Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Measurements

Fair Value Measurements

Note 15. Fair Value Measurements

ASC 820, Fair Value Measurements, defines fair value at the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are:

● Level 1—Valuation is based upon quoted prices for identical instruments traded in active markets.

● Level 2—Valuation is based upon inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (i.e. interest rate and yield curves observable at commonly quoted intervals, default rates, etc.). Observable inputs include quoted prices for similar instruments in active and non-active markets. Level 2 includes those financial instruments that are valued with industry standard valuation models that incorporate inputs that are observable in the marketplace throughout the full term of the instrument or can otherwise be derived from or supported by observable market data in the marketplace. Level 2 inputs may also include insignificant adjustments to market observable inputs.

● Level 3—Valuation is based upon one or more unobservable inputs that are significant in establishing a fair value estimate. These unobservable inputs are used to the extent relevant observable inputs are not available and are developed based on the best information available. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The following table summarizes the fair value of financial instruments at March 31, 2024:

	March 31, 2024
(Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Green coffee associated with forward contracts	$	—	$	27,017	$	—	$	27,017
Coffee futures contracts		2,772		—		—		2,772
Forward purchase and sales contracts		—		12,652		—		12,652
Total	$	2,772	$	39,669	$	—	$	42,441
Liabilities:
Forward purchase and sales contracts		—		4,229		—		4,229
Westrock Public Warrants		39,372		—		—		39,372
Westrock Private Warrants		—		—		5,389		5,389
Total	$	39,372	$	4,229	$	5,389	$	48,990

The following table presents the change in fair value of Level 3 Westrock Private Warrant liabilities:

	Westrock
(Thousands)	Private Warrants
Fair value as of December 31, 2023	$	5,430
Change in fair value		(41)
Fair value as of March 31, 2024	$	5,389

The following table summarizes the fair value of financial instruments at December 31, 2023:

	December 31, 2023
(Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Green coffee associated with forward contracts	$	—	$	33,447	$	—	$	33,447
Coffee futures contracts		3,355		—		—		3,355
Forward purchase and sales contracts		—		10,303		—		10,303
Total	$	3,355	$	43,750	$	—	$	47,105
Liabilities:
Forward purchase and sales contracts		—		3,731		—		3,731
Westrock Public Warrants		39,371		—		—		39,371
Westrock Private Warrants		—		—		5,430		5,430
Total	$	39,371	$	3,731	$	5,430	$	48,532

Coffee futures contracts and coffee options are valued based on quoted market prices. The estimated fair value for green coffee inventories associated with forward contracts and forward sales and purchase contracts are based on exchange-quoted prices, adjusted for differences in origin, quantity, quality, and future delivery period, as the exchange quoted prices represent standardized terms for the commodity. These adjustments are generally determined using broker or dealer quotes or based upon observable market transactions. As a result, green coffee associated with forward contracts and forward sales and purchase contracts are classified within Level 2 of the fair value hierarchy.

Westrock Public Warrants are valued based on their quoted market price of $2.30 per warrant as of March 31, 2024 and December 31, 2023, respectively. Westrock Private Warrants price of $2.66 and $2.68 per warrant as of March 31, 2024 and December 31, 2023, respectively, are valued using a binomial lattice valuation model, which is considered to be a Level 3 fair value measurement. The primary unobservable inputs were as follows:

	March 31, 2024		December 31, 2023
Stock price	$	10.33	$	10.21
Exercise price		11.50		11.50
Expected term (years)		5.00		5.00
Expected volatility		33.40%		33.80%
Risk-free rate of return		4.31%		3.91%
Dividend yield		0.00%		0.00%

The most significant of these primary unobservable inputs 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.

Financial instruments consist primarily of cash, accounts receivable, accounts payable, a supply chain finance program, convertible notes payable, short-term debt and long-term debt. The carrying amount of cash, accounts receivable, accounts payable, short-term debt and the supply chain finance program was estimated by management to approximate fair value due to the relatively short period of time to maturity for those instruments. The Term Loan Facility, Revolving Credit Facility and Delayed Draw Term Loan Facility are carried on the Condensed Consolidated Balance Sheets at amortized cost and are estimated by management to approximate fair value as of March 31, 2024 as the interest rate on these facilities is adjusted for changes in the market rates. The Convertible Notes are carried on the Condensed Consolidated Balance Sheets at amortized cost and are estimated by management to approximate fair value as of March 31, 2024, as the Convertible Notes were issued on February 15, 2024. The fair value of the Term Loan Facility, Revolving Credit Facility, Delayed Draw Term Loan Facility and Convertible Notes was determined based on Level 2 inputs under the fair value hierarchy.

Non-financial assets and liabilities, including property, plant and equipment, goodwill and intangible assets are measured at fair value on a non-recurring basis. No events occurred during the three months ended March 31, 2024 or 2023, requiring these non-financial assets and liabilities to be subsequently recognized at fair value.

At March 31, 2024, the Company had an equity investment with a carrying value of approximately $1.0 million, for which there is no readily determinable fair value. This investment is recorded at cost within other long-term assets on the Condensed Consolidated Balance Sheets. As of March 31, 2024, there have been no adjustments, upward or downward, to the carrying value.