144 ​ Segment Costs of Sales: ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 544,611 ​ ​ 170,496 ​ n/a ​ ​ 715,107 ​ 2021 ​ ​ 423,314 ​ ​ 129,407 ​ n/a ​ ​ 552,721 ​ Segment Gross Profit: ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 140,692 ​ ​ 12,073 ​ n/a ​ ​ 152,765 ​ 2021 ​ ​ 127,699 ​ ​ 17,724 ​ n/a ​ ​ 145,423 ​ Segment Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 53,951 ​ ​ 6,102 ​ n/a ​ ​ 60,053 ​ 2021 ​ ​ 41,468 ​ ​ 5,706 ​ n/a ​ ​ 47,174 ​ Segment Adjusted EBITDA Margin: ​ ​ ​ ​ ​ 2022 ​ 7.9 % 3.3 % n/a ​ 6.9 % 2021 ​ 7.5 % 3.9 % n/a ​ 6.8 % (1) Intersegment revenues represent sales of green coffee from our SS&T segment to our Beverage Solutions Segment.
Our income tax expense for the year ended December 31, 2022 is primarily comprised of federal and state benefits, at statutory rates, of $13.1 million, offset by $6.2 million of tax expense resulting from the change in fair value of warrants and $7.3 million of expense related to increases in the valuation allowance against our deferred tax assets. ​ ​ 37 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended % of ​ Year Ended % of (Thousands) ​ December 31, 2022 ​ Revenues ​ December 31, 2021 ​ Revenues Net Sales ​ $ 867,872 ​ 100.0 % ​ $ 698,144 ​ 100.0 % Costs of sales ​ 715,107 82.4 % ​ 552,721 79.2 % Gross profit ​ 152,765 17.6 % ​ 145,423 20.8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expense ​ 129,985 15.0 % ​ 128,506 18.4 % Transaction, restructuring and integration expense ​ 13,169 1.5 % ​ 8,835 1.3 % Loss on disposal of property, plant and equipment ​ 935 0.1 % ​ 243 0.0 % Total operating expenses ​ 144,089 16.6 % ​ 137,584 19.7 % Income (loss) from operations ​ 8,676 1.0 % ​ 7,839 1.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (income) expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ​ 35,497 ​ 4.1 % ​ ​ 32,549 ​ 4.7 % Change in fair value of warrant liabilities ​ 29,675 3.4 % ​ — 0.0 % Other, net ​ (1,146) (0.1) % ​ (34) (0.0) % Loss before income taxes and equity in earnings from unconsolidated entities ​ (55,350) (6.4) % ​ (24,676) (3.5) % Income tax expense (benefit) ​ 111 0.0 % ​ (3,368) (0.5) % Net loss ​ $ (55,461) (6.4) % ​ $ (21,308) (3.1) % Net income (loss) attributable to non-controlling interest ​ (276) (0.0) % ​ 639 0.1 % Net loss attributable to shareholders ​ (55,185) (6.4) % ​ (21,947) (3.1) % Accretion of Series A Convertible Preferred Shares ​ ​ (1,316) ​ (0.2) % ​ ​ — ​ 0.0 % Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net ​ ​ (2,870) ​ (0.3) % ​ ​ — ​ 0.0 % Common equivalent preferred dividends ​ ​ (4,380) ​ (0.5) % ​ ​ — ​ 0.0 % Accumulating preferred dividends ​ (13,882) (1.6) % ​ (24,208) (3.5) % Net loss attributable to common shareholders ​ $ (77,633) (8.9) % ​ $ (46,155) (6.6) % ​ ​ 38 Table of Contents The following table sets forth selected financial information of our reportable segments for the years ended December 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sustainable ​ ​ Total of ​ ​ Beverage ​ Sourcing & ​ Intersegment ​ Reportable (Thousands) ​ Solutions ​ Traceability ​ Revenues (1) ​ Segments Segment Revenues: ​ ​ ​ ​ ​ 2022 ​ $ 685,303 ​ $ 207,579 ​ $ (25,010) ​ $ 867,872 ​ 2021 ​ ​ 551,013 ​ ​ 170,035 ​ ​ (22,904) ​ ​ 698,144 ​ Segment Costs of Sales: ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 544,611 ​ ​ 170,496 ​ n/a ​ ​ 715,107 ​ 2021 ​ ​ 423,314 ​ ​ 129,407 ​ n/a ​ ​ 552,721 ​ Segment Gross Profit: ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 140,692 ​ ​ 12,073 ​ n/a ​ ​ 152,765 ​ 2021 ​ ​ 127,699 ​ ​ 17,724 ​ n/a ​ ​ 145,423 ​ Segment Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ 53,951 ​ ​ 6,102 ​ n/a ​ ​ 60,053 ​ 2021 ​ ​ 41,468 ​ ​ 5,706 ​ n/a ​ ​ 47,174 ​ Segment Adjusted EBITDA Margin: ​ ​ ​ ​ ​ 2022 ​ 7.9 % 3.3 % n/a ​ 6.9 % 2021 ​ 7.5 % 3.9 % n/a ​ 6.8 % (1) Intersegment revenues represent sales of green coffee from our SS&T segment to our Beverage Solutions Segment.
Credit Agreement On August 29, 2022, the Company entered into the Credit Agreement among the Company, Westrock Beverage Solutions, LLC, as the borrower (the “Borrower”), Wells Fargo Bank, N.A., as administrative agent, collateral agent, and swingline lender, Wells Fargo Securities, LLC, as sustainability structuring agent, and each issuing bank and lender party thereto.
Credit Agreement The Company is party to a credit agreement (the “Credit Agreement”) among the Company, Westrock Beverage Solutions, LLC, as the borrower (the “Borrower”), Wells Fargo Bank, N.A., as administrative agent, collateral agent, and swingline lender, Wells Fargo Securities, LLC, as sustainability structuring agent, and each issuing bank and lender party thereto (the “Credit Agreement”).
Sustainable Sourcing & Traceability : Through this segment, we utilize our proprietary technology and digitally traceable supply chain to directly impact and improve the lives of our farming partners, tangible economic empowerment and an emphasis on environmental accountability and farmer literacy.
Sustainable Sourcing & Traceability : Through this segment, we utilize our proprietary technology and digitally traceable supply chain to directly impact and improve the lives of our farming partners, tangible economic empowerment and an emphasis on environmental accountability and farmer literacy. Revenues primarily relate to the physical delivery and settlement of forward sales contracts for green coffee.
The new facility is uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility. The new facility will mature one year from inception.
The facility replaced Falcon’s then existing working capital trade finance facility. The facility is uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility. The facility will mature one year from inception.
Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (Thousands) 2022 2021 Interest expense, net ​ ​ Cash: ​ ​ Term loan facility ​ $ 3,642 ​ $ — Prior term loan facility ​ ​ 14,735 ​ ​ 22,959 Prior term loan facility early termination fee ​ ​ 1,580 ​ ​ — Prior ABL facility ​ 2,414 ​ 1,980 Short-term related party debt ​ 428 ​ 1,393 Subordinated related party debt ​ 642 ​ 1,237 International trade finance lines ​ 3,465 ​ 568 International notes payable ​ 681 ​ 316 Other ​ 1,593 ​ 479 Total cash interest ​ 29,180 ​ 28,932 Non-cash: ​ ​ Amortization of deferred financing costs ​ 1,726 ​ 1,840 Write-off of deferred financing costs ​ ​ 4,296 ​ ​ — Payments-in-kind interest ​ 295 ​ 1,777 Total non-cash interest ​ 6,317 ​ 3,617 Total interest expense ​ $ 35,497 ​ $ 32,549 ​ Interest expense for the year ended December 31, 2022 was $35.5 million compared to $32.5 million for the year ended December 31, 2021.
During the year ended December 31, 2021, we incurred $8.8 million of transaction, restructuring and integration expenses, $3.2 million of which related to restructuring costs, primarily attributable to optimizing our sales organization, $2.0 million of which related to integration costs related to the acquired S&D business, $1.7 million of which related to the integration of our enterprise resource planning system and $1.0 million of public-company preparedness costs. ​ ​ Interest Expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (Thousands) 2022 2021 Interest expense ​ ​ Cash: ​ ​ Term loan facility ​ $ 3,642 ​ $ — Prior term loan facility ​ ​ 14,735 ​ ​ 22,959 Prior term loan facility early termination fee ​ ​ 1,580 ​ ​ — Prior ABL facility ​ 2,414 ​ 1,980 Short-term related party debt ​ 428 ​ 1,393 Subordinated related party debt ​ 642 ​ 1,237 International trade finance lines ​ 3,465 ​ 568 International notes payable ​ 681 ​ 316 Other ​ 1,593 ​ 479 Total cash interest ​ 29,180 ​ 28,932 Non-cash: ​ ​ Amortization of deferred financing costs ​ 1,726 ​ 1,840 Write-off of deferred financing costs ​ ​ 4,296 ​ ​ — Payments-in-kind interest ​ 295 ​ 1,777 Total non-cash interest ​ 6,317 ​ 3,617 Total interest expense ​ $ 35,497 ​ $ 32,549 ​ Interest expense for the year ended December 31, 2022 was $35.5 million compared to $32.5 million for the year ended December 31, 2021.
During the fourth quarter of 2022, the Company completed a qualitative analysis to evaluate impairment of goodwill and concluded that it was more likely than not that the fair value of our goodwill reporting unit exceeded the carrying amount.
During the fourth quarter of 2023, the Company completed a qualitative analysis to evaluate impairment of goodwill and concluded that it was more likely than not that the fair value of our goodwill reporting unit exceeded the carrying amount. As a result, the Company concluded that no impairment existed in the year ending December 31, 2023.
The Company does not apply the normal purchase and normal sale exception under ASC 815 to these contracts. Revenues from commodity contracts are recognized in revenues for the contractually stated amount when the contracts are settled. Settlement generally occurs upon shipment or delivery of the product when title and risks and rewards of ownership transfers to the customer.
Revenues from commodity contracts are recognized in revenues for the contractually stated amount when the contracts are settled. Settlement generally occurs upon shipment or delivery of the product when title and risks and rewards of ownership transfers to the customer.
However, our pricing increases often lag our cost increases, including increases in commodity costs. The persistence of these negative effects on our business could adversely impact our ability to reach our revenue and other financial targets.
Where possible, we seek to recover inflation-impacted costs by passing these costs onto our customers through periodic pricing increases. However, our pricing increases often lag our cost increases, including increases in commodity costs. The persistence of these negative effects on our business could adversely impact our ability to reach our revenue and other financial targets.
Adjusted EBITDA We refer to EBITDA and Adjusted EBITDA in our analysis of our results of operations, which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).
Key Business Metrics We use Adjusted EBITDA to evaluate our performance, identify trends, formulate financial projections, and to make strategic decisions. Adjusted EBITDA We refer to EBITDA and Adjusted EBITDA in our analysis of our results of operations, which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).
Capital expenditures for the years ended December 31, 2022, 2021 and 2020 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beverage ​ ​ ​ ​ ​ ​ (Thousands) ​ Growth ​ Maintenance ​ Equipment ​ Other ​ Total Year ended December 31, 2022 ​ $ 56,582 ​ $ 2,344 ​ $ 2,170 ​ $ 2,165 ​ $ 63,261 Year ended December 31, 2021 ​ $ 19,784 ​ $ 1,682 ​ $ 1,577 ​ $ 2,072 ​ $ 25,115 Year ended December 31, 2020 ​ $ 14,949 ​ $ 1,718 ​ $ 2,342 ​ $ 463 ​ $ 19,472 ​ We expect to invest to expand our extract and ready-to-drink product manufacturing capacity in Conway, Arkansas, for which we currently expect to spend approximately $275 million over the next 3 years.
Capital expenditures for the years ended December 31, 2023, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beverage ​ ​ ​ ​ ​ ​ (Thousands) ​ Growth ​ Maintenance ​ Equipment ​ Other ​ Total Year ended December 31, 2023 ​ $ 153,604 ​ $ 3,478 ​ $ 2,039 ​ $ 5,490 ​ $ 164,611 Year ended December 31, 2022 ​ $ 56,582 ​ $ 2,344 ​ $ 2,170 ​ $ 2,165 ​ $ 63,261 Year ended December 31, 2021 ​ $ 19,784 ​ $ 1,682 ​ $ 1,577 ​ $ 2,072 ​ $ 25,115 ​ During 2024, we expect to continue to invest to expand our extract and ready-to-drink product manufacturing capacity in Conway, Arkansas.
Any delayed draw term loan funded under the Delayed Draw Term Loan Facility will mature on August 29, 2027.
The Revolving Credit Facility, the Term Loan Facility and the Delayed Draw Term Loan Facility will mature on August 29, 2027.
Impairment testing is required when events or changes in circumstances exist that indicate that an asset may not be recoverable. An asset is tested for recoverability by comparing the net carrying value of the asset to the entity-specific, undiscounted net cash flows to be generated from the use and eventual disposition of that asset group.
An asset is tested for recoverability by comparing the net carrying value of the asset to the entity-specific, undiscounted net cash flows to be generated from the use and eventual disposition of that asset group.
Our Private Placement Warrants are not redeemable so long as they are held by Riverview Sponsor or its permitted transferees (except as otherwise set forth herein). As such, it is possible that we may never generate any or only very limited cash proceeds from the exercise of our Warrants.
Our Westrock Private Placement Warrants, of which there were 2,026,046 outstanding at December 31, 2023, are not redeemable so long as they are held by the Riverview Sponsor Partners, LLC or its permitted transferees. As such, it is possible that we may never generate any or only very limited cash proceeds from the exercise of our warrants.
Additionally, we may reserve cash, refrain from pursuing other business objectives and/or direct cash away from other business objectives to ensure that we have sufficient available cash to satisfy holder redemptions and this may adversely affect our business and financial condition and ability to execute on our business strategy.
Additionally, we may reserve cash, refrain from pursuing other business objectives and/or direct cash away from other business objectives to ensure that we have sufficient available cash to satisfy holder redemptions and this may adversely affect our business and financial condition and ability to execute on our business strategy. 49 Table of Contents Contractual and Other Obligations Our material contractual and other obligations include the payment of principal and interest under our debt obligations and future purchase of inventory obligations.
During the year ended December 31, 2021, we incurred $8.8 million of acquisition, restructuring and integration expenses, $3.2 million of which related to restructuring costs, primarily attributable to optimizing our sales organization, $2.0 million of which related to integration costs related to the acquired S&D business, $1.7 million of which related to the integration of our enterprise resource planning system and $1.0 million of public-company preparedness costs.
During the year ended December 31, 2022, we incurred $13.2 million of transaction, restructuring and integration expenses, $5.3 million of which related to the integration of the acquired S&D business onto our enterprise resource planning system and $5.6 million of which related to public-company preparedness costs.
Sales from commodity contracts primarily relate to forward sales of green coffee which are accounted for as derivatives at fair value under ASC 815. These forward sales meet the definition of a derivative under ASC 815 as they have an underlying, notional amount, no initial net investment and can be net settled since the commodity is readily converted to cash.
These forward sales meet the definition of a derivative under ASC 815 as they have an underlying, notional amount, no initial net investment and can be net settled since the commodity is readily converted to cash. The Company does not apply the normal purchase and normal sale exception under ASC 815 to these contracts.
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.
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 41 Table of Contents performed after a customer obtains control of the product are accounted for as fulfillment costs.
Our income tax benefit for the year ended December 31, 2020 is primarily comprised of federal and state benefits, at statutory rates, of $33.6 million, offset by a $16.6 million permanent difference related to the goodwill impairment charge recorded during the year. ​ Critical Accounting Estimates Our consolidated financial statements and related notes presented in Item 8 Financial Statements and Supplementary Data in this Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
Our income tax benefit for the year ended December 31, 2021 is primarily comprised of federal and state benefits, at statutory rates, of $6.0 million, partially offset by $1.2 million of negative impacts related to the impact of changes in foreign tax rates on our tax benefit. ​ Critical Accounting Estimates Our Consolidated Financial Statements and related notes presented in Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K have been prepared in accordance with GAAP.
Recent Accounting Pronouncements See Note 3, Summary of Significant Accounting Policies, to the consolidated financial statements included in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a discussion of certain recent accounting pronouncements. ​
Off-Balance Sheet Arrangements As of the date of this Annual Report on Form 10-K, we do not have any off-balance sheet arrangements. Recent Accounting Pronouncements See Note 3, Summary of Significant Accounting Policies, to the Consolidated Financial Statements included in Part II, Item 8.
We reached this conclusion based on the valuation of our recently completed de-SPAC merger transaction, industry tailwinds, and in consideration of the significant excess fair value over carrying value of the prior year quantitative goodwill impairment evaluation. Our 2021 quantitative goodwill analysis indicated that the estimated fair value of our reporting units exceeded their carrying values by over 50%.
We reached this conclusion based on consideration of the significant excess fair value over carrying value of previous quantitative goodwill impairment evaluations, the recently completed HF Investment and PIPE Investments and the Company’s current market capitalization. Our previous quantitative goodwill analysis indicated that the estimated fair value of our reporting units exceeded their carrying values by over 50%.
Our primary sources of liquidity and capital resources are cash on hand, cash provided by operating activities, and available borrowings under our Credit Agreement. 53 Table of Contents Our ability to generate cash provided by operating activities is dependent on several factors, including our ability to generate net sales and manage costs in-line with our expectations.
Our ability to generate cash provided by operating activities is dependent on several factors, including our ability to generate net sales and manage costs in line with our expectations.
Any excess of the purchase price over the fair value of the net tangible and intangible assets acquired is recorded as goodwill. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in determination of the fair value of assets acquired and liabilities assumed.
Business Combinations We record business combinations using the acquisition method of accounting. All assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. Any excess of the purchase price over the fair value of the net tangible and intangible assets acquired is recorded as goodwill.
Warrant Liabilities We account for warrants assumed in connection with the Transaction (see Note 4 to our Consolidated Financial Statements) 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.
Warrant Liabilities We account for warrants in accordance with the guidance contained in ASC 815, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period.
In addition, we expect to use cash from operations and borrowings available under the Credit Agreement, as amended, to fund our near-term growth strategies, which include, (i) extending and enhancing product offerings through innovation, (ii) expanding our customer base, (iii) expanding geographically, (iv) funding accretive acquisitions, and (v) continuing to drive margin expansion.
We believe proceeds from the Delayed Draw Term Loans, Convertible Notes, cash from operations and borrowings available under the Revolving Credit Facility will provide sufficient cash on-hand to fund our near-term growth strategies, which include, (i) extending and enhancing product offerings through innovation, (ii) expanding our customer base, (iii) expanding geographically, (iv) funding accretive acquisitions, and (v) continuing to drive margin expansion and (vi) to complete the build-out of our extract and ready-to-drink manufacturing facility in Conway, Arkansas.
Borrowings under the new facility will bear interest at the borrower’s option at a rate equal to i) Term SOFR plus a margin of 4.00% plus a liquidity premium set by the lender at the time of borrowing or ii) the Base Rate (determined by reference to the greatest of i) the Prime Rate at such time, ii) ½ of 1% in excess of the Federal Funds Effective Rate at such time, and iii) Term SOFR for a one-month tenor in effect at such time plus 1%. ​ Westrock Coffee International, LLC, through its subsidiary Rwanda Trading Company, maintains two stock and mortgage-backed lending facilities with a local bank in Rwanda: a short-term trade finance facility with a balance of $6.6 million at December 31, 2022 and a long-term note payable with a balance of $1.8 million at December 31, 2022.
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%).
The nature of those estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change.
The nature of those estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. We have identified the following critical accounting estimates, as they are the most important to our financial statement presentation and require difficult, subjective and complex judgments.
Future purchase obligations of $184.2 million as of December 31, 2022 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. There are no material purchase obligations beyond 12 months.
We have no other material obligations to pay principal amounts of our long-term debt obligations prior to their maturity. Future purchase obligations of $238.7 million as of December 31, 2023 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.
Our income tax benefit for the year ended December 31, 2021 is primarily comprised of federal and state benefits, at statutory rates of $6.0 million, partially offset by $1.2 million of negative impacts related to the impact of changes in foreign tax rates on our tax benefit. ​ Income tax benefit for the year ended December 31, 2020 was $17.5 million, resulting in an effective tax rate of 12.0%.
Our income tax benefit for the year ended December 31, 2023 is primarily comprised of federal and state benefits, at statutory rates, of $9.4 million and $2.1 million of tax benefit resulting from the change in fair value of warrants, offset by $4.4 million of expense related to increases in the valuation allowance against our deferred tax assets. ​ Income tax expense for the year ended December 31, 2022 was $0.1 million, resulting in an effective tax rate of (0.2%).
As of the date of this Annual Report on Form 10-K, no borrowings have been made under the Delayed Draw Term Loan Facility. 54 Table of Contents ​ The Term Loan Facility requires quarterly principal payments during the first three years of approximately $2.2 million (1.25% of the original principal balance).
As of the date of this Annual Report on Form 10-K, the Company was in compliance with its financial covenants. ​ The Term Loan Facility and Delayed Draw Term Loan Facility require quarterly principal payments during the first three years of 1.25% of the original principal balance.
The primary unobservable input utilized in determining the fair value of the Westrock Private Warrants is the expected volatility of the stock price, which is determined by use of an option pricing model. A 10% increase to the volatility input at December 31, 2022 would increase the fair value of the Private Warrants by approximately $0.1 million.
The Westrock Private Warrants (as defined in Note 4 to our Consolidated Financial Statements) are valued a binomial lattice valuation model. The primary unobservable input utilized in determining the fair value of the Westrock Private Warrants is the expected volatility of the stock price, which is determined by use of an option pricing model.
On February 14, 2023, the Company entered into an Incremental Assumption Agreement and Amendment No. 1 (the “Amendment”) to its Credit Agreement, which establishes a new class of incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $50.0 million, proceeds of which may be used to fund capital expenditures related to our extract and ready-to-drink facility in Conway, Arkansas, or for general corporate purposes. ​ The Credit Agreement matures on August 29, 2027.
See Note 23 to our Consolidated Financial Statements for additional discussion related to the Convertible Notes offering. ​ 31 Table of Contents Credit Agreement Amendment ​ On February 14, 2023, the Company entered into an Incremental Assumption Agreement and Amendment No. 1 (the “First Amendment”) to its Credit Agreement, which established a new class of incremental term loan commitments in the form of a senior secured delayed draw term loan facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $50.0 million.
Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations.
This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our consolidated statements of operations. The Company re-measures the fair value of the Westrock Public Warrants (as defined in Note 4 to our Consolidated Financial Statements) based on the quoted market price of the Westrock Public Warrants.
Warrant Proceeds As of December 31, 2022, we had 19,372,916 outstanding Warrants to purchase 19,372,916 Common Shares, exercisable at an exercise price of $11.50 per share, which expire on the earliest to occur of August 26, 2027 (i.e. the five year anniversary of the Closing), redemption or liquidation.
If it is determined that we have insufficient liquidity to fund the Conway facility build-out or fund our acquisition strategy, we may delay the build-out of the Conway facility and/or modify the scope of the build-out and we may reprioritize our strategy to focus on organic growth opportunities, which may have an adverse impact on our ability to achieve our growth objectives. 48 Table of Contents Warrant Proceeds As of December 31, 2023, we had 19,144,120 outstanding warrants to purchase 19,144,120 Common Shares, exercisable at an exercise price of $11.50 per share, which expire on the earliest to occur of August 26, 2027 (i.e. the five year anniversary of the Closing), redemption or liquidation.
The Company issued a total of 1,330,000 Common Shares in exchange for the contribution of the Subordinated Notes, which were subsequently extinguished. ​ Current and Long-Term Liquidity Our liquidity needs are to fund operating expenses, meet debt service obligations, and fund both current and long-term investment activities, which include capital expenditures.
As of December 31, 2023, there were $78.1 million obligations outstanding under the Program. Current and Long-Term Liquidity Our liquidity needs are to fund operating expenses, meet debt service obligations, and fund both current and long-term investment activities, which include capital expenditures.
The fair value of the acquired assets and liabilities are estimated using the income, market and/or cost valuation approach.
The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in determination of the fair value of assets acquired and liabilities assumed. The fair value of the acquired assets and liabilities are estimated using the income, market and/or cost valuation approach.
As of December 31, 2022, approximately $32.1 million has been spent towards our Conway facility. If circumstances warrant, we may need to take measures to conserve cash, which may include a suspension, delay, or reduction in growth and/or maintenance capital expenditures.
If circumstances warrant, we may need to take measures to conserve cash, which may include a suspension, delay, or reduction in growth and/or maintenance capital expenditures. We continually assess our capital expenditure plans in light of developments impacting our business, including the needs of our customers.
If actual results differ from the estimates and judgements used in these estimates, the amounts recorded in the consolidated financial statements may be exposed to potential impairment of the intangible assets and goodwill, as discussed in the Goodwill and Indefinite Lived Intangible Assets critical accounting estimate section above.
If actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the consolidated financial statements may be exposed to potential impairment of the intangible assets and goodwill, as discussed in the Goodwill and Indefinite Lived Intangible Assets section above. 44 Table of Contents Green Coffee Inventories Green coffee associated with our forward contracts is recorded at net realizable value, which approximates market price, within our SS&T segment, consistent with our forward purchase contracts recorded at fair value in accordance with ASC 815.
We have identified the following critical accounting estimates, as they are the most important to our financial statement presentation and require difficult, subjective and complex judgements. 48 Table of Contents We believe the current assumptions and other considerations used to estimate amounts reflected in our financial statements are appropriate.
We believe the current assumptions and other considerations used to estimate amounts reflected in our financial statements are appropriate.
Challenges made by taxing authorities may result in adjustments to the amount of taxes due and may result in the imposition of penalties and interest.
Challenges made by taxing authorities may result in adjustments to the amount of taxes due and may result in the imposition of penalties and interest. If any such challenges are not resolved in our favor, they could have a material adverse effect on our financial condition, results of operations and liquidity.
Costs of Sales In our Beverage Solutions segment, costs of sales increased to $423.3 million for the year ended December 31, 2021, compared to $330.3 million for the year ended December 31, 2020.
Net Sales Net Sales from our Beverage Solutions segment were $722.9 million for the year ended December 31, 2023, compared to $685.3 million for the year ended December 31, 2022, an increase of 5.5%.
Accordingly, no impairment loss was recognized. ​ Income Taxes We are subject to federal, state, local and foreign tax laws. We utilize the asset and liability method in accounting for income taxes.
Accordingly, if our current estimates of undiscounted cash flows are not realized, it is possible that an impairment charge may be recorded in the future. ​ 43 Table of Contents Income Taxes We are subject to federal, state, local and foreign tax laws. We utilize the asset and liability method in accounting for income taxes.
Quarterly payments increase to approximately $3.3 million and $4.4 million (1.875% and 2.5% of the original principal balance) during the fourth and fifth years, respectively. We have no other material obligations to pay principal amounts of our long-term debt obligations prior to their maturity.
Our Term Loan Facility and Delayed Draw Term Loan Facility require quarterly principal payments of 1.25% of the original principal. Quarterly payments increase 1.875% and 2.5% of the original principal balance during the fourth and fifth years of the Credit Facility, respectively.
The concluded business enterprise value of the Company noted in the February Valuation was weighted 50% based on the income approach and 50% on the market comparable approach. ​ Liquidity and Capital Resources Our principal liquidity needs are to fund operating expenses, meet debt service obligations, and fund investment activities, which include capital expenditures.
Liquidity and Capital Resources Our principal liquidity needs are to fund operating expenses, meet debt service obligations, and fund investment activities, which include capital expenditures. Our primary sources of liquidity and capital resources are cash on hand, cash provided by operating activities, and available borrowings under our Credit Agreement.
The Applicable Margin ranges from 1.50% to 2.50% for Adjusted Term SOFR loans and from 0.50% to 1.50% for Base Rate loans, in each case depending on the total net leverage ratio. Commitment fees on the daily unused amount of commitments under the Revolving Credit Facility range from 0.20% to 0.35% depending on the total net leverage ratio.
Commitment fees on the daily unused amount of commitments under the Revolving Credit Facility and Delayed Draw Term Loan Facility range from 0.20% to 0.35% depending on the total net leverage ratio. ​ At December 31, 2023, we had $65.0 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 8.9%, the interest rate applicable to our Term Loan Facility was 9.2%, and we had $2.6 million of standby letters of credit outstanding.
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 December 31, 2022, and the date of these financial statements. Interest is payable monthly at the U.S. Prime Rate plus 2.50%, subject to a minimum rate of 5.00%.
At December 31, 2023, there was $37.0 million of outstanding borrowings under the facility, which is recorded in short-term debt in the 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−2 removed6 unchanged
Biggest changeHowever, our pricing increases often lag our cost increases, including increases in commodity costs.
Biggest changeHowever, our pricing increases often lag our cost increases, including increases in commodity costs. ​ 51 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures Regarding Market Risk ​ Commodities Price Risk We are exposed to commodities price risk related to changes in the market price of green coffee.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ Commodities Price Risk We are exposed to commodities price risk related to changes in the market price of green coffee.
We estimate that the potential impact to our interest rate expense associated with the variable rate Term Loan Facility, assuming a hypothetical 10% change in interest rates as of December 31, 2022, would be an annualized impact of approximately $0.8 million on the Company’s results of operations for the year ended December 31, 2022.
We estimate that the potential impact to our interest rate expense associated with the variable rate Term Loan Facility, assuming a hypothetical 10% change in interest rates as of December 31, 2023, would be an annualized impact of approximately $0.9 million on the Company’s results of operations for the year ended December 31, 2023.
Removed
At this time, it is too early to determine what impact these inflationary pressures will have on our long-term growth strategies, as there is uncertainty in how long these risks may persist, and to what level we will be successful in passing these increased costs to our customers.
Removed
Risk Associated with the Russia/Ukraine Conflict We do not have any customers or supply chains that are directly impacted by the Russia/Ukraine conflict. ​ 59 Table of Contents

Other WEST 10-K year-over-year comparisons