Westrock Coffee Company — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter results filing. Westrock supplies coffee, tea, extracts, flavors and related products through Beverage Solutions and Sustainable Sourcing & Traceability (SS&T). It completed its de-SPAC transaction and became a public company on August 26, 2022.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | $867.9 million | $698.1 million |
| Gross profit / margin | $152.8 million / 17.6% | $145.4 million / 20.8% |
| Operating income | $8.7 million | $7.8 million |
| Net loss | $55.5 million | $21.3 million |
| Net loss attributable to common shareholders | $77.6 million; $1.60 per share | $46.2 million; $1.34 per share |
| Adjusted EBITDA (non-GAAP) | $60.1 million | $47.2 million |
| Cash provided by (used in) operating activities | $(56.6) million | $2.9 million |
| Capital expenditures | $63.3 million | $25.1 million |
Sales increased 24%. Beverage Solutions revenue was $685.3 million, up 24%, supported by higher single-serve volumes and green coffee prices; single-serve cup volume rose 50%, while roast-and-ground coffee declined 7% and tea declined 5%. SS&T net sales, after intersegment eliminations, increased 24% to $182.6 million, principally as average selling price per pound rose 35%; volume fell 9%.
Gross margin contracted 3.2 percentage points as higher green coffee, tea and other input costs outpaced pricing recovery. Operating income improved modestly, but net loss widened, including a $29.7 million non-cash loss from the change in fair value of warrant liabilities and higher interest expense. Adjusted EBITDA is a company-defined non-GAAP measure and includes adjustments; it should not be treated as a substitute for GAAP earnings or cash flow.
At year-end, cash and cash equivalents were $16.8 million, with an additional $9.6 million of restricted cash. Current assets were $298.1 million and current liabilities $216.1 million. Total debt before unamortized financing costs was $219.7 million, including $42.9 million of short-term international trade-finance debt; the filing separately describes outstanding indebtedness as approximately $216.9 million. The $175 million revolving facility was undrawn, except for $2.6 million of standby letters of credit. The $175 million term loan carried a 5.7% rate at year-end and matures in 2027. Westrock reported compliance with its financial covenants at December 31, 2022 and at the filing date.
Operating cash flow was negative, reflecting working-capital investment, including a $46.8 million increase in inventories and a $22.9 million cash-flow use from derivative assets and liabilities. Cash flow from operations less capital expenditures was approximately negative $119.9 million. The company reported total shareholders’ equity of $11.7 million, including $274.9 million of Series A convertible preferred shares presented separately from equity.
Material changes, outlook and risks
- Financing and public listing: The de-SPAC and PIPE financing generated $255.7 million of net proceeds shown in financing cash flows. Westrock issued common and preferred shares and replaced its prior term-loan and asset-based facilities with a new secured credit agreement.
- Acquisition: Westrock acquired Kohana Coffee in November 2022 for approximately $39.1 million in total consideration, including $15.7 million cash and $23.4 million in shares. Kohana contributed $1.5 million of sales and a $0.5 million operating loss after acquisition. Bixby Roasting was acquired in February 2023.
- Investment plans: The Conway, Arkansas extract and ready-to-drink facility is expected to begin commercial production in 2024. The company expects approximately $275 million of capital expenditures over three years for the expanded build-out; approximately $32.1 million had been spent by year-end 2022. A $50 million delayed-draw term-loan facility was added in February 2023; it had not been drawn as of the filing date. No specific revenue or earnings guidance is provided in the supplied filing text.
- Liquidity and cost pressures: Management said projected operating cash flow and available credit were expected to fund operations for at least 12 months, while noting that inflation and supply-chain costs may persist and price increases often lag costs. If cash generation or covenant headroom weakens, Westrock may delay or reduce Conway investment, reprioritize acquisitions, or cut costs. Falcon’s trade-finance facility is uncommitted and repayable on demand.
- Other significant exposures: Coffee and other input-price volatility, supply interruptions, customer concentration, customer credit risk, facility execution, variable-rate debt, and climate-related agricultural risks could affect margins, operations and liquidity. The top five customers accounted for approximately 37% of 2022 net sales; five customers represented 54% of year-end trade receivables.
- Controls and reporting: Management concluded disclosure controls were ineffective at December 31, 2022 because of material weaknesses in risk assessment, period-end reporting, segregation of duties and IT general controls. A separate weakness concerning unusual and complex transactions was reported remediated in the fourth quarter; other weaknesses remained outstanding. The auditor issued an unqualified opinion on the financial statements, but the filing did not include an auditor attestation on internal controls.
- Preferred-share obligation: Beginning February 26, 2028, holders may require cash redemption of Series A preferred shares, subject to legal and credit-agreement restrictions. Westrock estimated at least approximately $271.3 million of aggregate redemption payments if all shares remained outstanding and the stated liquidation preference assumptions held.
Most important facts for investors to verify
- Whether pricing and product mix can restore gross margin after the 2022 compression, and whether sales-volume declines in roast-and-ground coffee and tea persist.
- Cash conversion, working-capital requirements and access to financing while the company funds the planned Conway build-out and manages debt service and covenants.
- Whether the Conway project meets its cost, schedule and customer-commitment assumptions, and whether the $275 million investment produces the expected commercial returns.
- Progress in remediating the remaining internal-control weaknesses and whether subsequent filings report effective controls.
- Final Kohana purchase accounting, Bixby acquisition economics, and the dilution and potential cash demands associated with preferred shares and warrants.
- The distinction between reported total debt of $219.7 million before financing costs and the filing’s separate approximately $216.9 million indebtedness disclosure.