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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hostess Brands Inc | NASDAQ:TWNK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 33.30 | 32.40 | 33.50 | 0 | 01:00:00 |
|
|
|
|
|
(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the three months ended September 30, 2017
|
|
OR
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
|
Delaware
(State or other jurisdiction of incorporation or organization) |
47‑4168492
(I.R.S. Employer Identification No.) |
1 East Armour Boulevard
Kansas City, MO (Address of principal executive offices) |
64111
(Zip Code) |
Large accelerated filer
o
|
Accelerated
filer
x
|
Non‑accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company
o
|
Emerging growth company
x
|
|
|
Page
|
Item 1.
|
|
|
|
Consolidated Balance Sheets
(Unaudited)
|
|
|
Consolidated Statements of Operations
(Unaudited)
|
|
|
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
|
|
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
|
September 30,
|
|
|
December 31,
|
||||
ASSETS
|
2017
|
|
|
2016
|
||||
|
(Successor)
|
|
|
(Successor)
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
101,171
|
|
|
|
$
|
26,855
|
|
Accounts receivable, net
|
100,733
|
|
|
|
89,237
|
|
||
Inventories
|
33,812
|
|
|
|
30,444
|
|
||
Prepaids and other current assets
|
6,791
|
|
|
|
4,827
|
|
||
Total current assets
|
242,507
|
|
|
|
151,363
|
|
||
Property and equipment, net
|
166,931
|
|
|
|
153,224
|
|
||
Intangible assets, net
|
1,929,082
|
|
|
|
1,946,943
|
|
||
Goodwill
|
580,349
|
|
|
|
588,460
|
|
||
Other assets, net
|
7,804
|
|
|
|
7,902
|
|
||
Total assets
|
$
|
2,926,673
|
|
|
|
$
|
2,847,892
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Long-term debt and capital lease obligation payable within one year
|
$
|
11,357
|
|
|
|
$
|
11,496
|
|
Accounts payable
|
53,451
|
|
|
|
34,083
|
|
||
Customer trade allowances
|
35,150
|
|
|
|
36,691
|
|
||
Accrued expenses and other current liabilities
|
11,051
|
|
|
|
21,656
|
|
||
Total current liabilities
|
111,009
|
|
|
|
103,926
|
|
||
Long-term debt and capital lease obligation
|
988,476
|
|
|
|
993,374
|
|
||
Tax receivable agreement
|
175,487
|
|
|
|
165,384
|
|
||
Deferred tax liability
|
366,457
|
|
|
|
353,797
|
|
||
Total liabilities
|
1,641,429
|
|
|
|
1,616,481
|
|
||
Commitments and Contingencies (Note 14)
|
|
|
|
|
||||
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 99,992,183 and 98,250,917 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
|
10
|
|
|
|
10
|
|
||
Class B common stock, $0.0001 par value, 50,000,000 shares authorized, 30,398,777 and 31,704,988 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
|
3
|
|
|
|
3
|
|
||
Additional paid in capital
|
923,739
|
|
|
|
912,824
|
|
||
Accumulated other comprehensive loss
|
(43
|
)
|
|
|
—
|
|
||
Retained earnings (accumulated deficit)
|
28,593
|
|
|
|
(15,618
|
)
|
||
Stockholders’ equity
|
952,302
|
|
|
|
897,219
|
|
||
Non-controlling interest
|
332,942
|
|
|
|
334,192
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,926,673
|
|
|
|
$
|
2,847,892
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||
|
September 30,
2017 |
|
|
September 30,
2016 |
|
September 30,
2017 |
|
|
September 30,
2016 |
||||||||
|
(Successor)
|
|
|
(Predecessor)
|
|
(Successor)
|
|
|
(Predecessor)
|
||||||||
Net revenue
|
$
|
192,250
|
|
|
|
$
|
196,197
|
|
|
$
|
579,967
|
|
|
|
$
|
548,757
|
|
Cost of goods sold
|
113,885
|
|
|
|
113,618
|
|
|
333,861
|
|
|
|
309,427
|
|
||||
Gross profit
|
78,365
|
|
|
|
82,579
|
|
|
246,106
|
|
|
|
239,330
|
|
||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Advertising and marketing
|
8,871
|
|
|
|
10,381
|
|
|
24,304
|
|
|
|
27,529
|
|
||||
Selling expense
|
7,606
|
|
|
|
8,271
|
|
|
24,418
|
|
|
|
23,175
|
|
||||
General and administrative
|
14,494
|
|
|
|
10,784
|
|
|
43,416
|
|
|
|
32,015
|
|
||||
Amortization of customer relationships
|
5,994
|
|
|
|
156
|
|
|
17,860
|
|
|
|
468
|
|
||||
Business combination transaction costs
|
—
|
|
|
|
4,049
|
|
|
—
|
|
|
|
7,065
|
|
||||
Impairment of property and equipment
|
1,003
|
|
|
|
—
|
|
|
1,003
|
|
|
|
7,267
|
|
||||
Related party expenses
|
92
|
|
|
|
1,058
|
|
|
284
|
|
|
|
3,431
|
|
||||
Tax receivable agreement liability remeasurement
|
1,589
|
|
|
|
—
|
|
|
1,589
|
|
|
|
—
|
|
||||
Recall and other costs (recoveries)
|
—
|
|
|
|
(3,787
|
)
|
|
—
|
|
|
|
473
|
|
||||
Total operating costs and expenses
|
39,649
|
|
|
|
30,912
|
|
|
112,874
|
|
|
|
101,423
|
|
||||
Operating income
|
38,716
|
|
|
|
51,667
|
|
|
133,232
|
|
|
|
137,907
|
|
||||
Other expense:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
9,966
|
|
|
|
18,004
|
|
|
29,831
|
|
|
|
53,746
|
|
||||
Loss on modification of debt
|
2,122
|
|
|
|
—
|
|
|
1,948
|
|
|
|
—
|
|
||||
Other expense
|
182
|
|
|
|
173
|
|
|
1,309
|
|
|
|
2,344
|
|
||||
Total other expense
|
12,270
|
|
|
|
18,177
|
|
|
33,088
|
|
|
|
56,090
|
|
||||
Income before income taxes
|
26,446
|
|
|
|
33,490
|
|
|
100,144
|
|
|
|
81,817
|
|
||||
Income tax expense (benefit)
|
10,316
|
|
|
|
(23
|
)
|
|
31,608
|
|
|
|
294
|
|
||||
Net income
|
16,130
|
|
|
|
33,513
|
|
|
68,536
|
|
|
|
81,523
|
|
||||
Less: Net income attributable to the non-controlling interest
|
6,581
|
|
|
|
2,329
|
|
|
24,325
|
|
|
|
4,110
|
|
||||
Net income attributable to Class A shareholders/partners
|
$
|
9,549
|
|
|
|
$
|
31,184
|
|
|
$
|
44,211
|
|
|
|
$
|
77,413
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per Class A share:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.10
|
|
|
|
|
|
$
|
0.45
|
|
|
|
|
||||
Diluted
|
$
|
0.09
|
|
|
|
|
|
$
|
0.42
|
|
|
|
|
||||
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
99,557,183
|
|
|
|
|
|
98,920,808
|
|
|
|
|
||||||
Diluted
|
105,418,566
|
|
|
|
|
|
105,840,673
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
||||||||||||||
|
September 30,
2017 |
|
|
September 30,
2016 |
|
|
September 30,
2017 |
|
|
September 30,
2016 |
||||||||
|
(Successor)
|
|
|
(Predecessor)
|
|
|
(Successor)
|
|
|
(Predecessor)
|
||||||||
Net income
|
$
|
16,130
|
|
|
|
$
|
33,513
|
|
|
|
$
|
68,536
|
|
|
|
$
|
81,523
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Unrealized income (loss) on interest rate swap contract designated as a cash flow hedge
|
565
|
|
|
|
—
|
|
|
|
(100
|
)
|
|
|
—
|
|
||||
Income tax (expense) benefit
|
(172
|
)
|
|
|
—
|
|
|
|
31
|
|
|
|
—
|
|
||||
Comprehensive income
|
16,523
|
|
|
|
33,513
|
|
|
|
68,467
|
|
|
|
81,523
|
|
||||
Less: Comprehensive income attributed to non-controlling interest
|
6,712
|
|
|
|
2,329
|
|
|
|
24,299
|
|
|
|
4,110
|
|
||||
Comprehensive income attributed to class A shareholders/partners
|
$
|
9,811
|
|
|
|
$
|
31,184
|
|
|
|
$
|
44,168
|
|
|
|
$
|
77,413
|
|
Partners’ Equity (Deficit)
Hostess Holdings, LP
(Predecessor)
|
||||||||||||||||||||
|
|
Class A
|
|
Class C
|
|
Total Partners’
Equity (Deficit) |
|
Non-controlling
Interest |
||||||||||||
Balance – December 31, 2015
|
|
$
|
(276,084
|
)
|
|
$
|
(346,046
|
)
|
|
$
|
(622,130
|
)
|
|
$
|
(37,991
|
)
|
||||
Distributions to partners
|
|
(2,439
|
)
|
|
(8,134
|
)
|
|
(10,573
|
)
|
|
(555
|
)
|
||||||||
Unit based compensation
|
|
345
|
|
|
344
|
|
|
689
|
|
|
—
|
|
||||||||
Net income
|
|
38,707
|
|
|
38,706
|
|
|
77,413
|
|
|
4,110
|
|
||||||||
Balance – September 30, 2016
|
|
$
|
(239,471
|
)
|
|
$
|
(315,130
|
)
|
|
$
|
(554,601
|
)
|
|
$
|
(34,436
|
)
|
Stockholders’ Equity
|
|||||||||||||||||||||||||||||||||
Hostess Brands, Inc.
(Successor) |
|||||||||||||||||||||||||||||||||
|
Class A Voting
Common Stock |
|
Class B Voting
Common Stock |
|
Additional
Paid-in Capital |
|
Accumulated
Other Comprehensive Loss
|
|
Accumulated
Losses / Retained Earnings |
|
Total
Stockholders’ Equity |
|
Non-controlling
Interest |
||||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance–December 31, 2016
|
98,250,917
|
|
|
$
|
10
|
|
|
31,704,988
|
|
|
$
|
3
|
|
|
$
|
912,824
|
|
|
$
|
—
|
|
|
$
|
(15,618
|
)
|
|
$
|
897,219
|
|
|
$
|
334,192
|
|
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
44,211
|
|
|
44,168
|
|
|
24,299
|
|
|||||||
Share-based compensation
|
435,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,990
|
|
|
—
|
|
|
—
|
|
|
7,990
|
|
|
—
|
|
|||||||
Exchanges
|
1,306,211
|
|
|
—
|
|
|
(1,306,211
|
)
|
|
—
|
|
|
12,609
|
|
|
—
|
|
|
—
|
|
|
12,609
|
|
|
(12,609
|
)
|
|||||||
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,940
|
)
|
|||||||
Exercise of public warrants
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|||||||
Tax receivable agreement arising from exchanges, net of income taxes of $1,845
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,685
|
)
|
|
—
|
|
|
—
|
|
|
(9,685
|
)
|
|
—
|
|
|||||||
Balance–September 30, 2017
|
99,992,183
|
|
|
$
|
10
|
|
|
30,398,777
|
|
|
$
|
3
|
|
|
$
|
923,739
|
|
|
$
|
(43
|
)
|
|
$
|
28,593
|
|
|
$
|
952,302
|
|
|
$
|
332,942
|
|
|
|
|
Nine Months Ended
|
|||||||
|
|
|
September 30,
2017 |
|
|
September 30,
2016 |
||||
|
|
|
(Successor)
|
|
|
(Predecessor)
|
||||
Operating activities
|
|
|
|
|
||||||
|
Net income
|
$
|
68,536
|
|
|
|
$
|
81,523
|
|
|
|
Depreciation and amortization
|
28,576
|
|
|
|
9,054
|
|
|||
|
Impairment of property and equipment
|
1,003
|
|
|
|
7,267
|
|
|||
|
Debt discount (premium) amortization
|
(647
|
)
|
|
|
2,486
|
|
|||
|
Non-cash loss on debt modification
|
1,729
|
|
|
|
—
|
|
|||
|
Non-cash change in tax receivable agreement liability
|
1,589
|
|
|
|
—
|
|
|||
|
Gain on sale of property and equipment
|
(10
|
)
|
|
|
(153
|
)
|
|||
|
Share-based compensation
|
7,990
|
|
|
|
689
|
|
|||
|
Deferred taxes
|
19,993
|
|
|
|
237
|
|
|||
|
Change in operating assets and liabilities
|
|
|
|
|
|||||
|
|
Accounts receivable
|
(11,496
|
)
|
|
|
(13,555
|
)
|
||
|
|
Inventories
|
(3,368
|
)
|
|
|
(1,850
|
)
|
||
|
|
Prepaids and other current assets
|
(1,950
|
)
|
|
|
(9,397
|
)
|
||
|
|
Accounts payable and accrued expenses
|
7,369
|
|
|
|
17,098
|
|
||
|
|
Customer trade allowances
|
(1,541
|
)
|
|
|
(4,316
|
)
|
||
|
|
Other
|
—
|
|
|
|
430
|
|
||
|
Net cash provided by operating activities
|
117,773
|
|
|
|
89,513
|
|
|||
|
|
|
|
|
|
|
||||
Investing activities
|
|
|
|
|
||||||
|
Purchases of property and equipment
|
(22,755
|
)
|
|
|
(23,995
|
)
|
|||
|
Acquisition of Superior
|
—
|
|
|
|
(50,091
|
)
|
|||
|
Proceeds from sale of assets
|
85
|
|
|
|
4,350
|
|
|||
|
Acquisition of software assets
|
(1,728
|
)
|
|
|
(1,917
|
)
|
|||
|
Net cash used in investing activities
|
(24,398
|
)
|
|
|
(71,653
|
)
|
|||
|
|
|
|
|
|
|
||||
Financing activities
|
|
|
|
|
||||||
|
Repayments of long-term debt and capital lease obligation
|
(5,103
|
)
|
|
|
(6,985
|
)
|
|||
|
Debt fees
|
(1,017
|
)
|
|
|
—
|
|
|||
|
Distributions to partners
|
—
|
|
|
|
(10,573
|
)
|
|||
|
Distributions to non-controlling interest
|
(12,940
|
)
|
|
|
(555
|
)
|
|||
|
Proceeds from the exercise of warrants
|
1
|
|
|
|
—
|
|
|||
|
Net cash used in financing activities
|
(19,059
|
)
|
|
|
(18,113
|
)
|
|||
Net increase in cash and cash equivalents
|
74,316
|
|
|
|
(253
|
)
|
||||
Cash and cash equivalents at beginning of period
|
26,855
|
|
|
|
64,473
|
|
||||
Cash and cash equivalents at end of period
|
$
|
101,171
|
|
|
|
$
|
64,220
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
|
|
|
|
||||
|
Interest
|
$
|
35,085
|
|
|
|
$
|
50,799
|
|
|
|
|
Taxes paid
|
$
|
12,902
|
|
|
|
$
|
—
|
|
|
|
Supplemental disclosure of non-cash investing:
|
|
|
|
|
|
|
|
||||
|
Purchases of property and equipment funded by accounts payable
|
$
|
932
|
|
|
|
$
|
2,072
|
|
|
(In thousands)
|
September 30,
2017 |
|
December 31,
2016
|
||||
|
(Successor)
|
|
(Successor)
|
||||
Ingredients and packaging
|
$
|
14,474
|
|
|
$
|
12,712
|
|
Finished goods
|
16,441
|
|
|
14,229
|
|
||
Inventory in transit to customers
|
2,897
|
|
|
3,503
|
|
||
|
$
|
33,812
|
|
|
$
|
30,444
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
||||||||||
(% of Consolidated Net Revenues)
|
September 30,
2017 |
|
|
September 30,
2016 |
|
September 30,
2017 |
|
|
September 30,
2016 |
|
||||
|
(Successor)
|
|
|
(Predecessor)
|
|
(Successor)
|
|
|
(Predecessor)
|
|
||||
Sweet Baked Goods
|
18.8
|
%
|
|
|
18.1
|
%
|
|
18.9
|
%
|
|
|
20.3
|
%
|
|
Other
|
0.9
|
%
|
|
|
3.1
|
%
|
|
0.8
|
%
|
|
|
1.5
|
%
|
|
Total
|
19.7
|
%
|
|
|
21.2
|
%
|
|
19.7
|
%
|
|
|
21.8
|
%
|
|
•
|
22,732
RSUs to directors of the Company. The units vest on November 4, 2017. These awards only contain service conditions.
|
•
|
297,500
RSUs to certain members of management. One-third of the units vest at each of the following dates: January 1, 2018, November 4, 2018, and November 4, 2019. Vesting is dependent upon positive earnings per share for the fiscal year ending immediately prior to the vesting date. Management has determined it is probable that these performance conditions will be met.
|
•
|
18,116
RSUs to certain members of management. One-third of the units vest at each of the following dates: June 1 of each of 2018, 2019, and 2020.These awards only contain service conditions.
|
•
|
372,036
RSUs to certain members of management. One-third of the units vest at each of the following dates; November 4 of each of 2017, 2018 and 2019. These awards only contain service conditions.
|
•
|
715,406
RSUs to certain members of management. The units vest on December 31, 2019. At the end of each of
three
annual performance periods ending December 31, 2017, 2018 and 2019, a portion of the units will be banked if the Company achieves certain EBITDA targets. Banked shares continue to be subject to continued service through the December 31, 2019 vesting date. Management has determined it is probable that a portion of the EBITDA target will be met for the 2017 annual performance period. Depending on actual performance during each performance period, award recipients have the opportunity to receive up to
225%
of the granted units.
|
|
Restricted Stock
Units |
|
Weighted Average
Grant Date Fair Value |
|||
Unvested units as of December 31, 2016 (Successor)
|
—
|
|
|
$
|
—
|
|
Total Granted
|
1,425,790
|
|
|
15.77
|
|
|
Forfeited
|
(79,543
|
)
|
|
15.78
|
|
|
Vested
|
—
|
|
|
—
|
|
|
Unvested as of September 30, 2017 (Successor)
|
1,346,247
|
|
|
$
|
15.77
|
|
|
|
Shares of
Restricted Stock |
|
Weighted Average
Grant Date Fair Value |
|||
Unvested units as of December 31, 2016 (Successor)
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
435,000
|
|
|
15.78
|
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Unvested as of September 30, 2017 (Successor)
|
|
435,000
|
|
|
$
|
15.78
|
|
|
Nine Months
Ended
September 30, 2017
|
Expected volatility
(1)
|
27.53%
|
Expected dividend yield
(2)
|
—%
|
Expected option term
(3)
|
6.25 years
|
Risk-free rate
(4)
|
2.1%
|
(1)
|
The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period based on the expected term and ending on the grant date.
|
(2)
|
As of September 30, 2017, we have not paid any dividends on our common stock. As of the stock option grant date, we did not anticipate paying any dividends on our common stock over the term of the stock options. Option holders have no right to dividends prior to the exercise of the options.
|
(3)
|
We utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
|
(4)
|
The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant which corresponds to the expected term of the stock options.
|
|
Number
of Options |
|
Weighted Average
Remaining Contractual Life (years) |
|
Weighted
Average Exercise Price |
|
Weighted
Average Grant Date Fair Value |
||||||
Outstanding as of December 31, 2016 (Successor)
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Granted
|
1,155,788
|
|
|
5.77
|
|
|
15.85
|
|
|
5.03
|
|
||
Exercised
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
(44,371
|
)
|
|
5.75
|
|
|
15.78
|
|
|
5.03
|
|
||
Outstanding as of September 30, 2017 (Successor)
|
1,111,417
|
|
|
5.77
|
|
|
$
|
15.85
|
|
|
$
|
5.03
|
|
Exercisable as of September 30, 2017 (Successor)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(In thousands)
|
September 30,
2017
|
|
|
December 31,
2016
|
||||
|
(Successor)
|
|
|
(Successor)
|
||||
Land and buildings
|
$
|
31,296
|
|
|
|
$
|
30,275
|
|
Machinery and equipment
|
130,778
|
|
|
|
112,221
|
|
||
Construction in progress
|
15,363
|
|
|
|
12,334
|
|
||
|
177,437
|
|
|
|
154,830
|
|
||
Less accumulated depreciation
|
(10,506
|
)
|
|
|
(1,606
|
)
|
||
|
$
|
166,931
|
|
|
|
$
|
153,224
|
|
(In thousands)
|
Three Months Ended
September 30, 2017 |
|
|
Three Months Ended
September 30, 2016 |
|
Nine Months Ended
September 30,
2017
|
|
|
Nine Months Ended
September 30,
2016
|
||||||||
|
(Successor)
|
|
|
(Predecessor)
|
|
(Successor)
|
|
|
(Predecessor)
|
||||||||
Net revenue:
|
|
|
|
|
|
|
|
|
|
||||||||
Sweet Baked Goods
|
$
|
173,552
|
|
|
|
$
|
174,473
|
|
|
$
|
524,731
|
|
|
|
$
|
508,288
|
|
Other
|
18,698
|
|
|
|
21,724
|
|
|
55,236
|
|
|
|
40,469
|
|
||||
Net revenue
|
$
|
192,250
|
|
|
|
$
|
196,197
|
|
|
$
|
579,967
|
|
|
|
$
|
548,757
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
||||||||
Sweet Baked Goods
|
$
|
8,703
|
|
|
|
$
|
2,585
|
|
|
$
|
25,587
|
|
|
|
$
|
8,119
|
|
Other
|
1,019
|
|
|
|
583
|
|
|
2,989
|
|
|
|
935
|
|
||||
Depreciation and amortization
|
$
|
9,722
|
|
|
|
$
|
3,168
|
|
|
$
|
28,576
|
|
|
|
$
|
9,054
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|
||||||||
Sweet Baked Goods
|
$
|
72,965
|
|
|
|
$
|
76,777
|
|
|
$
|
230,217
|
|
|
|
$
|
227,322
|
|
Other
|
5,400
|
|
|
|
5,802
|
|
|
15,889
|
|
|
|
12,008
|
|
||||
Gross profit
|
$
|
78,365
|
|
|
|
$
|
82,579
|
|
|
$
|
246,106
|
|
|
|
$
|
239,330
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Capital expenditures (1):
|
|
|
|
|
|
|
|
|
|
||||||||
Sweet Baked Goods
|
$
|
9,109
|
|
|
|
$
|
9,312
|
|
|
$
|
24,772
|
|
|
|
$
|
25,701
|
|
Other
|
205
|
|
|
|
161
|
|
|
643
|
|
|
|
211
|
|
||||
Capital expenditures
|
$
|
9,314
|
|
|
|
$
|
9,473
|
|
|
$
|
25,415
|
|
|
|
$
|
25,912
|
|
(1)
|
Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable during the three and nine months ended September 30, 2017 (Successor) and 2016 (Predecessor).
|
(In thousands)
|
September 30,
2017 |
|
|
December 31,
2016 |
||||
|
(Successor)
|
|
|
(Successor)
|
||||
Total segment assets:
|
|
|
|
|
|
|
||
Sweet Baked Goods
|
$
|
2,719,743
|
|
|
|
$
|
2,633,758
|
|
Other
|
206,930
|
|
|
|
214,134
|
|
||
Total segment assets
|
$
|
2,926,673
|
|
|
|
$
|
2,847,892
|
|
(In thousands)
|
Sweet Baked Goods
|
|
Other
|
|
Total
|
||||||
Balance as of December 31, 2016 (Successor)
|
$
|
518,759
|
|
|
$
|
69,701
|
|
|
$
|
588,460
|
|
Measurement period adjustment of the Business Combination
|
(8,111
|
)
|
|
—
|
|
|
(8,111
|
)
|
|||
Balance as of September 30, 2017 (Successor)
|
$
|
510,648
|
|
|
$
|
69,701
|
|
|
$
|
580,349
|
|
(In thousands)
|
September 30,
2017
|
|
December 31,
2016
|
||||
|
(Successor)
|
|
(Successor)
|
||||
Intangible assets with indefinite lives (Trademarks and Trade Names)
|
$
|
1,408,848
|
|
|
$
|
1,408,848
|
|
Intangible assets with definite lives (Customer Relationships)
|
542,011
|
|
|
542,011
|
|
||
Less accumulated amortization (Customer Relationships)
|
(21,777
|
)
|
|
(3,916
|
)
|
||
Intangible assets, net
|
$
|
1,929,082
|
|
|
$
|
1,946,943
|
|
(In thousands)
|
September 30,
2017
|
|
|
December 31,
2016
|
||||
|
(Successor)
|
|
|
(Successor)
|
||||
Annual incentive bonuses
|
$
|
4,141
|
|
|
|
$
|
5,997
|
|
Payroll, vacation and other compensation
|
3,496
|
|
|
|
5,121
|
|
||
Self-insurance reserves
|
1,310
|
|
|
|
2,091
|
|
||
Accrued interest
|
224
|
|
|
|
4,885
|
|
||
Current income taxes payable
|
113
|
|
|
|
2
|
|
||
Workers compensation reserve
|
1,650
|
|
|
|
1,321
|
|
||
Interest rate swap contract
|
99
|
|
|
|
—
|
|
||
Litigation (Note 14)
|
—
|
|
|
|
1,100
|
|
||
Other
|
18
|
|
|
|
1,139
|
|
||
|
$
|
11,051
|
|
|
|
$
|
21,656
|
|
(In thousands)
|
September 30, 2017
|
|
|
December 31,
2016 |
||||
|
(Successor)
|
|
|
(Successor)
|
||||
Second Amended First Lien Term Loan (3.7% as of September 30, 2017)
|
|
|
|
|
||||
Principal
|
$
|
993,763
|
|
|
|
$
|
—
|
|
Unamortized debt premium and issuance costs
|
5,462
|
|
|
|
—
|
|
||
|
999,225
|
|
|
|
—
|
|
||
New First Lien Term Loan (4.0%)
|
|
|
|
|
||||
Principal
|
—
|
|
|
|
998,750
|
|
||
Unamortized debt premium and issuance costs
|
—
|
|
|
|
5,396
|
|
||
|
—
|
|
|
|
1,004,146
|
|
||
Capital lease obligation (6.8%)
|
608
|
|
|
|
724
|
|
||
Total debt and capital lease obligation
|
999,833
|
|
|
|
1,004,870
|
|
||
Less: Amounts due within one year
|
(11,357
|
)
|
|
|
(11,496
|
)
|
||
Long-term portion
|
$
|
988,476
|
|
|
|
$
|
993,374
|
|
|
|
Three Months Ended
September 30, 2017 |
|
Nine Months Ended
September 30, 2017 |
||||
|
|
(Successor)
|
|
(Successor)
|
||||
Numerator:
|
|
|
|
|
||||
Net income attributable to Class A shareholders (in thousands)
|
|
$
|
9,549
|
|
|
$
|
44,211
|
|
Denominator:
|
|
|
|
|
||||
Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards)
|
|
99,557,183
|
|
|
98,920,808
|
|
||
Dilutive effect of warrants
|
|
5,717,416
|
|
|
6,844,613
|
|
||
Dilutive effect of restricted stock awards and RSUs
|
|
143,967
|
|
|
75,252
|
|
||
Weighted-average shares outstanding - diluted
|
|
105,418,566
|
|
|
105,840,673
|
|
||
|
|
|
|
|
||||
Net income per Class A share - basic
|
|
$
|
0.10
|
|
|
$
|
0.45
|
|
|
|
|
|
|
||||
Net income per Class A share - dilutive
|
|
$
|
0.09
|
|
|
$
|
0.42
|
|
(In thousands)
|
|
|
||
Balance December 31, 2016 (Successor)
|
|
$
|
165,384
|
|
Measurement period adjustment of the Business Combination
|
|
(3,016
|
)
|
|
Balance arising from exchanges of Class B units for Class A shares
|
|
11,530
|
|
|
Remeasurement due to change in state tax rate
|
|
1,589
|
|
|
Balance September 30, 2017 (Successor)
|
|
$
|
175,487
|
|
(In thousands)
|
|
||
Remainder of 2017
|
$
|
—
|
|
2018
|
14,165
|
|
|
2019
|
10,375
|
|
|
2020
|
10,097
|
|
|
2021
|
9,845
|
|
|
Thereafter
|
131,005
|
|
(In millions)
|
Total Committed
|
Commitments within 1 year
|
Commitments beyond 1 year
|
||||||
Ingredients
|
$
|
82.4
|
|
$
|
69.2
|
|
$
|
13.2
|
|
Packaging
|
$
|
44.3
|
|
$
|
39.1
|
|
$
|
5.2
|
|
|
(Successor)
|
|
|
|
|
Historical
i
(Predecessor)
|
|
|
|
|
Pro Forma
|
|
|
||||||||||||
(
In thousands, except per share data
)
|
Three Months
Ended September 30, 2017
|
|
%
of Net Revenues |
|
|
Three Months
Ended September 30, 2016
|
|
|
Pro Forma
Adjustments
|
|
Three Months
Ended September 30, 2016
|
|
%
of Net Revenues |
||||||||||||
Net revenue
|
$
|
192,250
|
|
|
100.0
|
%
|
|
|
$
|
196,197
|
|
|
|
$
|
—
|
|
|
$
|
196,197
|
|
|
100.0
|
%
|
||
Cost of goods sold
|
113,885
|
|
|
59.2
|
|
|
|
113,618
|
|
|
|
(185
|
)
|
ii
|
113,433
|
|
|
57.8
|
|
||||||
Gross profit
|
78,365
|
|
|
40.8
|
|
|
|
82,579
|
|
|
|
185
|
|
|
82,764
|
|
|
42.2
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Advertising and marketing
|
8,871
|
|
|
4.6
|
|
|
|
10,381
|
|
|
|
—
|
|
|
10,381
|
|
|
5.3
|
|
||||||
Selling expense
|
7,606
|
|
|
4.0
|
|
|
|
8,271
|
|
|
|
—
|
|
|
8,271
|
|
|
4.2
|
|
||||||
General and administrative
|
14,494
|
|
|
7.5
|
|
|
|
10,784
|
|
|
|
(346
|
)
|
ii
|
10,438
|
|
|
5.3
|
|
||||||
Amortization of customer relationships
|
5,994
|
|
|
3.1
|
|
|
|
156
|
|
|
|
5,938
|
|
iii
|
6,094
|
|
|
3.1
|
|
||||||
Impairment of property and equipment
|
1,003
|
|
|
0.5
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Business combination transaction costs
|
—
|
|
|
—
|
|
|
|
4,049
|
|
|
|
(4,049
|
)
|
iv
|
—
|
|
|
—
|
|
||||||
Related party expenses
|
92
|
|
|
—
|
|
|
|
1,058
|
|
|
|
—
|
|
|
1,058
|
|
|
0.5
|
|
||||||
Tax receivable agreement liability remeasurement
|
1,589
|
|
|
0.8
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Recall and other costs (recoveries)
|
—
|
|
|
—
|
|
|
|
(3,787
|
)
|
|
|
—
|
|
|
(3,787
|
)
|
|
(1.9
|
)
|
||||||
Total operating costs and expenses
|
39,649
|
|
|
20.5
|
|
|
|
30,912
|
|
|
|
1,543
|
|
|
32,455
|
|
|
16.5
|
|
||||||
Operating income
|
38,716
|
|
|
20.1
|
|
|
|
51,667
|
|
|
|
(1,358
|
)
|
|
50,309
|
|
|
25.7
|
|
||||||
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense, net
|
9,966
|
|
|
5.2
|
|
|
|
18,004
|
|
|
|
(4,623
|
)
|
v
|
13,381
|
|
|
6.8
|
|
||||||
Loss on modification of debt
|
2,122
|
|
|
1.1
|
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
||||
Other expense
|
182
|
|
|
0.1
|
|
|
|
173
|
|
|
|
—
|
|
|
173
|
|
|
0.1
|
|
||||||
Total other expense
|
12,270
|
|
|
6.4
|
|
|
|
18,177
|
|
|
|
(4,623
|
)
|
|
13,554
|
|
|
6.9
|
|
||||||
Income before income taxes
|
26,446
|
|
|
13.7
|
|
|
|
33,490
|
|
|
|
3,265
|
|
|
36,755
|
|
|
18.7
|
|
||||||
Income tax expense (benefit)
|
10,316
|
|
|
5.4
|
|
|
|
(23
|
)
|
|
|
10,496
|
|
vi
|
10,473
|
|
|
5.3
|
|
||||||
Net income
|
16,130
|
|
|
8.3
|
|
|
|
33,513
|
|
|
|
(7,231
|
)
|
|
26,282
|
|
|
13.4
|
|
||||||
Less: Net income attributable to the non-controlling interest
|
6,581
|
|
|
3.4
|
|
|
|
2,329
|
|
|
|
6,852
|
|
vii
|
9,181
|
|
|
4.7
|
|
||||||
Net income attributable to Class A shareholders
|
$
|
9,549
|
|
|
4.9
|
%
|
|
|
$
|
31,184
|
|
|
|
$
|
(14,083
|
)
|
|
$
|
17,101
|
|
|
8.7
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings per Class A share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
$
|
0.18
|
|
|
|
||||||||
Diluted
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
$
|
0.18
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
99,557,183
|
|
|
|
|
|
|
|
|
97,589,217
|
|
viii
|
97,589,217
|
|
|
|
|||||||||
Diluted
|
105,418,566
|
|
|
|
|
|
|
|
|
97,589,217
|
|
viii
|
97,589,217
|
|
|
|
i.
|
The amounts in these columns represent our Hostess Holdings historical results of operations for the period reflected. Certain amounts previously reported within the 2016 Hostess Holdings quarterly financial statements have been reclassified to conform with the current financial statement presentation.
|
ii.
|
Represents the adjustment to depreciation expense associated with the allocation of purchase price to property and equipment.
|
iii.
|
Represents additional amortization expense associated with the fair value recognized for customer relationships in connection with the Business Combination.
|
iv.
|
This adjustment consists primarily of legal and professional fees and other costs associated with the Business Combination.
|
v.
|
Represents the reduction in interest expense due to the repayment of Hostess Holdings debt pursuant to the terms of the Business Combination.
|
vi.
|
Represents the effective income tax rate of 28.5%, giving effect to the non-controlling interest, a partnership for income tax purposes.
|
vii.
|
Represents the elimination of historical income attributable to the non-controlling interest and attributes a portion of the pro forma income to the non-controlling interest created in the Business Combination. Income is allocated to the non-controlling interest based on its pro rata share of the total equity of Hostess Holdings.
|
viii.
|
Represents the basic and diluted weighted average number of Class A shares that would have been outstanding had the Business Combination occurred on January 1, 2016. The outstanding warrants were determined not to be dilutive.
|
•
|
does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;
|
•
|
does not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
does not reflect the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt;
|
•
|
does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; and
|
•
|
does not reflect payments related to income taxes, the tax receivable agreement or distributions to the non-controlling interest to reimburse its tax liability.
|
Reconciliation of Adjusted EBITDA
(Unaudited) |
|||||||||
|
|
|
|
|
|
||||
(In thousands)
|
|
Three Months
Ended September 30, 2017 |
|
|
Pro Forma
Three Months Ended September 30, 2016 |
||||
|
|
|
|
|
|
||||
Net income
|
|
$
|
16,130
|
|
|
|
$
|
26,282
|
|
Plus non-GAAP adjustments:
|
|
|
|
|
|
||||
Income tax provision
|
|
10,316
|
|
|
|
10,473
|
|
||
Interest expense, net
|
|
9,966
|
|
|
|
13,381
|
|
||
Depreciation and amortization
|
|
9,722
|
|
|
|
9,103
|
|
||
Share-based compensation
|
i.
|
3,630
|
|
|
|
—
|
|
||
Tax receivable agreement liability remeasurement
|
ii.
|
1,589
|
|
|
|
—
|
|
||
Recall and other
|
iii.
|
—
|
|
|
|
(3,787
|
)
|
||
Other expense
|
iv.
|
182
|
|
|
|
173
|
|
||
Loss on debt modification
|
v.
|
2,122
|
|
|
|
—
|
|
||
Impairment of property and equipment
|
vi.
|
1,003
|
|
|
|
—
|
|
||
Adjusted EBITDA
|
|
$
|
54,660
|
|
|
|
$
|
55,625
|
|
i.
|
For the three months ended September 30, 2017, the Company recognized expense related to stock compensation awarded under the Hostess Brands, Inc. 2016 Equity Incentive Plan.
|
ii.
|
For the three months ended September 30, 2017, the Company incurred a loss on the remeasurement of the tax receivable agreement due to a change in a state tax law.
|
iii.
|
For the pro forma three months ended September 30, 2016, the Company recovered costs previously incurred in the second quarter of 2016 related to the voluntary recall of product containing undeclared peanut residue attributed to one of the Company’s suppliers.
|
iv.
|
During the three months ended September 30, 2017, the Company incurred professional fees related to the registration of certain privately held securities. During the pro forma three months ended September 30, 2016, the Company incurred professional fees attributable to the pursuit of a potential acquisition that has since been abandoned, and other special projects.
|
v.
|
During the three months ended September 30, 2017, previously capitalized debt issuance costs were expensed.
|
vi.
|
During the three months ended September 30, 2017, the Company transitioned the production of one of its products to a third party and recognized an impairment loss resulting from the idling of the related production equipment.
|
|
Unaudited Segment Financial Data
|
|
|||||||
(In thousands)
|
Three Months
Ended September 30, 2017 |
|
|
Three Months
Ended September 30, 2016 |
|
||||
|
(Successor)
|
|
|
(Predecessor)
|
|
||||
Net revenue:
|
|
|
|
|
|
||||
Sweet Baked Goods
|
$
|
173,552
|
|
|
|
$
|
174,473
|
|
|
Other
|
18,698
|
|
|
|
21,724
|
|
|
||
Net revenue
|
$
|
192,250
|
|
|
|
$
|
196,197
|
|
|
|
|
|
|
|
|
|
|
||
Gross profit:
|
|
|
|
|
|
||||
Sweet Baked Goods
|
$
|
72,965
|
|
|
|
$
|
76,777
|
|
|
Other
|
5,400
|
|
|
|
5,802
|
|
|
||
Gross profit
|
$
|
78,365
|
|
|
|
$
|
82,579
|
|
|
|
|
|
|
|
|
|
|
||
Capital expenditures (1):
|
|
|
|
|
|
||||
Sweet Baked Goods
|
$
|
9,109
|
|
|
|
$
|
9,312
|
|
|
Othe
r
|
205
|
|
|
|
161
|
|
|
||
Capital expenditures
|
$
|
9,314
|
|
|
|
$
|
9,473
|
|
|
(1)
|
Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable during the
three months ended September 30, 2017
(Successor) and 2016 (Predecessor).
|
|
Unaudited Segment Data
|
|
|||||
|
Three Months Ended
|
|
|||||
(% of Consolidated Net Revenues)
|
September 30, 2017
|
|
|
September 30, 2016
|
|
||
Sweet Baked Goods
|
18.8
|
%
|
|
|
18.1
|
%
|
|
Other
|
0.9
|
%
|
|
|
3.1
|
%
|
|
Total
|
19.7
|
%
|
|
|
21.2
|
%
|
|
|
(Successor)
|
|
|
|
|
Historical
i
(Predecessor)
|
|
|
|
|
Pro forma
|
|
|
|||||||||
(
In thousands, except per share data
)
|
Nine Months
Ended September 30, 2017
|
|
%
of Net Revenues |
|
|
Nine Months
Ended September 30, 2016
|
|
|
Pro Forma
Adjustments
|
|
Nine Months
Ended September 30, 2016
|
|
%
of Net Revenues |
|||||||||
Net revenue
|
$
|
579,967
|
|
|
100.0
|
%
|
|
|
$
|
548,757
|
|
|
|
—
|
|
|
$
|
548,757
|
|
|
100.0
|
%
|
Cost of goods sold
|
333,861
|
|
|
57.6
|
|
|
|
309,427
|
|
|
|
315
|
|
ii
|
309,742
|
|
|
56.4
|
|
|||
Gross profit
|
246,106
|
|
|
42.4
|
|
|
|
239,330
|
|
|
|
(315
|
)
|
|
239,015
|
|
|
43.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Advertising and marketing
|
24,304
|
|
|
4.2
|
|
|
|
27,529
|
|
|
|
—
|
|
|
27,529
|
|
|
5.0
|
|
|||
Selling expense
|
24,418
|
|
|
4.2
|
|
|
|
23,175
|
|
|
|
—
|
|
|
23,175
|
|
|
4.2
|
|
|||
General and administrative
|
43,416
|
|
|
7.5
|
|
|
|
32,015
|
|
|
|
(653
|
)
|
ii
|
31,362
|
|
|
5.7
|
|
|||
Amortization of customer relationships
|
17,860
|
|
|
3.1
|
|
|
|
468
|
|
|
|
17,950
|
|
iii
|
18,418
|
|
|
3.4
|
|
|||
Impairment of property and equipment
|
1,003
|
|
|
0.2
|
|
|
|
7,267
|
|
|
|
—
|
|
|
7,267
|
|
|
1.3
|
|
|||
Business combination transaction costs
|
—
|
|
|
—
|
|
|
|
7,065
|
|
|
|
(6,490
|
)
|
iv
|
575
|
|
|
0.1
|
|
|||
Related party expenses
|
284
|
|
|
—
|
|
|
|
3,431
|
|
|
|
—
|
|
|
3,431
|
|
|
0.6
|
|
|||
Tax receivable agreement liability remeasurement
|
1,589
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Recall and other costs (recoveries)
|
—
|
|
|
—
|
|
|
|
473
|
|
|
|
—
|
|
|
473
|
|
|
0.1
|
|
|||
Total operating costs and expenses
|
112,874
|
|
|
19.5
|
|
|
|
101,423
|
|
|
|
10,807
|
|
|
112,230
|
|
|
20.4
|
|
|||
Operating income
|
133,232
|
|
|
22.9
|
|
|
|
137,907
|
|
|
|
(11,122
|
)
|
|
126,785
|
|
|
23.1
|
|
|||
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Interest expense, net
|
29,831
|
|
|
5.1
|
|
|
|
53,746
|
|
|
|
(13,871
|
)
|
v
|
39,875
|
|
|
7.3
|
|
|||
Loss on debt modification
|
1,948
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other expense
|
1,309
|
|
|
0.2
|
|
|
|
2,344
|
|
|
|
—
|
|
|
2,344
|
|
|
0.4
|
|
|||
Total other expense
|
33,088
|
|
|
5.6
|
|
|
|
56,090
|
|
|
|
(13,871
|
)
|
|
42,219
|
|
|
7.7
|
|
|||
Income before income taxes
|
100,144
|
|
|
17.3
|
|
|
|
81,817
|
|
|
|
2,749
|
|
|
84,566
|
|
|
15.4
|
|
|||
Income tax expense
|
31,608
|
|
|
5.4
|
|
|
|
294
|
|
|
|
23,804
|
|
vi
|
24,098
|
|
|
4.4
|
|
|||
Net income
|
68,536
|
|
|
11.8
|
|
|
|
81,523
|
|
|
|
(21,055
|
)
|
|
60,468
|
|
|
11.0
|
|
|||
Less: Net income attributable to the non-controlling interest
|
24,325
|
|
|
4.2
|
|
|
|
4,110
|
|
|
|
16,954
|
|
vii
|
21,064
|
|
|
3.8
|
|
|||
Net income attributable to Class A shareholders
|
$
|
44,211
|
|
|
7.6
|
%
|
|
|
$
|
77,413
|
|
|
|
(38,009
|
)
|
|
$
|
39,404
|
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Earnings per Class A share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Basic
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|||||
Diluted
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Basic
|
98,920,808
|
|
|
|
|
|
|
|
|
97,589,217
|
|
viii
|
97,589,217
|
|
|
|
||||||
Diluted
|
105,840,673
|
|
|
|
|
|
|
|
|
97,589,217
|
|
viii
|
97,589,217
|
|
|
|
i.
|
The amounts in these columns represent our Hostess Holdings historical results of operations for the period reflected. Certain amounts previously reported within the 2016 Hostess Holdings quarterly financial statements have been reclassified to conform with the current financial statement presentation.
|
ii.
|
Represents the adjustment to depreciation expense associated with the allocation of purchase price to property and equipment.
|
iii.
|
Represents additional amortization expense associated with the fair value recognized for customer relationships in connection with the Business Combination.
|
iv.
|
This adjustment consists primarily of legal and professional fees and other costs associated with the Business Combination.
|
v.
|
Represents the reduction in interest expense due to the repayment of Hostess Holdings debt pursuant to the terms of the Business Combination.
|
vi.
|
Represents the effective income tax rate of 28.5%, giving effect to the non-controlling interest, a partnership for income tax purposes.
|
vii.
|
Represents the elimination of historical income attributable to the non-controlling interest and attributes a portion of the pro forma income to the non-controlling interest created in the Business Combination. Income is allocated to the non-controlling interest based on its pro rata share of the total equity of Hostess Holdings.
|
viii.
|
Represents the basic and diluted weighted average number of Class A shares that would have been outstanding had the Business Combination occurred on January 1, 2016. The outstanding warrants were determined not to be dilutive.
|
•
|
does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments;
|
•
|
does not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
does not reflect the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt;
|
•
|
does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; and
|
•
|
does not reflect payments related to income taxes, the tax receivable agreement or distributions to the non-controlling interest to reimburse its tax liability.
|
Reconciliation of Adjusted EBITDA
(Unaudited) |
|||||||||
|
|
|
|
|
|
||||
(In thousands)
|
|
Nine Months
Ended September 30, 2017 |
|
|
Pro Forma
Nine Months Ended September 30, 2016 |
||||
|
|
|
|
|
|
||||
Net income
|
|
$
|
68,536
|
|
|
|
$
|
60,468
|
|
Plus non-GAAP adjustments:
|
|
|
|
|
|
||||
Income tax provision
|
|
31,608
|
|
|
|
24,098
|
|
||
Interest expense, net
|
|
29,831
|
|
|
|
39,875
|
|
||
Depreciation and amortization
|
|
28,576
|
|
|
|
27,352
|
|
||
Share-based compensation
|
i.
|
7,990
|
|
|
|
—
|
|
||
Tax receivable agreement liability remeasurement
|
ii.
|
1,589
|
|
|
|
—
|
|
||
Recall and other
|
iii.
|
—
|
|
|
|
473
|
|
||
Other expense
|
iv.
|
1,309
|
|
|
|
2,342
|
|
||
Loss on debt modification
|
v.
|
1,948
|
|
|
|
—
|
|
||
Impairment of property and equipment
|
vi.
|
1,003
|
|
|
|
7,267
|
|
||
Business combination transaction costs
|
vii.
|
—
|
|
|
|
575
|
|
||
Adjusted EBITDA
|
|
$
|
172,390
|
|
|
|
$
|
162,450
|
|
i.
|
For the nine months ended September 30, 2017, the Company recognized expense related to stock compensation awarded under the Hostess Brands, Inc. 2016 Equity Incentive Plan.
|
ii.
|
For the nine months ended September 30, 2017, the Company incurred a loss on the remeasurement of the tax receivable agreement due to a change in state tax law.
|
iii.
|
For the nine months ended September 30, 2016, we incurred a loss on a sale/abandonment of property and bakery shutdown costs, primarily due to utilities, insurance, taxes and maintenance expenses related to the Schiller Park, Illinois bakery.
|
iv.
|
For the nine months ended September 30, 2017, other expense primarily included professional fees incurred related to the secondary public offering of common stock and the registration of certain privately held warrants. For the pro forma nine months ended September 30, 2016, other expense primarily consisted of professional fees attributed to the pursuit of a potential acquisition that has since been abandoned, and other special projects.
|
v.
|
During the nine months ended September 30, 2017, previously capitalized debt issuance costs were expensed.
|
vi.
|
During the nine months ended September 30, 2017, the Company transitioned the production of one of its products to a third party and recognized an impairment loss resulting from the idling of the related production equipment. During the pro forma nine months ended September 30, 2016, the Company closed multiple production lines in Indianapolis, Indiana bakery and transitioned production to other facilities resulting in an impairment loss.
|
vii.
|
For the pro forma nine months ended September 30, 2016, business combination transaction costs consisted of professional and legal costs for the acquisition of Superior.
|
|
Unaudited Segment Financial Data
|
|
|||||||
(In thousands)
|
Nine Months
Ended September 30, 2017 |
|
|
Nine Months
Ended September 30, 2016 |
|
||||
|
(Successor)
|
|
|
(Predecessor)
|
|
||||
Net revenue:
|
|
|
|
|
|
||||
Sweet Baked Goods
|
$
|
524,731
|
|
|
|
$
|
508,288
|
|
|
Other
|
55,236
|
|
|
|
40,469
|
|
|
||
Net revenue
|
$
|
579,967
|
|
|
|
$
|
548,757
|
|
|
|
|
|
|
|
|
|
|
||
Gross profit:
|
|
|
|
|
|
||||
Sweet Baked Goods
|
$
|
230,217
|
|
|
|
$
|
227,322
|
|
|
Other
|
15,889
|
|
|
|
12,008
|
|
|
||
Gross profit
|
$
|
246,106
|
|
|
|
$
|
239,330
|
|
|
|
|
|
|
|
|
|
|
||
Capital expenditures (1):
|
|
|
|
|
|
||||
Sweet Baked Goods
|
$
|
24,772
|
|
|
|
$
|
25,701
|
|
|
Othe
r
|
643
|
|
|
|
211
|
|
|
||
Capital expenditures
|
$
|
25,415
|
|
|
|
$
|
25,912
|
|
|
(1)
|
Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable during the
nine months ended September 30, 2017
(Successor) and 2016 (Predecessor).
|
|
Unaudited Segment Data
|
|
|||||
|
Nine Months Ended
|
|
|||||
(% of Consolidated Net Revenues)
|
September 30, 2017
|
|
|
September 30, 2016
|
|
||
|
(Successor)
|
|
|
(Predecessor)
|
|
||
Sweet Baked Goods
|
18.9
|
%
|
|
|
20.3
|
%
|
|
Other
|
0.8
|
%
|
|
|
1.5
|
%
|
|
Total
|
19.7
|
%
|
|
|
21.8
|
%
|
|
Contractual Commitments as of September 30, 2017
|
Total Committed
|
|
Commitments within 1 year
|
|
Commitments beyond 1 year
|
||||||
(In thousands)
|
|
|
|
|
|
||||||
Tax receivable agreement
|
$
|
175,487
|
|
|
$
|
—
|
|
|
$
|
175,487
|
|
Second Amended First Term Loan
|
993,763
|
|
|
9,963
|
|
|
983,800
|
|
|||
Interest payments on Term Loan
|
180,924
|
|
|
36,928
|
|
|
143,996
|
|
|||
Distribution Center (Shorewood, IL)
|
2,656
|
|
|
1,763
|
|
|
893
|
|
|||
Corporate office lease (Kansas City, MO)
|
426
|
|
|
243
|
|
|
183
|
|
|||
Corporate office lease (Dallas, TX)
|
6
|
|
|
6
|
|
|
—
|
|
|||
Superior capital lease
|
683
|
|
|
200
|
|
|
483
|
|
|||
Ingredient procurement
|
82,400
|
|
|
69,200
|
|
|
13,200
|
|
|||
Packaging procurement
|
44,300
|
|
|
39,100
|
|
|
5,200
|
|
|||
|
$
|
1,480,645
|
|
|
$
|
157,403
|
|
|
$
|
1,323,242
|
|
Item 4.
|
Controls and Procedures
|
Exhibit No.
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
|
|
|
32.2
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
HOSTESS BRANDS, INC.
|
|
|
|
By
|
/s/ Thomas Peterson
|
|
Thomas Peterson
Executive Vice President, Chief Financial Officer
|
1 Year Hostess Brands Chart |
1 Month Hostess Brands Chart |
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