Document and Entity Information
Document and Entity Information Document and Entity Information - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 08, 2017 | Jun. 30, 2016 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2016 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | HOSTESS BRANDS, INC. | ||
Entity Central Index Key | 1,644,406 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Class of Stock [Line Items] | |||
Entity Public Float | $ 365,250 | ||
Common Class A | |||
Class of Stock [Line Items] | |||
Entity Common Stock, Shares Outstanding | 98,250,917 | ||
Common Class B | |||
Class of Stock [Line Items] | |||
Entity Common Stock, Shares Outstanding | 31,704,988 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Accounts receivable, net | $ 89,200 | $ 68,500 |
Successor | ||
Current assets: | ||
Cash and cash equivalents | 26,855 | |
Restricted cash | 0 | |
Accounts receivable, net | 89,237 | |
Inventories | 30,444 | |
Prepaids and other current assets | 4,827 | |
Total current assets | 151,363 | |
Property and equipment, net | 153,224 | |
Restricted cash | 0 | |
Intangible assets, net | 1,946,943 | |
Goodwill | 588,460 | |
Deferred finance charges | 0 | |
Other assets, net | 7,902 | |
Total assets | 2,847,892 | |
Current liabilities: | ||
Long-term debt and capital lease obligation payable within one year | 11,496 | |
Accounts payable | 34,083 | |
Deferred distributions to partners | 0 | |
Customer trade allowances | 36,691 | |
Accrued expenses and other current liabilities | 21,656 | |
Total current liabilities | 103,926 | |
Long-term debt and capital lease obligation | 993,374 | |
Tax receivable agreement | 165,384 | |
Deferred tax liability | 353,797 | |
Deferred distributions to partners | 0 | |
Total liabilities | 1,616,481 | |
Commitments and Contingencies (Note 12) | ||
Additional paid in capital | 912,824 | |
Retained earnings (accumulated deficit) | (15,618) | |
Stockholders' equity | 897,219 | |
Non-controlling interest | 334,192 | |
Total liabilities and stockholders’ equity (partners' deficit) | 2,847,892 | |
Successor | Common Class A | ||
Current liabilities: | ||
Common Stock | 10 | |
Successor | Common Class B | ||
Current liabilities: | ||
Common Stock | $ 3 | |
Predecessor | ||
Current assets: | ||
Cash and cash equivalents | 64,473 | |
Restricted cash | 4,655 | |
Accounts receivable, net | 68,518 | |
Inventories | 25,130 | |
Prepaids and other current assets | 6,041 | |
Total current assets | 168,817 | |
Property and equipment, net | 128,078 | |
Restricted cash | 17,225 | |
Intangible assets, net | 263,579 | |
Goodwill | 56,992 | |
Deferred finance charges | 1,696 | |
Other assets, net | 7,142 | |
Total assets | 643,529 | |
Current liabilities: | ||
Long-term debt and capital lease obligation payable within one year | 9,250 | |
Accounts payable | 28,053 | |
Deferred distributions to partners | 4,655 | |
Customer trade allowances | 29,638 | |
Accrued expenses and other current liabilities | 21,162 | |
Total current liabilities | 92,758 | |
Long-term debt and capital lease obligation | 1,193,667 | |
Tax receivable agreement | 0 | |
Deferred tax liability | 0 | |
Deferred distributions to partners | 17,225 | |
Total liabilities | 1,303,650 | |
Commitments and Contingencies (Note 12) | ||
Partners’ deficit | (622,130) | |
Non-controlling interest | (37,991) | |
Total liabilities and stockholders’ equity (partners' deficit) | $ 643,529 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) | Dec. 31, 2016$ / sharesshares |
Common Class A | |
Common stock, authorized (shares) | 200,000,000 |
Common stock, issued (shares) | 98,250,917 |
Common stock, outstanding (shares) | 98,250,917 |
Common Class B | |
Common stock, authorized (shares) | 50,000,000 |
Common stock, issued (shares) | 31,704,988 |
Common stock, outstanding (shares) | 31,704,988 |
Successor | Common Class A | |
Common stock, par value (usd per share) | $ / shares | $ 0.0001 |
Common stock, authorized (shares) | 200,000,000 |
Common stock, issued (shares) | 98,250,917 |
Common stock, outstanding (shares) | 98,250,917 |
Successor | Common Class B | |
Common stock, par value (usd per share) | $ / shares | $ 0.0001 |
Common stock, authorized (shares) | 50,000,000 |
Common stock, issued (shares) | 31,704,988 |
Common stock, outstanding (shares) | 31,704,988 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Net revenue | $ 111,998 | |||
Cost of goods sold | 73,284 | |||
Special employee incentive compensation | 0 | |||
Gross profit | 38,714 | |||
Operating costs and expenses: | ||||
Advertising and marketing | 5,245 | |||
Selling expense | 5,033 | |||
General and administrative | 7,322 | |||
Special employee incentive compensation | 0 | |||
Amortization of customer relationships | 3,922 | |||
Impairment of property and equipment | 0 | |||
Loss on sale/abandonment of property and equipment and bakery shutdown costs | 0 | |||
Business combination transaction costs | 0 | |||
Related party expenses | 26,799 | |||
Total operating costs and expenses | 48,321 | |||
Operating income (loss) | (9,607) | |||
Other (income) expense: | ||||
Interest expense, net | 6,649 | |||
(Gain) loss on debt extinguishment | (763) | |||
Other expense (income) | 754 | |||
Total other expense | 6,640 | |||
Income (loss) before income taxes | (16,247) | |||
Income tax expense (benefit) | (7,762) | |||
Net income (loss) | (8,485) | |||
Less: Net income (loss) attributable to the non-controlling interest | (4,081) | |||
Net income (loss) attributable to Class A shareholders | $ (4,404) | |||
Earnings (loss) per Class A share: | ||||
Basic (usd per share) | $ (0.05) | |||
Diluted (usd per share) | $ (0.05) | |||
Weighted-average shares outstanding: | ||||
Basic (shares) | 97,791,658 | |||
Diluted (shares) | 97,792,000 | |||
Predecessor | ||||
Net revenue | $ 615,588 | $ 620,815 | $ 554,695 | |
Cost of goods sold | 346,864 | 355,963 | 320,763 | |
Special employee incentive compensation | 2,195 | 2,649 | 0 | |
Gross profit | 266,529 | 262,203 | 233,932 | |
Operating costs and expenses: | ||||
Advertising and marketing | 30,626 | 31,967 | 32,197 | |
Selling expense | 25,730 | 29,484 | 25,664 | |
General and administrative | 38,391 | 31,531 | 33,122 | |
Special employee incentive compensation | 2,503 | 1,274 | 0 | |
Amortization of customer relationships | 1,185 | 851 | 623 | |
Impairment of property and equipment | 7,300 | 2,700 | 13,241 | |
Loss on sale/abandonment of property and equipment and bakery shutdown costs | 2,551 | 4,182 | 5,150 | |
Business combination transaction costs | 31,832 | 0 | 0 | |
Related party expenses | 3,539 | 4,306 | 4,468 | |
Total operating costs and expenses | 143,657 | 106,295 | 114,465 | |
Operating income (loss) | 122,872 | 155,908 | 119,467 | |
Other (income) expense: | ||||
Interest expense, net | 60,384 | 50,011 | 37,447 | |
(Gain) loss on debt extinguishment | 0 | 25,880 | 0 | |
Other expense (income) | 1,624 | (8,743) | 556 | |
Total other expense | 62,008 | 67,148 | 38,003 | |
Income (loss) before income taxes | 60,864 | 88,760 | 81,464 | |
Income tax expense (benefit) | 439 | 0 | 0 | |
Net income (loss) | 60,425 | 88,760 | 81,464 | |
Less: Net income (loss) attributable to the non-controlling interest | 3,214 | 4,507 | 4,267 | |
Net income (loss) attributable to Class A shareholders | $ 57,211 | $ 84,253 | $ 77,197 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) $ in Thousands | Total | Common Class A | Common Class B | Common StockCommon Class A | Common StockCommon Class B | Common StockCommon Class C | Additional Paid-in Capital | Accumulated losses | Total Partners'/Stockholders’ Equity (Deficit) | Noncontrolling Interest |
Balance at beginning of period (Predecessor) at Dec. 31, 2013 | $ 135,365 | $ 38,173 | $ 173,538 | $ 0 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Distributions to partners | Predecessor | (3,880) | (2,138) | (6,018) | |||||||
Unit based compensation | Predecessor | 290 | 82 | 372 | |||||||
Net income (loss) | Predecessor | $ 81,464 | 60,214 | 16,983 | 77,197 | 4,267 | |||||
Balance at end of period (Predecessor) at Dec. 31, 2014 | 191,989 | 53,100 | 245,089 | 4,267 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Distributions to partners | Predecessor | (533,030) | (419,823) | (952,853) | (46,765) | ||||||
Unit based compensation | Predecessor | 948 | 433 | 1,381 | |||||||
Net income (loss) | Predecessor | 88,760 | 64,009 | 20,244 | 84,253 | 4,507 | |||||
Balance at end of period (Predecessor) at Dec. 31, 2015 | (276,084) | (346,046) | (622,130) | (37,991) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Distributions to partners | Predecessor | (9,817) | (13,765) | (23,582) | (1,027) | ||||||
Unit based compensation | Predecessor | 1,945 | 1,945 | 3,890 | |||||||
Net income (loss) | Predecessor | 60,425 | 28,605 | 28,606 | 57,211 | 3,214 | |||||
Balance at end of period (Predecessor) at Nov. 03, 2016 | $ (255,351) | $ (329,260) | (584,611) | (35,804) | ||||||
Balance at end of period (shares) (Successor) at Nov. 03, 2016 | 97,589,217 | 29,870,688 | ||||||||
Balance at end of period (Successor) at Nov. 03, 2016 | $ 10 | $ 3 | $ 901,157 | $ (11,214) | 889,956 | 326,601 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Net income (loss) | Successor | $ (8,485) | (4,404) | (4,404) | (4,081) | ||||||
Share‑based compensation (shares) | Successor | 2,496,000 | |||||||||
Share‑based compensation, net income taxes of $3,140 | Successor | 5,718 | 5,718 | 17,889 | |||||||
Exchanges (shares) | Successor | 661,700 | 661,700 | (661,700) | |||||||
Exchanges | Successor | 6,217 | 6,217 | (6,217) | |||||||
Tax receivable agreement arising from exchanges, net of income taxes of $420 | Successor | (268) | (268) | ||||||||
Balance at end of period (shares) (Successor) at Dec. 31, 2016 | 98,250,917 | 31,704,988 | 98,250,917 | 31,704,988 | ||||||
Balance at end of period (shares) at Dec. 31, 2016 | 98,250,917 | 31,704,988 | ||||||||
Balance at end of period (Successor) at Dec. 31, 2016 | $ 10 | $ 3 | $ 912,824 | $ (15,618) | $ 897,219 | $ 334,192 |
Consolidated Statements of Sto6
Consolidated Statements of Stockholders' Equity (Deficit) (Parenthetical) - Successor $ in Thousands | 2 Months Ended |
Dec. 31, 2016USD ($) | |
Share-based compensation, taxes | $ 3,140 |
Tax receivable agreement, taxes | $ 420 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Operating activities | ||||
Net income (loss) | $ (8,485) | |||
Depreciation and amortization | 5,843 | |||
Impairment of property and equipment | 0 | |||
Non-cash interest expense-debt discount (premium) amortization | (197) | |||
Non-cash loss (gain) on extinguishment of debt | (3,974) | |||
Stock-based compensation | 26,748 | |||
Loss on sale/abandonment of property and equipment | 0 | |||
Change in operating assets and liabilities | ||||
Accounts receivable | 3,705 | |||
Inventories | 8,895 | |||
Prepaids and other current assets | (1,694) | |||
Accounts payable and accrued expenses | (11,296) | |||
Deferred taxes | (7,815) | |||
Customer trade allowances | 2,225 | |||
Other | (344) | |||
Net cash provided by operating activities | 13,611 | |||
Investing activities | ||||
Purchases of property and equipment | (6,494) | |||
Acquisition of business, net of cash | (421,242) | |||
Proceeds from sale of assets | 0 | |||
Purchases of marketable securities | 0 | |||
Proceeds from sale of marketable securities | 0 | |||
Restricted cash release | 0 | |||
Acquisition and development of software assets | (460) | |||
Net cash provided by (used in) investing activities | (428,196) | |||
Financing activities | ||||
Repayments of long-term debt and capital lease obligation | (217,400) | |||
Proceeds from issuance of long-term debt | 0 | |||
Payment of deferred underwriting costs | (13,125) | |||
Debt fees | (1,820) | |||
Distributions to partners | 0 | |||
Distributions to non-controlling interest | 0 | |||
Net cash used in financing activities | (232,345) | |||
Net increase (decrease) in cash and cash equivalents | (646,930) | |||
Cash and cash equivalents at beginning of period | 673,785 | |||
Cash and cash equivalents at end of period | 26,855 | $ 673,785 | ||
Cash paid during the period for: | ||||
Interest | 0 | |||
Taxes paid | 43 | |||
Supplemental disclosure of non-cash investing: | ||||
Purchases of property and equipment funded by accounts payable | 673 | |||
Predecessor | ||||
Operating activities | ||||
Net income (loss) | 60,425 | $ 88,760 | $ 81,464 | |
Depreciation and amortization | 10,265 | 9,836 | 7,113 | |
Impairment of property and equipment | 7,300 | 2,700 | 13,241 | |
Non-cash interest expense-debt discount (premium) amortization | 2,790 | 3,423 | 3,583 | |
Non-cash loss (gain) on extinguishment of debt | 0 | 16,005 | 0 | |
Stock-based compensation | 3,890 | 1,381 | 372 | |
Loss on sale/abandonment of property and equipment | 2,551 | 3,001 | 835 | |
Change in operating assets and liabilities | ||||
Accounts receivable | (19,869) | (1,077) | (8,630) | |
Inventories | (2,994) | (5,611) | (1,468) | |
Prepaids and other current assets | (1,049) | (441) | (344) | |
Accounts payable and accrued expenses | 33,886 | 10,480 | 4,755 | |
Deferred taxes | 0 | 0 | 0 | |
Customer trade allowances | 4,828 | 4,364 | 7,266 | |
Other | 198 | 151 | 142 | |
Net cash provided by operating activities | 102,221 | 132,972 | 108,329 | |
Investing activities | ||||
Purchases of property and equipment | (28,633) | (25,082) | (51,073) | |
Acquisition of business, net of cash | (49,735) | 0 | 0 | |
Proceeds from sale of assets | 4,000 | 425 | 5,805 | |
Purchases of marketable securities | 0 | 0 | (42,470) | |
Proceeds from sale of marketable securities | 0 | 42,960 | 0 | |
Restricted cash release | 0 | 1,762 | 0 | |
Acquisition and development of software assets | (2,211) | (2,185) | (3,655) | |
Net cash provided by (used in) investing activities | (76,579) | 17,880 | (91,393) | |
Financing activities | ||||
Repayments of long-term debt and capital lease obligation | (6,987) | (498,565) | (3,751) | |
Proceeds from issuance of long-term debt | 0 | 1,225,000 | 0 | |
Payment of deferred underwriting costs | 0 | 0 | 0 | |
Debt fees | 0 | (22,819) | 0 | |
Distributions to partners | (23,582) | (952,853) | (6,018) | |
Distributions to non-controlling interest | (1,027) | (46,765) | 0 | |
Net cash used in financing activities | (31,596) | (296,002) | (9,769) | |
Net increase (decrease) in cash and cash equivalents | (5,954) | (145,150) | 7,167 | |
Cash and cash equivalents at beginning of period | $ 58,519 | 64,473 | 209,623 | 202,456 |
Cash and cash equivalents at end of period | 58,519 | 64,473 | 209,623 | |
Cash paid during the period for: | ||||
Interest | 68,606 | 34,710 | 34,154 | |
Taxes paid | 0 | 0 | 0 | |
Supplemental disclosure of non-cash investing: | ||||
Purchases of property and equipment funded by accounts payable | $ 633 | $ (15) | $ 1,724 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation On November 4, 2016 (the “Closing Date”), Hostess Brands, Inc. (f/k/a Gores Holdings, Inc.), referred to below as the “Company”, consummated a business combination (the “Business Combination”) pursuant to the certain Master Transaction Agreement (the “Master Transaction Agreement”), by and among Gores Holdings, Inc., a Delaware corporation (“Gores Holdings”), Homer Merger Sub, Inc., a Delaware corporation which was a wholly-owned subsidiary of Gores Holdings at the time of the mergers described below (“Company Merger Sub”), AP Hostess Holdings, L.P., a Delaware limited partnership (“AP Hostess LP”) affiliated with Apollo Global Management, LLC, a Delaware limited liability company (“Apollo”), Hostess CDM Co-Invest, LLC, a Delaware limited liability company (“Hostess CDM Co-Invest”) controlled by Mr. C. Dean Metropoulos (“Mr. Metropoulos”), CDM Hostess Class C, LLC, a Delaware limited liability company (“CDM Hostess”) controlled by Mr. Metropoulos, and AP Hostess LP, in its capacity as the sellers’ representative thereunder, which provided for: (i) the mergers of: (A) Hostess Management, LLC, a Delaware limited liability company (“Hostess Management”), owned, directly or indirectly, by certain of the Legacy Hostess Equityholders (as defined below) and certain members of Hostess’ management, with and into Hostess Holdings, L.P., a Delaware limited partnership owned, directly or indirectly, by certain of the Legacy Hostess Equityholders (“Hostess Holdings”), with Hostess Holdings continuing as the surviving entity; (B) Company Merger Sub with and into AP Hostess Holdings, Inc., a Delaware corporation (“AP Hostess Holdings”) and wholly-owned subsidiary of AP Hostess LP, with AP Hostess Holdings continuing as the surviving entity; and (C) immediately thereafter, the merger of AP Hostess Holdings with and into Gores Holdings, with Gores Holdings continuing as the surviving entity; and (ii) the purchase by Gores Holdings of certain of the limited partnership interests in Hostess Holdings held by certain of the Legacy Hostess Equityholders as well as all ownership interests in Hostess Holdings GP, LLC (“Hostess GP”). In connection with the closing of the Business Combination, Gores Holdings, Inc. changed its name to “Hostess brands, Inc.” and its trading symbol on the NASDAQ from “GRSH,”“GRSHU” and “GRSHW,” to “TWNK” and “TWNKW”. Unless the context otherwise requires, “we”, “us”, "our”, and the “Company”, refer, for periods prior to the completion of the Business Combination, to Hostess Holdings and its subsidiaries and, for periods after the completion of the Business Combination, to Hostess Brands, Inc. and its subsidiaries, including Hostess Holdings and its subsidiaries. “Apollo Funds” refer to the funds managed by affiliates of Apollo Global Management, LLC that continue to hold an equity stake in the Company, and “Metropoulos Entities” refer to Mr. Metropoulos and entities controlled by him that continue to hold an equity stake in the Company. “Legacy Hostess Equityholders” refer to the Apollo Funds and Metropoulos Entities, collectively. Subsequent to the Business Combination, the Legacy Hostess Equityholders held a portion of the Company's common stock. In addition, the Metropoulos Entities retained a significant interest in Hostess Holdings. Our “Sponsor” refers to Gores Sponsor, LLC, a Delaware limited liability company and our principal stockholder prior to the Business Combination, and the “The Gores Group” refers to The Gores Group LLC, an affiliate of our Sponsor. As a result of the Business Combination, for accounting purposes, the Company is the acquirer and Hostess Holdings is the acquiree and accounting predecessor. The financial statement presentation includes the financial statements of Hostess Holdings as “Predecessor” for periods prior to the Closing Date and of the Company for periods after the Closing Date, including the consolidation of Hostess Holdings. Under the terms of its limited partnership agreement, all voting rights for Hostess Holdings are held by Hostess GP and are separate from the economic interests held by the Company and certain Legacy Hostess Equityholders. This separation of voting rights and economic interests causes Hostess Holdings to be considered a variable interest entity (a “VIE”). As the Company owns all of the interests in Hostess GP, as well as a majority of the common units of Hostess Holdings, it has both the power to direct all the activities of Hostess Holdings, and substantial economic risks and rewards from Hostess Holdings performance. As such, the Company is considered to be the primary beneficiary of Hostess Holdings, and consolidates it. Descr i ption of Business The Company is a Delaware corporation headquartered in Kansas City, Missouri. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries (collectively, the “Company”). The Company is one of the largest packaged food companies focused on developing, manufacturing, marketing, selling and distributing fresh sweet baked goods in the United States. The Hostess brand dates to 1919 when the Hostess CupCake was introduced to the public, followed by Twinkies in 1930. In 2013, the Legacy Hostess Equityholders acquired the Hostess brand out of the bankruptcy liquidation proceedings of its prior owners, free and clear of all past liabilities. After a brief hiatus in production, the Company began providing Hostess products to consumers and retailers across the nation in July 2013. By combining Hostess’ beloved brands’ established reputation with an innovative business model, the Company rapidly recaptured market share. Hostess, America’s Original Snack Cake, has been an iconic American brand for generations. Today, the Company produces a variety of new and classic treats under the Hostess® and Dolly Madison® group of brands, including Twinkies®, CupCakes, Ding Dongs®, HoHos®, Donettes® and Fruit Pies. Gores Holdings was originally incorporated in Delaware on June 1, 2015 as a special purpose acquisition company (SPAC), formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On May 10, 2016, the Predecessor purchased the stock of Superior Cake Products, Inc. (“Superior”) located in Southbridge, Massachusetts. Superior manufactures and distributes eclairs, madeleines, brownies, and iced cookies sold in the “In-Store Bakery” section of grocery and club retailers. In the Consolidated Statements of Operations, amortization of customer relationships (previously within general and administrative) have been presented separately from general and administrative in the current year presentation, with conforming reclassifications made for the prior period presentation. In the Consolidated Balance Sheets, customer trade allowances (previously netted as an allowance against trade accounts receivable) are presented in current liabilities, with conforming reclassifications made for the prior period presentation. The Business Combination was accounted for as a business combination under the scope of the Financial Accounting Standards Board’s Accounting Standards Codification 805, Business Combinations, or ASC 805. In addition, pursuant to ASC 810, Consolidations, or ASC 810, the Company has determined that Hostess Holdings, a limited partnership, is a VIE. The Company determined there are neither any applicable scope exceptions from the consolidation guidance under ASC 810 nor any VIE scope exceptions in ASC 810 applicable to Hostess Holdings. Furthermore, it was determined that the Company is the primary beneficiary of the VIE and, therefore, the accounting acquirer under ASC 805. The Company determined that, through Hostess GP, it has the power to direct all of the activities of Hostess Holdings, with no substantive kick-out rights or participating rights by the limited partners individually or as a group. Hostess Holdings constitutes the majority of the assets of the Company. The acquisition of Hostess Holdings constitutes the acquisition of a business for purposes of ASC 805, and due to the change in control, has been accounted for using the acquisition method. Under the acquisition method, the acquisition-date fair value of the gross consideration paid by the Company to effect the Business Combination is allocated to the assets acquired and the liabilities assumed based on their estimated fair values including Hostess GP’s variable interest in Hostess Holdings. The Company has two reportable segments: Sweet Baked Goods and Other. Principles of Consolidation The consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as either Hostess or the Company. All intercompany balances and transactions have been eliminated in consolidation. For the Successor period from November 4, 2016 through December 31, 2016, Hostess Brands, Inc. consolidated the financial position and results of operations of Hostess Holdings. Mr. Metropoulos and the Metropoulos Entities hold their equity investment in us primarily through Class B limited partnership units in the Company’s subsidiary, Hostess Holdings (“Class B Units”) and an equal number of shares of the Company’s Class B common stock (“Class B Stock”). Our Class B Stock has voting, but no economic, rights, while Hostess Holdings’ Class B Units have economic, but no voting, rights. Each Class B Unit, together with a share of Class B Stock held by the Metropoulos Entities, is exchangeable for a share of the Company’s Class A common stock (or at the option of the Company, the cash equivalent thereof). The Company holds 100% of the general partnership interest in Hostess Holdings and a majority of the limited partnership interests, and consolidates Hostess Holdings in the Company’s Consolidated Financial Statements. The interest of the Metropoulos Entities in Hostess Holdings’ Class B Units is reflected in our Consolidated Financial Statements as a noncontrolling interest. The noncontrolling interest was recorded at fair value at November 4, 2016 as a result of the Business Combination. For the Predecessor periods, Hostess Holdings consolidated the financial position and results of operations of New Hostess Holdco LLC. The portion of the New Hostess Holdco, LLC not owned by Hostess Holdings was recognized as a noncontrolling interest in the Consolidated Financial Statements. The non-controlling interest presented in the accompanying consolidated balance sheet represents the amount of cash that would be payable to the non-controlling interest holders if the Company were liquidated at book value as of the balance sheet date. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, is the share of the earnings or losses allocated to non-controlling interest for the period. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements for the reported amounts of revenues and expenses during the reporting period. Management utilizes estimates, including, but not limited to, valuation and useful lives of tangible and intangible assets, shipments in-transit, reserves for trade and promotional allowances, insurance recoveries and other costs related to the voluntary product recall, workers’ compensation and self-insured medical claims. Actual results could differ from these estimates. Certain prior year amounts have been reclassified to conform with current year presentation. Management Profits Interest Plan (Predecessor) The Predecessor established a profits interest plan under the 2013 Hostess Management, LLC Equity Incentive Plan (“Plan”) to allow members of the management team to participate in the success of the Predecessor. This Plan consisted of an approximate 9% ownership interest in Hostess Management. Hostess Management had three classes of units and required certain returns to ranking classes before other classes participated in subsequent returns of the Predecessor. Hostess Management was authorized to issue class A units to Hostess Holdings members, class B units to management, and 916,096 class C units to Mr. Metropoulos. In March 2016, as a result of the second amendment to the Hostess Management, LLC Agreement, the number of units authorized for grant increased for each of the class A and B units from 1,282,534 to 1,652,759 units and therefore, Hostess Management’s ownership interest in the Predecessor increased from 7% to 9% in exchange for the issuance of 370,225 class A units to Hostess Holdings members. On March 18, 2016, class B units, in the amount of 593,630 , were granted to certain members of management. The units vest at a rate of one-fifth at approximately the end of each year, or at the management member’s anniversary employment date, over 5 years , provided the participant remained employed with the Predecessor. The unit value of $4.25 per share was used to estimate the fair value of the class B units and was based upon a contemporaneous valuation reflecting market conditions on March 18, 2016. The total estimated grant date fair value was $2.5 million . The Predecessor recognized unit-based compensation expense of $1.4 million and $0.4 million during the years ended December 31, 2015, and 2014, respectively, within general and administrative and $3.9 million of expense was recognized from January 1, 2016 through November 3, 2016 (Predecessor), within general and administrative including $3.2 million of expense due to a grant agreement provision which caused the accelerated vesting of units granted prior to January 1, 2016 upon consummation of the Business Combination and the accelerated vesting of units granted in 2016 based on the approval of the board of directors. This provision was triggered by the consummation of the Business Combination. All units were redeemed and the Plan was terminated on November 4, 2016. As of December 31, 2016, there were no outstanding units. The following table represents the non-vested class B unit activity for the period ended November 3, 2016: (Predecessor) Units Weighted Beginning balance at January 1, 2016 368,332 $ 2.87 Granted 593,630 4.25 Vested (50,845 ) 1.61 Forfeited — — Redeemed (911,117 ) (3.84 ) Nonvested at November 3, 2016 — $ — During the year ended December 31, 2015, distributions were available to class B and class C unit holders in excess of the units’ vested balances. These distributions were held by Hostess Management within restricted cash and were paid to the unit holders when they vested under the terms of each holder’s respective agreement. At December 31, 2015, $21.9 million of deferred partner distributions were due to class B and class C unit holders, of which $4.7 million was current, and $17.2 million was long-term. All deferred partner distributions were paid on November 4, 2016 from restricted cash concurrent with the Business Combination. The funding of the restricted cash is included within distributions to non-controlling interest in the Consolidated Statements of Cash Flows as a financing activity. Employee Benefit Plans The Company provides several benefit plans for employees depending upon employee eligibility. The Company has a health care plan, a defined contribution retirement plan (401(k)), company-sponsored life insurance, and other benefit plans. The health care plan, available to all full-time employees, is self-insured by the Company. Amounts contributed to the health care plan by the Company, totaled approximately $6.3 million for the Predecessor period from January 1, 2016 through November 3, 2016 and $1.0 million for the Successor period from November 4, 2016 through December 31, 2016. Comparatively, for the years ended December 31, 2015, and 2014, the Company contributed $5.8 million and $5.4 million , respectively. The Company offers an annual incentive plan based upon operating targets. Final payout is approved by the board of directors. The Company has accrued $5.9 million and $1.5 million at December 31, 2016 (Successor) and December 31, 2015 (Predecessor), respectively. The Company has also instituted a long-term incentive plan for certain director-level employees, payment under which is contingent on changes in certain ownership levels. Amounts paid in the year ended December 31, 2015 and the Predecessor period from January 1, 2016 through November 3, 2016 are reported as special employee incentive compensation in the Consolidated Statement of Operations. The total that could be payable due to any future qualifying changes in ownership levels under the plan is $2.6 million as of December 31, 2016. In accordance with U.S. GAAP, the Company does not carry an accrual for the long-term incentive plan. Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid investments purchased with original maturities of three months or less when purchased as cash equivalents and are recorded at cost. Under the Company’s cash management system, checks that have been issued and are out of the control of the Company, but which have not cleared the bank by the balance sheet date, are reported as a reduction of cash. Accounts Receivable Accounts receivable represents amounts invoiced to customers for goods that have been received by the customer. As of December 31, 2016 and December 31, 2015, the Company’s accounts receivable was $89.2 million and $68.5 million , respectively, which have been reduced by a reserve to cover allowances for damages occurring during shipment, quality claims and doubtful accounts in the amount of $1.9 million and $2.0 million , respectively. In addition, there are customer trade allowances of $36.7 million and $29.6 million at December 31, 2016 and December 31, 2015 in current liabilities in the Consolidated Balance Sheets. Inventories Inventories are stated at the lower of cost or market on a first-in first-out basis. The Company estimates its costs for ingredients, packaging, direct labor and overhead prior to the beginning of each period for the Company’s expected production costs for its various products. Abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) are expensed in the period they are incurred. The components of inventories are as follows : (In thousands) December 31, December 31, 2015 (Successor) (Predecessor) Ingredients and packaging $ 12,712 $ 12,353 Finished goods 14,229 10,054 Inventory in transit to customers 3,503 2,723 $ 30,444 $ 25,130 Property and Equipment At the acquisition date, a third party valuation specialist conducted analyses in order to assist our management in determining the fair values of the acquired assets and liabilities assumed during the Business Combination. The property and equipment acquired in the transaction were assigned useful lives for purposes of depreciation that the Company believes to be the useful life of such assets. Additions to property and equipment are recorded at cost and depreciated straight line over estimated useful lives of 10 to 50 years for buildings and land improvements and 3 to 20 years for machinery and equipment. In order to maximize the efficiency of the Company’s operations and to operate the acquired equipment, occasionally the Company will remove and relocate equipment between bakeries. Such removal and relocation costs are expensed as incurred. Reinstallation costs are capitalized if the useful life is extended or the equipment is significantly improved. Otherwise, reinstallation costs are expensed as incurred. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the balance sheet and any resulting gain or loss is recognized in the Consolidated Statements of Operations. From January 1 through November 3, 2016, the Predecessor closed multiple production lines at the Indianapolis, Indiana bakery and transitioned production to other facilities. The Predecessor recorded an impairment loss of $7.3 million , related to equipment that the Company had idled, or which otherwise qualified for impairment. The measurement of this loss was considered to be based on Level 3 inputs within the fair value measurement hierarchy as defined in the accounting guidance. Level 3 fair values were determined using management’s best estimate of fair value for assets that were idled and written-down to salvage value. Assets that the Predecessor no longer intended to use were retired. Gains and losses on the disposal of assets are recorded as the difference between the net proceeds received and net carrying values of the assets disposed and are presented within loss on sale/abandonment of property and equipment and bakery shutdown costs in the Consolidated Statements of Operations. Software Costs Costs associated with computer software projects during the preliminary project stage are expensed as incurred. Once management authorizes and commits to funding a project, appropriate application development stage costs are capitalized. Capitalization ceases when the project is substantially complete and the software is ready for its intended use. Upgrades and enhancements to capitalized software are capitalized when such enhancements are determined to provide additional functionality. Training and maintenance costs associated with software applications are expensed as incurred. Included in the caption “Other assets” in the Consolidated Balance Sheets is capitalized software in the amount of approximately $7.4 million and $6.5 million at December 31, 2016 and December 31, 2015, respectively. Capitalized software costs are amortized over their estimated useful life of five years commencing when such assets are ready for their intended use. Software amortization expense included in general and administrative was $1.5 million from January 1, 2016 through November 3, 2016 (Predecessor) and $0.3 million for November 4, 2016 through December 31, 2016 (Successor), $1.4 million (Predecessor), for the year ended December 31, 2015 and $1.0 million for the year ended December 31, 2014. Bakery Shutdown Costs Bakery shutdown costs are considered to be non-recurring activities an entity undertakes when it closes a facility, or terminates a significant process related to operations. On October 17, 2014, the Predecessor closed its Schiller Park, Illinois bakery and completed the sale of the bakery in May 2016. For the period January 1, 2016 through November 3, 2016, the Company incurred $0.3 million (Predecessor) in bakery shutdown costs associated with utilities, insurance, maintenance, and taxes related to the assets that were held for sale. For the year ended December 31, 2015, the Company incurred $1.2 million in bakery shutdown costs associated with the closure and relocation of assets, and assets held for sale were fair valued and included in other assets. Fair Value Measurements The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the best extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: • Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date • Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability • Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date Fair Value of Financial Instruments Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company estimates that the carrying amount of its financial instruments reasonably approximates fair value. At December 31, 2016 and December 31, 2015, the approximate fair value of the Company’s debt was $1.0 billion and $1.2 billion , respectively. The fair value is calculated using current interest rates and pricing from financial institutions (Level 2 inputs). Goodwill and Intangible Assets At December 31, 2016, the goodwill balance of $588.5 million represents the excess of the amount the Successor paid for the Business Combination over the fair value of the assets acquired and liabilities assumed. Goodwill that resulted from the Business Combination was allocated to the Sweet Baked Goods segment and the Other segment. At December 31, 2015 the goodwill balance of $57.0 million represents the excess of the amount the Predecessor paid for the business over fair value of the assets acquired, resulting from the formation of the Predecessor in 2013. Goodwill that resulted from the 2013 acquisition was allocated to the Sweet Baked Goods segment. The Company’s indefinite-lived intangible assets consist of trademarks and trade names. The $1.4 billion balance at December 31, 2016 was recognized as part of the Business Combination. The $0.3 billion balance at December 31, 2015 resulted from the formation of the Predecessor in 2013. The trademarks and trade names are integral to the Company’s identity and are expected to contribute indefinitely to its corporate cash flows. Fair value for trademarks was determined using the income approach, which is considered to be Level 3 within the fair value hierarchy. The application of the income approach was premised on a royalty savings method, whereby the trademark is valued by reference to the amount of royalty income it could generate if it was licensed, in an arm’s‑length transaction, to a third-party. These assets have been assigned an indefinite life and therefore are not amortized but rather evaluated for impairment annually. Also, the Company has definite-lived intangible assets that consist of customer relationships. The $538.1 million balance on December 31, 2016 was recognized as part of the Business Combination. The $8.9 million balance at December 31, 2015, resulted from the formation of the Predecessor in 2013. For customer relationships, the application of the income approach was premised on an excess earnings method, whereby the customer relationships are valued by the earnings expected to be generated from those customers after other capital charges. Definite-lived intangible assets are being amortized on a straight‑line basis over the estimated remaining useful lives of the assets. The Company’s policy is to perform an impairment analysis ea ch year as of September 30. Reserves for Self-Insurance Benefits The Company’s employee health plan is self-insured by the Company up to a stop-loss amount of $0.3 million for each participant per plan year. In addition, the Company maintains insurance programs covering its exposure to workers’ compensation. Such programs include the retention of certain levels of risks and costs through high deductibles and other risk retention strategies. Reserves for the Company’s retained exposures are estimated for reported but unpaid losses, as well as incurred but not reported losses, and are calculated based upon actuarially determined loss development factors, expected long-term medical cost trend rates, future administrative costs, and other assumptions considered by management, including assumptions provided by external insurance brokers, consultants, and actuaries. The factors and assumptions used for estimating reserves are subject to change based upon experience, changes in expected cost and inflation trends, discount rates, and other factors. Adjustments to previously established reserves are included in operating results in the period of adjustment. Included in the accrued expenses in the Consolidated Balance Sheets is a reserve for healthcare claims in the amount of approximately $1.7 million and $1.6 million at December 31, 2016 and December 31, 2015, respectively, and a reserve for workers’ compensation claims of $1.3 million and $1.4 million at December 31, 2016 and December 31, 2015, respectively. Revenue Recognition The Company invoices at the time of shipment of its product, but only recognizes revenue upon delivery to retail customers and distributors as the Company arranges freight and is generally responsible, along with the Company’s common carriers, for any damage that occurs during transportation. The Company allows retail customers and distributors to return product that is damaged or defective at the time of delivery. A provision for payment discounts and product return allowances, which is estimated based upon the Company’s historical performance, management’s experience and current economic trends, is recorded as a reduction of sales in the same period that the revenue is recognized. The Company’s products are sold on credit terms established in accordance with industry practice, which typically requires payment within 30 days of invoice date. Trade promotions, consisting primarily of customer pricing allowances and merchandising funds, and consumer coupons are offered through various programs to customers and consumers. Sales are recorded net of estimated trade promotion spending, which is recognized as incurred at the time of sale. The Company participates in a number of promotional activities including, but not limited to, offering rebates for achieving various performance levels, offering incentives for product placement locations in retail stores, offering pricing discounts for those customers electing to provide their own transportation for shipment of product and offering subsidies for advertising placed by customers. In lieu of accepting returns, the Company offers an allowance for anticipated expired and damaged products to certain customers. The ultimate cost of these programs depends on retailer performance and is the subject of significant management estimates. The Company records as expense the estimated ultimate cost of the program in the period during which the program occurs. In accordance with the authoritative guidance for revenue recognition, the cost of these programs is classified in the Consolidated Statements of Operations as a reduction of net sales. Also, in accordance with the guidance, coupon redemption costs are also recognized as reductions of net revenues when issued. The Company has one customer that accounted for 10% or more of the Company’s net revenues. The weighted percent of net revenues for this customer is presented below by segment: (% of Net Revenues) From November 4, 2016 From Year Ended Year Ended Year Ended (Successor) (Predecessor) (Predecessor) (Predecessor) Sweet Baked Goods 19.3 % 20.2 % 21.0 % 24.0 % Other 0.7 % 1.4 % — — Total 20.0 % 21.6 % 21.0 % 24.0 % Cost of Goods Sold Cost of goods sold consists of ingredients, packaging, labor, energy, other production costs and warehousing and transportation costs for the distribution of product to customers. The cost of ingredients and packaging represent the majority of the Company’s total costs of products sold. All costs that are incurred at the bakeries are included in cost of goods sold. The Company does not allocate any corporate functions into cost of goods sold. Advertising and Marketing Costs Advertising and marketing costs, through both national and regional media, are expensed i |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations On July 5, 2016, Gores Holdings, Company Merger Sub, the Legacy Hostess Equityholders, and AP Hostess LP, in its capacity as the sellers’ representative, entered into the Master Transaction, which provides for, among other things, (i) the mergers of: (A) Hostess Management, with and into Hostess Holdings, with Hostess Holdings, continuing as the surviving entity; (B) Company Merger Sub with and into AP Hostess Holdings, with AP Hostess Holdings continuing as the surviving entity; and (C) immediately thereafter, AP Hostess Holdings with and into the Company, with the Company continuing as the surviving entity; and (ii) the purchase by the Company of certain of the limited partnership interests in Hostess Holdings held by certain of the Selling Legacy Hostess Equityholders. The Business Combination was consummated on November 4, 2016 (the Closing Date). The following summarizes the estimated fair value of the Business Combination: (amounts in thousands) Cash paid $ 479,761 Equity consideration paid to Selling Equityholders (1) 239,323 Tax receivable arrangement payable to Selling Equityholders (2) 164,697 Total consideration $ 883,781 Hostess Holdings debt assumed by Gores Holdings, Inc 1,228,254 Noncontrolling interest (3) 326,601 Estimated fair value of the Business Combination $ 2,438,636 (1) Equity consideration paid to the Legacy Hostess Equityholders is summarized below: (In thousands, except share data) Class A common shares of the Company subject to six month sales restriction 22,098 Fair value per share $ 10.83 239,323 (2) The Tax Receivable Arrangement generally provides for the payment by the Company to the Legacy Hostess Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination (which periods may extend, unless the Tax Receivable Agreement is terminated early in accordance with its terms, for more than 15 years following any exchange of Class B Units of Hostess Holdings for shares of the Company’s Class A common stock or the cash equivalent thereof) as a result of (i) certain increases in tax basis resulting from the Business Combination; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the Business Combination; (iii) certain increases in tax basis resulting from exchanges of Class B Units; (iv) imputed interest deemed to be paid by the Company as a result of payments it makes under the Tax Receivable Agreement; and (v) certain increases in tax basis resulting from payments the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash savings. Certain payments under the Tax Receivable Agreement will be made to Legacy Hostess Equityholders in accordance with specified percentages, regardless of the source of the applicable tax attribute. (3) Noncontrolling interest represents the class B units in Hostess Holdings, LP not owned by the Company. (in thousands except share data) Class B units of Hostess Holdings, LP subject to six month sales restriction 24,424 Fair value per unit $ 10.83 264,515 (in thousands except share data) Class B units of Hostess Holdings, LP not subject to sales restrictions 5,446 Fair value per unit $ 11.40 62,086 The fair value of these units was determined as follows: Per share price based on average market price on the day of the Business Combination $ 11.40 Discount for lack of marketability 5.0 % $ 10.83 The 5% discount for lack of marketability was determined by using an option pricing method (Finnerty Protective Put Model) to reflect a six month sales restriction. The Company recorded a preliminary allocation of the purchase price to Predecessor’s tangible and identified intangible assets acquired and liabilities assumed, excluding long-term debt, based on their fair values as of the closing date. The preliminary purchase price allocation is as follows (in thousands): Cash $ 58,519 Accounts receivable 58,474 Inventories 39,338 Prepaids and other assets 2,998 Property and equipment 155,076 Accounts payable and accrued expenses (56,197 ) Deferred tax liabilities (358,891 ) Trade name and trademarks (1) 1,408,848 Customer relationships (2) 542,011 Goodwill 588,460 Total assets acquired and liabilities assumed $ 2,438,636 (1) The trade names were valued through application of the income approach, involving the estimation of likely future sales and an appropriate royalty rate. The trade name and trademarks are preliminarily estimated to have indefinite useful lives as the Company expects a market participant would use the trade name and trademarks in perpetuity based on their historical strength and consumer recognition. (2) Customer relationships were valued through application of the income approach. Under this approach, revenue, operating expenses and other costs associated with existing customers were estimated in order to derive cash flows attributable to the existing customer relationships. The resulting cash flows were then discounted to present value to arrive at the fair value of existing customer relationships as of the valuation date. The preliminarily estimated useful lives by operating segment ranging from 18 to 23 years represent the approximate point in the projection period in which a majority of the assets’ cash flows are expected to be realized based on assumed attrition rates. The preliminary allocation of the purchase price is based on preliminary valuations performed to determine the fair value of the net assets as of the Closing Date. This allocation is subject to revision as the assessment is based on preliminary information subject to refinement. From January 1, 2016 through November 3, 2016 (the Predecessor) approximately $31.3 million of expenses were incurred directly related to the Business Combination. From January 1, 2016 through the date of its last filing for the nine month period ending September 30, 2016, Gores Holdings incurred $4.0 million of transaction related expenses. From October 1, 2016 through the Closing Date, Gores Holdings incurred $6.7 million of expenses related to the Business Combination. On the Closing Date, the Company paid $13.1 million of deferred underwriting costs related to Gores Holdings’ initial public offering and repaid a working capital loan of $0.2 million . The following unaudited pro forma combined financial information presents the Company’s results as though the Business Combination had occurred at January 1, 2015. The unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP: Year Ended December 31, 2016 Year Ended December 31, 2015 (In thousands) (pro forma) (pro forma) (unaudited) (unaudited) Net Revenue $ 727,586 $ 620,815 Net Income $ 82,442 $ 44,604 On May 10, 2016, the Predecessor purchased the stock of Superior for $51.1 million , $49.7 million net of cash acquired. The purchase price was subject to working capital and other purchase price adjustments as described in the stock purchase agreement. The Predecessor paid working capital and other purchase price adjustments of $0.1 million during the third quarter of 2016, based on the final closing date working capital amounts, and included this amount as part of the total purchase price. Superior is located in Southbridge, Massachusetts and manufactures eclairs, madeleines, brownies, and iced cookies. The Predecessor acquired Superior to expand its market and product offerings in the ISB section of grocery and club retailers. The In-Store Bakery operation has been included in the Company’s Other reportable segment. The Company expects to realize synergies and cost savings related to this acquisition as a result of purchasing and procurement economies of scale and general and administrative expense savings, particularly with respect to the consolidation of corporate related functions and elimination of redundancies. The acquisition is being treated as a purchase in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. The allocation of purchase price was based on management’s judgment and was a preliminary valuation assessment. Adjustments made during the fourth quarter of 2016 decreased recorded goodwill by approximately $0.4 million and the impact to the Consolidated Statements of Operations was immaterial. The allocation of purchase price is considered final. The following is a summary of the allocation of the purchase price: May 10, 2016 (In thousands) (Predecessor) Cash $ 1,009 Accounts receivable 2,122 Inventories 2,300 Prepaids and other current assets 112 Property and equipment (1) 7,075 Intangible assets (2) 29,370 Goodwill (3) 24,227 Accounts payable (2,920 ) Accrued expenses (552 ) Capital lease obligation (799 ) Deferred tax liability (10,844 ) Total assets acquired and liabilities assumed $ 51,100 (1) Amounts recorded for property and equipment includes land, building, plant machinery and equipment. (2) Amounts recorded for intangible assets includes customer relationships, trade names and trademarks. (3) Amounts recorded for goodwill are generally not expected to be deductible for tax purposes. The fair value measurement of tangible and intangible assets and liabilities was based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows, appraisals, and market comparables. From January 1, 2016 through November 3, 2016, the Predecessor incurred acquisition‑related costs for Superior of approximately $0.6 million . For the period from January 1, 2016 through November 3, 2016 (Predecessor) net revenue and net income for Superior was $19.9 million and $0.7 million , respectively. For the period from November 4, 2016 through December 31, 2016 (Successor), net revenue and net loss for Superior was $6.8 million , and $0.1 million , respectively. The acquisition of Superior was deemed not material to the Company under Item 3-05 of Regulation S-X, and, therefore, separate financial statements are not required because Superior does not meet the definition of a “ significant subsidiary”. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Land and buildings $ 30,275 $ 27,936 Machinery and equipment 112,221 109,800 Construction in progress 12,334 3,249 154,830 140,985 Less accumulated depreciation (1,606 ) (12,907 ) $ 153,224 $ 128,078 Depreciation expense was $1.6 million (Successor) and $7.6 million (Predecessor) for the year ended December 31, 2016, and $7.8 million for the year ended December 31, 2015. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company has two reportable segments: Sweet Baked Goods and Other. The Company’s Sweet Baked Goods segment consists of sweet baked goods that are sold under the Hostess® and Dolly Madison® brands. Other consists of Hostess® branded bread and buns, which we launched in April 2015, frozen retail (which consists of deep-fried Twinkies®, launched in August 2016) and “In-Store Bakery,” or “ISB” (which consists of Superior, which we purchased in May 2016, and manufactures and distributes eclairs, madeleines, brownies, and iced cookies in the ISB section of grocery and club retailers The Company evaluates performance and allocates resources based on net revenue and gross profit. Information regarding the operations of these reportable segments is as follows: (In thousands) From November 4, 2016 From Year Ended December 31, 2015 Year Ended December 31, 2014 (Successor) (Predecessor) (Predecessor) (Predecessor) Net revenue: Sweet Baked Goods $ 101,319 $ 569,086 $ 609,895 $ 554,695 Other 10,679 46,502 10,920 — Net revenue $ 111,998 $ 615,588 $ 620,815 $ 554,695 Depreciation & amortization: Sweet Baked Goods $ 5,245 $ 9,221 $ 9,836 $ 7,113 Other 598 1,044 — — Depreciation & amortization $ 5,843 $ 10,265 $ 9,836 $ 7,113 Gross profit: Sweet Baked Goods $ 36,524 $ 252,432 $ 258,248 $ 233,932 Other 2,190 14,097 3,955 — Gross profit $ 38,714 $ 266,529 $ 262,203 $ 233,932 Capital expenditures (1): Sweet Baked Goods $ 7,544 $ 31,254 $ 27,252 $ 56,452 Other 83 223 — — Capital expenditures $ 7,627 $ 31,477 $ 27,252 $ 56,452 (1) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets. Information regarding total assets by reportable segment is as follows: (In thousands) December 31, December 31, (Successor) (Predecessor) Total segment assets: Sweet Baked Goods $ 2,633,758 $ 641,201 Other 214,134 2,328 Total segment assets $ 2,847,892 $ 643,529 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and intangible assets at December 31, 2016 (Successor) are based on the preliminary purchase price allocation of Hostess, which is based on preliminary valuations performed to determine the fair value of the acquired assets as of the acquisition date. The amount allocated to goodwill and other intangible assets are subject to final adjustment to reflect the final valuations. These final valuations could have a material impact on goodwill and other intangible assets. Activity of goodwill is presented below by reportable segment: (In thousands) Sweet Baked Goods Other Total (Predecessor) Balance as of December 31, 2015 $ 56,992 $ — $ 56,992 Acquisition of Superior — 24,227 24,227 Elimination of Predecessor goodwill (56,992 ) (24,227 ) (81,219 ) Business combination 518,759 69,701 588,460 Balance as of December 31, 2016 (Successor) $ 518,759 $ 69,701 $ 588,460 Intangible assets consist of the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,848 $ 254,681 Intangible assets with definite lives (Customer Relationships) 542,011 10,598 Less accumulated amortization (Customer Relationships) (3,916 ) (1,700 ) Intangible assets, net $ 1,946,943 $ 263,579 The carrying value of trademarks was $1.4 billion and $254.7 million at December 31, 2016 (Successor) and December 31, 2015 (Predecessor), respectively. The change in the carrying value of the trademarks from the prior year is due to fair value adjustments recorded through the purchase price allocation. The net carrying value of customer relationships was $538.1 million and $8.9 million at December 31, 2016 (Successor) and December 31, 2015 (Predecessor), respectively. Amortization expense was $3.9 million (Successor) and $1.2 million (Predecessor) for the periods from November 4, 2016 through December 31, 2016 and from January 1, 2016 through November 3, 2016, respectively, and $0.9 million and $0.6 million (Predecessor) for the years ended December 31, 2015 and 2014, respectively. The unamortized portion of customer relationships will be expensed over their remaining useful life, from 18 to 23 years . The weighted-average amortization periods as of December 31, 2016 (Successor) for customer relationships was 22.5 years. Amortization is estimated as follows (in thousands): 2017 $ 23,977 2018 23,977 2019 23,977 2020 23,977 2021 23,977 2022 and thereafter $ 418,087 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses Included in accrued expenses are the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Payroll, vacation and other compensation $ 11,489 $ 4,521 Self-insurance reserves 1,720 1,643 Accrued interest 4,885 11,730 Taxes, management fees, and other 921 1,330 Workers compensation reserve 1,321 1,364 Deferred revenue and litigation 1,320 574 $ 21,656 $ 21,162 |
Tax Receivable Agreement
Tax Receivable Agreement | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Tax Receivable Agreement | Tax Receivable Agreement The Tax Receivable Agreement entered into by the Company in consideration for the Business Combination is valued based on the future expected payments under the terms of the agreement (see Note 3). Significant inputs used to preliminarily estimate the future expected payments include a tax savings rate of approximately 40% and an imputed interest rate of approximately 8% . As of December 31, 2016 the future expected payments under the Tax Receivable Arrangement are as follows: (In thousands) 2017 $ — 2018 13,838 2019 9,744 2020 9,475 2021 9,236 Thereafter $ 123,091 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt A summary of the carrying value of the debt and the capital lease obligation is as follows (in thousands): (In thousands) December 31, 2016 December 31, (Successor) (Predecessor) First Lien Term Loan (4.0% as of December 31, 2016) Principal $ 998,750 $ 922,688 Unamortized debt premium and issuance costs 5,396 (13,817 ) $ 1,004,146 $ 908,871 Second Lien Term Loan (8.5% as of December 31, 2015) Principal $ — $ 300,000 Unamortized debt premium and issuance costs — (5,954 ) — 294,046 Capital lease obligation (6.8%) 724 $ — Total debt and capital lease obligation 1,004,870 1,202,917 Less: Amounts due within one year (11,496 ) (9,250 ) Long-term portion $ 993,374 $ 1,193,667 First and Second Lien Term Loans A term loan was originated on November 18, 2016 through the Company’s subsidiary, Hostess Brands, LLC (referred to below as the New First Term Loan). It requires quarterly payments of interest at a rate of the greater of the applicable LIBOR or 1.00% per annum (LIBOR Floor) plus an applicable margin of 3.0% per annum and principal at a rate of 0.25% of the aggregate principal balance with the remaining principal amount due upon maturity on August 3, 2022. The New First Lien Term Loan is secured by substantially all of Hostess Brands’ present and future assets. The interest rate charged to the Company on the New First Lien Term Loan during the Successor period was 4.0% per annum. The proceeds from the New First Lien Term Loan paid the remaining balance on the First and Second Lien Term Loans (referred to below as the Former First Lien Term Loan and Former Second Lien Term Loan, respectively) previously incurred by Hostess Brands, LLC of $915.7 million and $83.0 million , respectively, through a non-cash refinancing transaction. The Company expensed prepayment penalties of $3.0 million as part of the deleverage and refinancing, in accordance with the contractual terms of Former First and Second Lien Term loans. Prior to the refinancing, required quarterly payments on the Former First Lien Term included interest at a rate of the greater of the LIBOR Floor plus an applicable margin of 3.50% per annum or the base rate plus an applicable margin of 2.25% or 2.50% per annum, based on the net first lien leverage ratio, and principal at a rate of 0.25% of the aggregate principal amount through August 3, 2022, at which time all remaining principal was due. The interest rate charged to the Company on the Former First Lien Term Loan during the Predecessor period and the first two weeks of the Successor period was 4.5% per annum. Prior to the refinancing, required quarterly payments on the Former Second Lien Term Loan included interest at a rate of the greater of the LIBOR Floor plus an applicable margin of 7.50% per annum or the base rate plus an applicable margin of 6.50% per annum. The interest rate charged to the Company on the Second Lien Term Loan during the Predecessor period and the first two weeks of the Successor period was 8.5% per annum. The aggregate principal amount was due with a balloon payment on the Second Lien Term Loan maturity date of August 3, 2023. In connection with the Business Combination, the Company recognized $8.9 million of premiums on the Former First and Former Second Lien Term Loans and subsequently adjusted the premium to $7.7 million due to the refinancing. Discount costs and deferred financing costs of $0.2 million and $2.0 million were capitalized as part of the refinancing. Lender debt discount costs, premium, and deferred financing costs are presented net of the long-term debt balance on the Consolidated Balance Sheets and will be amortized to interest expense utilizing the effective interest method over the term of the debt. Interest expense from the Former First Lien Term Loan debt fee amortization was $1.83 million (Predecessor) and $.04 million (Successor) for the period ended December 31, 2016. For the Second Lien Term Loan and Revolver (as defined below), the amortization was $0.6 million and $0.3 million respectively (Predecessor). Minimum debt repayments under the New First Lien Term Loan are due as follows: (In thousands) 2017 $ 9,988 2018 9,988 2019 9,988 2020 9,988 2021 9,988 2022 and thereafter $ 948,813 Revolving Credit Facility A Revolving Credit Agreement (the “Revolver”) was entered into on August 3, 2015 and provides for borrowings up to $100.0 million . The Revolver has a stated maturity date of August 3, 2020 and is secured by liens on substantially all of Hostess Brands’ present and future assets, including accounts receivable and inventories, as defined in the Revolver. The Revolver is pari passu, or ranked equally, with the New First Lien Term Loan in regards to secured liens. The Revolver has an annual commitment fee on the unused portion of between 0.375% and 0.50% annually based upon the unused percentage. Interest on borrowings under the Revolver is, at Hostess Brands’ option, either the applicable LIBOR plus a margin of between 2.00% and 2.50% per annum or the base rate plus a margin of 1.00% per annum. The Company has not borrowed any funds under the Revolver as of December 31, 2016. See Note 12. Commitments and Contingencies for information regarding the letters of credits, which reduce the amount available for borrowing under the Revolver. Deferred finance charges of $1.8 million (Predecessor) were paid in securing the Revolver and were capitalized as deferred financing charges in the Consolidated Balance Sheet. These debt fees were amortized and recognized as interest expense utilizing the straight-line method over the life of the Revolver until the Business Combination. Interest expense from the Revolver debt fee amortization was $0.3 million (Predecessor) for the ended December 31, 2016, respectively, and $0.1 million for the year ended December 31, 2015. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Equity | Equity The Company’s authorized common shares consist of two classes: 200,000,000 shares of Class A common stock and 50,000,000 shares of Class B common stock. As of December 31, 2016, there were 98,250,917 shares of Class A common stock issued and outstanding and 31,704,988 shares of Class B common stock issued and outstanding. Shares of Class A common stock and Class B common stock have identical voting rights. However, shares of Class B common stock do not participate in earnings or dividends of the Company. Ownership of shares of Class B common stock is restricted to owners of Class B units in Hostess Holdings. Class B units in Hostess Holdings may be exchanged (together with the cancellation of an equivalent number of shares of Class B common stock) by the holders thereof for, at the election of the Company, shares of Class A common stock or the cash equivalent of such shares. From November 4, 2016 through December 31, 2016 (Successor) 661,700 Class B units in Hostess Holdings along with an equivalent amount of shares of Class B common stock were exchanged for 661,700 shares of Class A common stock. As of December 31, 2016, there were 37,500,000 public warrants and 19,000,000 private placement warrants outstanding. Each warrant entitles its holder to purchase one half of one share of our Class A common stock at an exercise price of $5.75 per half share, to be exercised only for a whole number of shares of our Class A common stock. The warrants became exercisable 30 days after the completion of the Business Combination on November 4, 2016 and expire five years after that date, or earlier upon redemption or liquidation. Once the warrants become exercisable, the Company may redeem the outstanding warrants at a price of $0.01 per warrant, if the last sale price of the Company’s common stock equals or exceeds $24.00 per share for any 20 trading days within a 30 trading day period ending on the third business day before the Company sends the notice of redemption to the warrant holders. The private placement warrants, however, are nonredeemable so long as they are held by our Sponsor or its permitted transferees. Prior to the Business Combination, Gores Holdings had 46,875,000 shares of common stock issued and outstanding, consisting of 37,500,000 shares originally sold as part as part of the Gores Holdings’ initial public offering (the “IPO”) consummated on June 1, 2015 and 9,375,000 Founder Shares that were issued to the Sponsor prior to the IPO. All of the 37,500,000 shares of common stock sold as part of the IPO contained a redemption feature which allowed for the redemption of such shares. This redemption provision generally required Gores Holdings to classify these shares outside of permanent equity, at its redemption value of $10 per share. Prior to the Business Combination, 2,168,404 shares were reclassified to equity as shareholders waived their redemption rights. In connection with the Business Combination, no shares were redeemed, the remaining 35,331,596 redeemable shares were reclassified to equity and the 9,375,000 Founder Shares were canceled. |
Earnings per Share
Earnings per Share | 12 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share Basic loss per share is calculated by dividing net loss attributable to the Company’s class A shareholders for the Successor period by the weighted average number of class A common shares outstanding for the period. In computing dilutive loss per share, basic loss per share is adjusted for the assumed issuance of all applicable potentially dilutive share-based awards, including stock warrants. Below are basic and diluted net loss per share for the periods indicated: Successor (In thousands, except share data) From November 4, 2016 through December 31, 2016 Numerator: Net loss attributable to Class A shareholders $ (4,404 ) Denominator: Weighted-average Class A shares outstanding - basic 97,791,658 (1 ) Net loss per Class A share - basic and diluted $ (0.05 ) (1) Excludes the weighted average impact of 2,573,386 shares due to the potential exercise of outstanding warrants because the net effect of their inclusion would be anti-dilutive. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Additionally, the impact of changes in the tax rates and laws on deferred taxes, if any, is reflected in the financial statements in the period of enactment. The income tax expense (benefit) consisted of the following: 2016 (In thousands) November 4, 2016 January 1, 2016 (Successor) (Predecessor) Current tax expense (benefit) Federal $ 9 $ 35 State and local 43 12 Total Current $ 52 $ 47 Deferred tax expense (benefit) Federal $ (6,751 ) $ 343 State and local (1,063 ) 49 Total Deferred $ (7,814 ) $ 392 Income tax expense (benefit), net $ (7,762 ) $ 439 The Company was a nontaxable partnership in the Predecessor years ended December 31, 2015 and December 31, 2014. In the Predecessor period January 1, 2016 through November 3, 2016, Superior, a C corporation, was subject to income taxes. As a result of the Business Combination, the Company acquired a controlling interest in Hostess Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hostess Holdings is not itself subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Hostess Holdings is passed through to and included in the taxable income or loss of its partners, including the Company following the Business Combination, on a pro rata basis. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Hostess Holdings following the Business Combination. The operations of Hostess Holdings include those of its C corporation subsidiaries. These C corporation subsidiaries are subject to U.S. federal, state and local income taxes. The Company’s tax provision includes income taxes for both the pro rata share of Hostess Holdings income or loss passed through to the Company, as well as the income or loss of the Company’s C corporation subsidiaries. For the periods from November 4 through December 31, 2016 (Successor) and January 1 through November 3, 2016 (Predecessor), the effective income tax rate differs from the federal statutory income tax rate as explained below: 2016 November 4, 2016 January 1, 2016 (Successor) (Predecessor) U. S. federal statutory income tax rate 35.0 % 35.0 % State and local income taxes, net of federal benefit 4.1 0.1 Income attributable to noncontrolling interest (8.8 ) — Nontaxable partnerships — (34.4 ) Valuation allowance 17.2 — Other/permanent differences 0.3 — Effective income tax rate 47.8 % 0.7 % Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the accompanying Consolidated Balance Sheets. These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows: 2016 2015 (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Deferred tax assets Imputed interest $ 10,113 $ — Net operating loss carryforwards 9,574 — Tax credits 2,019 — Other 1,472 — Subtotal $ 23,178 $ — Valuation allowance (205 ) — Total deferred tax assets $ 22,973 $ — Deferred tax liabilities Investment in partnership (363,439 ) — Property and equipment (1,857 ) — Goodwill and intangible assets (11,474 ) — Total deferred tax liabilities $ (376,770 ) $ — Total deferred tax assets and liabilities $ (353,797 ) $ — The recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefits associated with temporary differences, net operating loss carryforwards and tax credits will be utilized. The Company assesses the recoverability of the deferred tax assets on an ongoing basis. In making this assessment, the Company considers all positive and negative evidence, and all potential sources of taxable income including scheduled reversals of deferred tax liabilities, tax-planning strategies, projected future taxable income and recent financial performance. Prior to the acquisition of Hostess Holdings, the Company did not have a significant source of taxable income to support the realization of its deferred tax assets and therefore had a full valuation allowance booked on its deferred tax assets. The Company re-evaluated its conclusion on November 4, 2016 due to the acquisition of Hostess Holdings and concluded that the valuation allowance was no longer appropriate. The Company reversed $2.8 million of valuation allowance in the fourth quarter of 2016. This reversal is reflected as a non-cash income tax benefit recorded in the accompanying consolidated statement of operations. The Company still maintains a valuation allowance of $0.2 million against deferred tax assets for state net operating loss carryforwards attributable to its C corporation subsidiaries. The Company and its C corporation subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. For federal tax purposes, the Company’s and its C corporation subsidiaries’ 2013 through 2016 tax years remain open for examination by the tax authorities under the normal three year statute of limitations. Generally, for state tax purposes, the Company’s and its C corporation subsidiaries’ 2013 through 2016 tax years remain open for examination by the tax authorities under a three year statute of limitations. Should the Company or its C corporation subsidiaries utilize any of their U.S. or state loss carryforwards, their carryforward losses, which date back to 2003, would be subject to examination. At December 31, 2016, the Company and its C corporation subsidiaries had available federal net operating loss carryforwards of approximately $20.8 million and $2.8 million , respectively. These carryforwards expire from 2030 to 2036. Of these NOL carryforwards, $20.8 million and $2.8 million , respectively, are subject to annual limitations due to a change in ownership of the Company and its C corporation subsidiaries as defined in the Internal Revenue Code. The Company and its C corporation subsidiaries also had various state net operating loss carryforwards totaling approximately $25.2 million and $4.2 million , respectively. Of these NOL carryforwards, $25.2 million and $4.2 million , respectively, are subject to an annual limitation due to an ownership change of the Company and its C corporation subsidiaries. Unless utilized, the state carryforwards expire from 2022 to 2036. The Company does not believe that these limitations will prevent it from utilizing its pre-ownership change net operating loss carryforwards. The Company also has state income tax credit carryforwards of $2 million which expire from 2030 to 2031. The Company does not believe it has any significant uncertain tax positions and therefore has no unrecognized tax benefits at December 31, 2016, that if recognized, would affect the annual effective tax rate. Interest and penalties related to income tax liabilities, if incurred, are included in income tax expense in the consolidated statement of operations. For the fiscal years ended December 31, 2016, 2015 and 2014, we have not recorded any penalties and interest and do not have any accrued balance of penalties and interest. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Accruals and the Potential Effect of Litigation Liabilities related to legal proceedings are recorded when it is probable that a liability has been incurred and the associated amount can be reasonably estimated. Where the estimated amount of loss is within a range of amounts and no amount within the range is a better estimate than any other amount, the minimum amount is accrued. As additional information becomes available, the potential liabilities related to these matters are reassessed and the estimates revised, if necessary. These accrued liabilities are subject to change in the future based on new developments in each matter, or changes in circumstances, which could have a material effect on the Company’s financial condition and results of operations. In November 2015, the Company gave notice of termination of its broker agreement with National Frozen Distribution Consultants, LLC (“NFDC”) for cause under the terms of the agreement. Thereafter, the Company received a demand for arbitration from NFDC claiming damages of approximately $ 15.0 million plus attorney’s fees and costs for breach of a confidentiality agreement, violation of the Missouri Uniform Trade Secrets Act, breach of contract, breach of the implied covenant of good faith and fair dealing and breach of fiduciary duty and seeking a permanent injunction. The Company has filed counterclaims for negligent misrepresentation and unjust enrichment and intends to vigorously defend this action. From time to time, the Company is subject to various other legal actions, lawsuits, claims and proceedings related to products, employment, environmental regulations, and other matters incidental to its businesses. Based upon information presently known, the Company does not believe that the ultimate resolution of such matters will have a material effect on the Company’s financial position, although the final resolution of such matters could have a material effect on its results of operations or cash flows in the period of settlement. Lease Commitments Operating Leases In the ordinary course of business, the Company has entered into operating leases for office equipment and bakery equipment. Rental expense under these operating leases through December 31, 2016 is not material. In February 2016, the Company entered into a lease agreement for a distribution center located in Shorewood, Illinois. The term of the lease is from April 1, 2016 through March 31, 2019. In October 2014, the Company sold its corporate office located at 1 East Armour Boulevard in Kansas City, Missouri. The transaction was completed as a sale leaseback, resulting in the Company retaining the office space as a tenant of the third party purchaser through at least December 31, 2015 as outlined in the lease agreement. The Company has subsequently extended the lease through December 31, 2019. In addition, the Company entered into a bond-lease agreement with the Development Authority of Columbus, GA on December 1, 2013, which was amended in December, 2016. The bond-lease transaction required the Company to exchange its property to the taxing jurisdiction for tax-exempt bonds issued in the name of the Company and not to exceed $18 million . As the issuer and holder of the bonds, the Company is not required to make lease payments. On December 16, 2013, the Company received an ad valorem tax agreement from the Columbus, GA Board of Tax Assessors granting tax abatement for the real and personal property located at the Company’s Columbus, GA bakery through 2023. Rent expense was $0.3 million (Successor) for November 4, 2016 through December 31, 2016 and $1.3 million (Predecessor) for the period January 1, 2016 through November 3, 2016, compared to $0.4 million for the year ended December 31, 2015 (Predecessor) and $0.1 million for the year ended December 31, 2014 (Predecessor). Future minimum non-cancellable rental payments as of December 31, 2016 are as follows: (In thousands) 2017 $ 2,042 2018 2,017 2019 568 2020 — 2021 — Thereafter — Total $ 4,627 As of December 31, 2016, all of our operating leases expire by the end of year 2019. Capital Leases As a result of the acquisition of Superior on May 10, 2016, the Company recorded a capital lease obligation of $0.8 million for a lease located at Southbridge, Massachusetts. The base term of the lease is through February 2021. Future minimum lease payments under capital leases were as follows: (In thousands) 2017 $ 200 2018 200 2019 200 2020 200 2021 33 Thereafter — Total $ 833 Contractual Commitments The Company has entered into various long-term arrangements through advance purchase contracts to lock in prices for certain high-volume raw materials, packaging components and fuel for normal product production requirements. These advance purchase arrangements are contractual agreements and can only be canceled with a termination penalty that is based upon the current market price of the commodity at the time of cancellation. These agreements qualify for the “normal purchase” exception under ASC 815; therefore, the purchases under these contracts are included as a component of cost of goods sold. Contractual Commitments Total Committed Commitments within 1 year Commitments beyond 1 year Ingredients $ 79.0 $ 71.0 $ 8.0 Packaging $ 12.0 $ 9.0 $ 3.0 Letters of Credit In April 2016 and April 2013, the Company entered into Letter of Credit arrangements to provide for the issuance of standby letters of credit in the amount of $ 1.0 million and $ 1.8 million , respectively. The arrangements support the collateral requirements for insurance. The Letters of Credit are 100% secured through our Revolver. Product Recall On June 3, 2016, the Company voluntarily recalled approximately 710,000 cases of snack cakes and donuts as a direct result of the recall by the Company’s supplier, Grain Craft, of certain lots of its flour for undeclared peanut residue. The Company also destroyed approximately 200,000 cases of product within its possession that was produced using Grain Craft flour. The matter was resolved by mutual agreement of the parties and the Company recorded a gain on settlement of $0.8 million to Other income in the Consolidated Statements of Operations for the Predecessor period ended November 3, 2016. As a result, this recall did not result in any expense (not including lost sales during this period of time) for the year ended December 31, 2016, for recall costs related to flour in the Consolidated Statements of Operations. On January 9, 2017, the Company announced a voluntary recall of certain products because of a recall of the milk powder ingredients used in the confectionary coating due to a concern of Salmonella contamination. See Note 16 for further information. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Prior to the Business Combination, the Company was party to an agreement to employ Mr. Metropoulos as the Executive Chairman. The agreement, dated April 2013, included payment of an annual salary, a performance bonus at the discretion of the board of directors, and expenses related to the use of his personal aircraft. From January 1, 2016 through November 3, 2016 (Predecessor), $3.5 million , was expensed by the Company for this compensation agreement. For the year ended December 31, 2015, the Company expensed $4.3 million . The agreement with Mr. Metropoulos was terminated in connection with the Business Combination. As part of the Business Combination, the Company agreed to grant future shares of Class A Common Stock to Mr. Metropoulos if certain EBITDA thresholds are met for the year ended December 31, 2017. The potential grants under this arrangement are between zero and 5.5 million shares. Based on the nature of the arrangement, the potential grants are considered to be compensation for future services to be provided by Mr. Metropoulos. As of December 31, 2016, management determined it was not probable that the Company would meet the 2017 EBITDA thresholds. Also in connection with the Business Combination, the Company entered into an Executive Chairman Employment Agreement with Mr. Metropoulos. Under the terms of this agreement, Mr. Metropoulos was granted 2,496,000 fully vested units of Hostess Holdings and an equivalent number of shares of Class B common stock in the Company as compensation for his continuing service as Executive Chairman. The Company determined the fair value of this compensation as follows: (In thousands, except share data) Number of Class B units granted 2,496 Closing price of equivalent shares of Class A common stock on date of grant $ 11.40 28,454 Discount for lack of marketability 6 % $ 26,747 As these units are subject to certain sales restrictions, a discount for lack of marketability was determined by using an option pricing method (Finnerty Protective Put Model). Also under the terms of this agreement, the Company is obligated to grant additional equity (in the form of either shares of Class A common stock of the Company, or Class B units of Hostess Holdings and equivalent shares Class B common stock of the Company) if certain EBITDA thresholds are met for the year ended 2018. The potential grants range from zero to 2.7 million shares. As of December 31, 2016, Management determined it was not probable that the Company would meet these thresholds. For periods prior to the Business Combination, related party expenses consisted of the normal annual cash payments associated with our employment arrangements with Mr. Metropoulos as Chief Executive Officer and/or Executive Chairman. For the Successor Period November 4, 2016 through December 31, 2016, related party expenses consisted of a grant of stock awarded to Mr. Metropoulos under his new employment arrangements. Following the consummation of the Business Combination, the cash expense associated with Mr. Metropoulos’s employment arrangements are estimated to be approximately $0.3 million annually. The Company entered into a lease agreement in July 2013, with an entity controlled by Mr. Metropoulos to lease a portion of its Dallas, TX office. The rental payments were immaterial to the Company for the ended December 31, 2016, as well as the year ended December 31, 2015. An entity controlled by Mr. Metropoulos held $90.0 million of the aggregate principal amount outstanding under the Second Lien Term Loan issued in August 2015, which was subsequently paid in full during the November 2016 debt refinancing. The Company has a trademark license agreement, effective in March 2014, with AGS Capital LLC, an affiliate of Apollo Management, L.P., which uses the Company’s trademarks for gaming machines and internet applications. The income received related to this agreement was immaterial for the year ended December 31, 2016, as well as the year ended December 31, 2015. |
Unaudited Quarterly Financial D
Unaudited Quarterly Financial Data | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Unaudited Quarterly Financial Data | Unaudited Quarterly Financial Data Summarized quarterly financial data: (In thousands) Successor Predecessor From November 4, 2016 through December 31, 2016 From October 1, 2016 through November 3, 2016 Quarter Ended September 30, 2016 Quarter Ended June 30, 2016 Quarter Ended March 31, 2016 Net revenue $ 111,998 $ 66,831 $ 196,197 $ 192,342 $ 160,218 Operating income (9,607 ) (15,022 ) 47,661 52,590 37,643 Net income (loss) (8,485 ) (21,084 ) 33,509 29,465 18,535 Loss) per Class A share: Basic $ (0.05 ) Diluted $ (0.05 ) Year Ended December 31, 2015 Quarter Ended December 31, 2015 Quarter Ended September 30, 2015 Quarter Ended June 30, 2015 Quarter Ended March 31, 2015 Total revenue $ 620,815 $ 147,026 $ 158,212 $ 168,887 $ 146,690 Income from operations 155,908 35,295 31,598 47,487 41,528 Net income (loss) $ 88,760 $ 17,155 $ (4,066 ) $ 43,234 $ 32,437 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On January 9, 2017, the Company voluntarily recalled its Holiday White Peppermint Twinkies because of a recall by Blommer Chocolate Company of the confectionary coating used on the product. The confectionary coating contained milk powder ingredients recalled by Valley Milk Products, LLC due to a concern of Salmonella contamination. Although it is too early to estimate the total cost of the recall, the Company currently expects these costs to be immaterial and to fully recover such costs from its third-party indemnities. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Reclassifications | In the Consolidated Statements of Operations, amortization of customer relationships (previously within general and administrative) have been presented separately from general and administrative in the current year presentation, with conforming reclassifications made for the prior period presentation. In the Consolidated Balance Sheets, customer trade allowances (previously netted as an allowance against trade accounts receivable) are presented in current liabilities, with conforming reclassifications made for the prior period presentation. |
Business Combination | The Business Combination was accounted for as a business combination under the scope of the Financial Accounting Standards Board’s Accounting Standards Codification 805, Business Combinations, or ASC 805. In addition, pursuant to ASC 810, Consolidations, or ASC 810, the Company has determined that Hostess Holdings, a limited partnership, is a VIE. The Company determined there are neither any applicable scope exceptions from the consolidation guidance under ASC 810 nor any VIE scope exceptions in ASC 810 applicable to Hostess Holdings. Furthermore, it was determined that the Company is the primary beneficiary of the VIE and, therefore, the accounting acquirer under ASC 805. The Company determined that, through Hostess GP, it has the power to direct all of the activities of Hostess Holdings, with no substantive kick-out rights or participating rights by the limited partners individually or as a group. Hostess Holdings constitutes the majority of the assets of the Company. The acquisition of Hostess Holdings constitutes the acquisition of a business for purposes of ASC 805, and due to the change in control, has been accounted for using the acquisition method. Under the acquisition method, the acquisition-date fair value of the gross consideration paid by the Company to effect the Business Combination is allocated to the assets acquired and the liabilities assumed based on their estimated fair values including Hostess GP’s variable interest in Hostess Holdings. |
Segments | The Company has two reportable segments: Sweet Baked Goods and Other. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as either Hostess or the Company. All intercompany balances and transactions have been eliminated in consolidation. For the Successor period from November 4, 2016 through December 31, 2016, Hostess Brands, Inc. consolidated the financial position and results of operations of Hostess Holdings. Mr. Metropoulos and the Metropoulos Entities hold their equity investment in us primarily through Class B limited partnership units in the Company’s subsidiary, Hostess Holdings (“Class B Units”) and an equal number of shares of the Company’s Class B common stock (“Class B Stock”). Our Class B Stock has voting, but no economic, rights, while Hostess Holdings’ Class B Units have economic, but no voting, rights. Each Class B Unit, together with a share of Class B Stock held by the Metropoulos Entities, is exchangeable for a share of the Company’s Class A common stock (or at the option of the Company, the cash equivalent thereof). The Company holds 100% of the general partnership interest in Hostess Holdings and a majority of the limited partnership interests, and consolidates Hostess Holdings in the Company’s Consolidated Financial Statements. The interest of the Metropoulos Entities in Hostess Holdings’ Class B Units is reflected in our Consolidated Financial Statements as a noncontrolling interest. The noncontrolling interest was recorded at fair value at November 4, 2016 as a result of the Business Combination. For the Predecessor periods, Hostess Holdings consolidated the financial position and results of operations of New Hostess Holdco LLC. The portion of the New Hostess Holdco, LLC not owned by Hostess Holdings was recognized as a noncontrolling interest in the Consolidated Financial Statements. The non-controlling interest presented in the accompanying consolidated balance sheet represents the amount of cash that would be payable to the non-controlling interest holders if the Company were liquidated at book value as of the balance sheet date. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, is the share of the earnings or losses allocated to non-controlling interest for the period. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements for the reported amounts of revenues and expenses during the reporting period. Management utilizes estimates, including, but not limited to, valuation and useful lives of tangible and intangible assets, shipments in-transit, reserves for trade and promotional allowances, insurance recoveries and other costs related to the voluntary product recall, workers’ compensation and self-insured medical claims. Actual results could differ from these estimates. Certain prior year amounts have been reclassified to conform with current year presentation. |
Management Profits Interest Plan (Predecessor) | The Predecessor established a profits interest plan under the 2013 Hostess Management, LLC Equity Incentive Plan (“Plan”) to allow members of the management team to participate in the success of the Predecessor. This Plan consisted of an approximate 9% ownership interest in Hostess Management. Hostess Management had three classes of units and required certain returns to ranking classes before other classes participated in subsequent returns of the Predecessor. Hostess Management was authorized to issue class A units to Hostess Holdings members, class B units to management, and 916,096 class C units to Mr. Metropoulos. In March 2016, as a result of the second amendment to the Hostess Management, LLC Agreement, the number of units authorized for grant increased for each of the class A and B units from 1,282,534 to 1,652,759 units and therefore, Hostess Management’s ownership interest in the Predecessor increased from 7% to 9% in exchange for the issuance of 370,225 class A units to Hostess Holdings members. On March 18, 2016, class B units, in the amount of 593,630 , were granted to certain members of management. The units vest at a rate of one-fifth at approximately the end of each year, or at the management member’s anniversary employment date, over 5 years , provided the participant remained employed with the Predecessor. The unit value of $4.25 per share was used to estimate the fair value of the class B units and was based upon a contemporaneous valuation reflecting market conditions on March 18, 2016. The total estimated grant date fair value was $2.5 million . The Predecessor recognized unit-based compensation expense of $1.4 million and $0.4 million during the years ended December 31, 2015, and 2014, respectively, within general and administrative and $3.9 million of expense was recognized from January 1, 2016 through November 3, 2016 (Predecessor), within general and administrative including $3.2 million of expense due to a grant agreement provision which caused the accelerated vesting of units granted prior to January 1, 2016 upon consummation of the Business Combination and the accelerated vesting of units granted in 2016 based on the approval of the board of directors. This provision was triggered by the consummation of the Business Combination. All units were redeemed and the Plan was terminated on November 4, 2016. As of December 31, 2016, there were no outstanding units. The following table represents the non-vested class B unit activity for the period ended November 3, 2016: (Predecessor) Units Weighted Beginning balance at January 1, 2016 368,332 $ 2.87 Granted 593,630 4.25 Vested (50,845 ) 1.61 Forfeited — — Redeemed (911,117 ) (3.84 ) Nonvested at November 3, 2016 — $ — During the year ended December 31, 2015, distributions were available to class B and class C unit holders in excess of the units’ vested balances. These distributions were held by Hostess Management within restricted cash and were paid to the unit holders when they vested under the terms of each holder’s respective agreement. At December 31, 2015, $21.9 million of deferred partner distributions were due to class B and class C unit holders, of which $4.7 million was current, and $17.2 million was long-term. All deferred partner distributions were paid on November 4, 2016 from restricted cash concurrent with the Business Combination. The funding of the restricted cash is included within distributions to non-controlling interest in the Consolidated Statements of Cash Flows as a financing activity. |
Employee Benefit Plans | Employee Benefit Plans The Company provides several benefit plans for employees depending upon employee eligibility. The Company has a health care plan, a defined contribution retirement plan (401(k)), company-sponsored life insurance, and other benefit plans. The health care plan, available to all full-time employees, is self-insured by the Company. Amounts contributed to the health care plan by the Company, totaled approximately $6.3 million for the Predecessor period from January 1, 2016 through November 3, 2016 and $1.0 million for the Successor period from November 4, 2016 through December 31, 2016. Comparatively, for the years ended December 31, 2015, and 2014, the Company contributed $5.8 million and $5.4 million , respectively. The Company offers an annual incentive plan based upon operating targets. Final payout is approved by the board of directors. The Company has accrued $5.9 million and $1.5 million at December 31, 2016 (Successor) and December 31, 2015 (Predecessor), respectively. The Company has also instituted a long-term incentive plan for certain director-level employees, payment under which is contingent on changes in certain ownership levels. Amounts paid in the year ended December 31, 2015 and the Predecessor period from January 1, 2016 through November 3, 2016 are reported as special employee incentive compensation in the Consolidated Statement of Operations. |
Cash and Cash Equivalents and Restricted Cash | Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid investments purchased with original maturities of three months or less when purchased as cash equivalents and are recorded at cost. Under the Company’s cash management system, checks that have been issued and are out of the control of the Company, but which have not cleared the bank by the balance sheet date, are reported as a reduction of cash. |
Accounts Receivable | Accounts Receivable Accounts receivable represents amounts invoiced to customers for goods that have been received by the customer. |
Inventories | Inventories Inventories are stated at the lower of cost or market on a first-in first-out basis. The Company estimates its costs for ingredients, packaging, direct labor and overhead prior to the beginning of each period for the Company’s expected production costs for its various products. Abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) are expensed in the period they are incurred. |
Property and Equipment | Property and Equipment At the acquisition date, a third party valuation specialist conducted analyses in order to assist our management in determining the fair values of the acquired assets and liabilities assumed during the Business Combination. The property and equipment acquired in the transaction were assigned useful lives for purposes of depreciation that the Company believes to be the useful life of such assets. Additions to property and equipment are recorded at cost and depreciated straight line over estimated useful lives of 10 to 50 years for buildings and land improvements and 3 to 20 years for machinery and equipment. In order to maximize the efficiency of the Company’s operations and to operate the acquired equipment, occasionally the Company will remove and relocate equipment between bakeries. Such removal and relocation costs are expensed as incurred. Reinstallation costs are capitalized if the useful life is extended or the equipment is significantly improved. Otherwise, reinstallation costs are expensed as incurred. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the balance sheet and any resulting gain or loss is recognized in the Consolidated Statements of Operations. From January 1 through November 3, 2016, the Predecessor closed multiple production lines at the Indianapolis, Indiana bakery and transitioned production to other facilities. The Predecessor recorded an impairment loss of $7.3 million , related to equipment that the Company had idled, or which otherwise qualified for impairment. The measurement of this loss was considered to be based on Level 3 inputs within the fair value measurement hierarchy as defined in the accounting guidance. Level 3 fair values were determined using management’s best estimate of fair value for assets that were idled and written-down to salvage value. Assets that the Predecessor no longer intended to use were retired. Gains and losses on the disposal of assets are recorded as the difference between the net proceeds received and net carrying values of the assets disposed and are presented within loss on sale/abandonment of property and equipment and bakery shutdown costs in the Consolidated Statements of Operations. |
Software Costs | Software Costs Costs associated with computer software projects during the preliminary project stage are expensed as incurred. Once management authorizes and commits to funding a project, appropriate application development stage costs are capitalized. Capitalization ceases when the project is substantially complete and the software is ready for its intended use. Upgrades and enhancements to capitalized software are capitalized when such enhancements are determined to provide additional functionality. Training and maintenance costs associated with software applications are expensed as incurred. Included in the caption “Other assets” in the Consolidated Balance Sheets is capitalized software in the amount of approximately $7.4 million and $6.5 million at December 31, 2016 and December 31, 2015, respectively. Capitalized software costs are amortized over their estimated useful life of five years commencing when such assets are ready for their intended use. |
Bakery Shutdown Costs | Bakery Shutdown Costs Bakery shutdown costs are considered to be non-recurring activities an entity undertakes when it closes a facility, or terminates a significant process related to operations. |
Fair Value Measurements | Fair Value Measurements The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the best extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: • Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date • Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability • Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company estimates that the carrying amount of its financial instruments reasonably approximates fair value. At December 31, 2016 and December 31, 2015, the approximate fair value of the Company’s debt was $1.0 billion and $1.2 billion , respectively. The fair value is calculated using current interest rates and pricing from financial institutions (Level 2 inputs). |
Goodwill and Intangible Assets | Goodwill and Intangible Assets At December 31, 2016, the goodwill balance of $588.5 million represents the excess of the amount the Successor paid for the Business Combination over the fair value of the assets acquired and liabilities assumed. Goodwill that resulted from the Business Combination was allocated to the Sweet Baked Goods segment and the Other segment. At December 31, 2015 the goodwill balance of $57.0 million represents the excess of the amount the Predecessor paid for the business over fair value of the assets acquired, resulting from the formation of the Predecessor in 2013. Goodwill that resulted from the 2013 acquisition was allocated to the Sweet Baked Goods segment. The Company’s indefinite-lived intangible assets consist of trademarks and trade names. The $1.4 billion balance at December 31, 2016 was recognized as part of the Business Combination. The $0.3 billion balance at December 31, 2015 resulted from the formation of the Predecessor in 2013. The trademarks and trade names are integral to the Company’s identity and are expected to contribute indefinitely to its corporate cash flows. Fair value for trademarks was determined using the income approach, which is considered to be Level 3 within the fair value hierarchy. The application of the income approach was premised on a royalty savings method, whereby the trademark is valued by reference to the amount of royalty income it could generate if it was licensed, in an arm’s‑length transaction, to a third-party. These assets have been assigned an indefinite life and therefore are not amortized but rather evaluated for impairment annually. Also, the Company has definite-lived intangible assets that consist of customer relationships. The $538.1 million balance on December 31, 2016 was recognized as part of the Business Combination. The $8.9 million balance at December 31, 2015, resulted from the formation of the Predecessor in 2013. For customer relationships, the application of the income approach was premised on an excess earnings method, whereby the customer relationships are valued by the earnings expected to be generated from those customers after other capital charges. Definite-lived intangible assets are being amortized on a straight‑line basis over the estimated remaining useful lives of the assets. The Company’s policy is to perform an impairment analysis ea ch year as of September 30. |
Reserves for Self-Insurance Benefits | Reserves for Self-Insurance Benefits The Company’s employee health plan is self-insured by the Company up to a stop-loss amount of $0.3 million for each participant per plan year. In addition, the Company maintains insurance programs covering its exposure to workers’ compensation. Such programs include the retention of certain levels of risks and costs through high deductibles and other risk retention strategies. Reserves for the Company’s retained exposures are estimated for reported but unpaid losses, as well as incurred but not reported losses, and are calculated based upon actuarially determined loss development factors, expected long-term medical cost trend rates, future administrative costs, and other assumptions considered by management, including assumptions provided by external insurance brokers, consultants, and actuaries. The factors and assumptions used for estimating reserves are subject to change based upon experience, changes in expected cost and inflation trends, discount rates, and other factors. Adjustments to previously established reserves are included in operating results in the period of adjustment. |
Revenue Recognition | Revenue Recognition The Company invoices at the time of shipment of its product, but only recognizes revenue upon delivery to retail customers and distributors as the Company arranges freight and is generally responsible, along with the Company’s common carriers, for any damage that occurs during transportation. The Company allows retail customers and distributors to return product that is damaged or defective at the time of delivery. A provision for payment discounts and product return allowances, which is estimated based upon the Company’s historical performance, management’s experience and current economic trends, is recorded as a reduction of sales in the same period that the revenue is recognized. The Company’s products are sold on credit terms established in accordance with industry practice, which typically requires payment within 30 days of invoice date. Trade promotions, consisting primarily of customer pricing allowances and merchandising funds, and consumer coupons are offered through various programs to customers and consumers. Sales are recorded net of estimated trade promotion spending, which is recognized as incurred at the time of sale. The Company participates in a number of promotional activities including, but not limited to, offering rebates for achieving various performance levels, offering incentives for product placement locations in retail stores, offering pricing discounts for those customers electing to provide their own transportation for shipment of product and offering subsidies for advertising placed by customers. In lieu of accepting returns, the Company offers an allowance for anticipated expired and damaged products to certain customers. The ultimate cost of these programs depends on retailer performance and is the subject of significant management estimates. The Company records as expense the estimated ultimate cost of the program in the period during which the program occurs. In accordance with the authoritative guidance for revenue recognition, the cost of these programs is classified in the Consolidated Statements of Operations as a reduction of net sales. Also, in accordance with the guidance, coupon redemption costs are also recognized as reductions of net revenues when issued. |
Cost of Goods Sold | Cost of Goods Sold Cost of goods sold consists of ingredients, packaging, labor, energy, other production costs and warehousing and transportation costs for the distribution of product to customers. The cost of ingredients and packaging represent the majority of the Company’s total costs of products sold. All costs that are incurred at the bakeries are included in cost of goods sold. The Company does not allocate any corporate functions into cost of goods sold. |
Advertising and Marketing Costs | Advertising and Marketing Costs Advertising and marketing costs, through both national and regional media, are expensed in the period in which the advertisements are run. |
Income Taxes | Income Taxes The Predecessor acquired Superior, a Subchapter C corporation in May 2016. As a result of its form of organization, Superior is subject to income taxes, which are reflected in the Company’s consolidated financial statements. Historically, the Predecessor had not recorded an income tax provision because it was a series of limited liability companies and income was taxed to the ultimate owners based on their proportionate share of the Predecessor’s taxable income. The Company recorded income tax expense (benefit) of $(7.8) million (Successor) and $0.4 million (Predecessor) on pretax book income (loss) of $(16.2) million (Successor) and $60.9 million (Predecessor) for the year ended December 31, 2016. For the Successor period, the rate is higher than the U.S. statutory rate of 35% , primarily due to the reversal of a previously recorded valuation allowance and state and local income taxes. For the Predecessor, the rate is lower than the U.S. federal statutory rate of 35% because the majority of the Company’s income was earned through the limited liability companies, which are considered pass through for tax purposes. As a result of the Business Combination, Hostess Brands, Inc. acquired a controlling interest in Hostess Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hostess Holdings is not directly subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Hostess Holdings is passed through to and included in the taxable income or loss of its partners, including the Company following the Business Combination, on a pro rata basis. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Hostess Holdings following the Business Combination. |
Contingencies | Contingencies The Company is involved in various lawsuits, claims and proceedings arising in the ordinary course of business. Management records an estimate to accrue for loss contingencies if it believes it is probable that a liability was incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. |
New Accounting Pronouncements | New Accounting Pronouncements In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation—Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which is intended to improve financial reporting about share-based payment transactions. This guidance simplifies several aspects of the accounting for share-based payment awards to employees including accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. ASU 2016-09 will be effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company has early adopted ASU 2016-09 as of October 1, 2016 and does not expect the adoption of ASU 2016-09 to have a material impact on its consolidated financial position, results of operations or cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which is intended to improve financial reporting about leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial position, results of operations or cash flows. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet. This standard is effective for annual and interim periods in fiscal years beginning after December 15, 2016. The standard allows for either prospective or retrospective transition and early adoption is permitted. The Company has early adopted ASU 2015-17 as of December 31, 2015, however the standard does not have a material impact to the Company’s historical presentation of current and non-current deferred tax assets and liabilities within the Company’s consolidated balance sheet due to the predecessor company being a non-taxable pass-through partnership which had zero net deferred tax assets and liabilities recorded. The early adoption impacted the current and non-current presentation of deferred tax assets and liabilities within the consolidated balance sheet of December 31, 2016, but did not affect the Company’s consolidated statement of operations. In February 2015, the FASB issued ASU No. 2015-2, “Consolidation (Topic 820): Amendments to the Consolidation Analysis.” ASU 2015-2 provides a revised consolidation model for all reporting entities to use in evaluating whether they should consolidate certain legal entities. All legal entities will be subject to reevaluation under this revised consolidation model. The revised consolidation model, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are voting interest entities, or VIEs, (ii) eliminates the presumption that a general partner should consolidate a limited partnership and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. ASU 2015-2 is effective for fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2015. Under the ASU, Hostess Holdings is a variable interest entity of the Company and will therefore be included in the Company’s consolidated financial statements. In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805)—Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). The standard requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 eliminates the requirement to retrospectively account for those adjustments. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The Company adopted this pronouncement as of the beginning of 2016 and the adoption of this pronouncement did not impact the Company’s consolidated financial position, results of operations or cash flows. In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30)—Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this standard. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The Company adopted ASU 2015-03 as of the beginning of 2016 and changed the presentation of its debt issuance costs for the term loan notes by reclassifying the amounts from deferred finance charges to long-term debt, net, in the Consolidated Balance Sheets. The Company adopted ASU 2015-03 on a retrospective basis for debt issuance costs related to its term loans. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. On July 9, 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year. The new standard is effective for the Company on January 1, 2019. Companies may elect to adopt this application as of the original effective date for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method. In March 2016 and April 2016, the FASB issued ASU No. 2016-08 and ASU No. 2016-10, respectively, which clarifies the implementation guidance on principal versus agent considerations and also identifies performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Based on the analysis conducted to date, the Company does not believe the impact upon adoption will be material to its consolidated financial statements. The Company plans to adopt the standard in the first quarter of 2019 under the cumulative effect transition method. The planned adoption dates for all standards not yet implemented are based on the Company’s current classification as an Emerging Growth Company as defined in the Jumpstart Our Business Startups Act (JOBS Act). If this classification changes, we will re-valuate our timeline for implementing these standards. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Non-vested Class B Unit Activity | The following table represents the non-vested class B unit activity for the period ended November 3, 2016: (Predecessor) Units Weighted Beginning balance at January 1, 2016 368,332 $ 2.87 Granted 593,630 4.25 Vested (50,845 ) 1.61 Forfeited — — Redeemed (911,117 ) (3.84 ) Nonvested at November 3, 2016 — $ — |
Components of Inventories | The components of inventories are as follows : (In thousands) December 31, December 31, 2015 (Successor) (Predecessor) Ingredients and packaging $ 12,712 $ 12,353 Finished goods 14,229 10,054 Inventory in transit to customers 3,503 2,723 $ 30,444 $ 25,130 |
Customer Concentration Risk | The Company has one customer that accounted for 10% or more of the Company’s net revenues. The weighted percent of net revenues for this customer is presented below by segment: (% of Net Revenues) From November 4, 2016 From Year Ended Year Ended Year Ended (Successor) (Predecessor) (Predecessor) (Predecessor) Sweet Baked Goods 19.3 % 20.2 % 21.0 % 24.0 % Other 0.7 % 1.4 % — — Total 20.0 % 21.6 % 21.0 % 24.0 % |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Consideration Paid | The following summarizes the estimated fair value of the Business Combination: (amounts in thousands) Cash paid $ 479,761 Equity consideration paid to Selling Equityholders (1) 239,323 Tax receivable arrangement payable to Selling Equityholders (2) 164,697 Total consideration $ 883,781 Hostess Holdings debt assumed by Gores Holdings, Inc 1,228,254 Noncontrolling interest (3) 326,601 Estimated fair value of the Business Combination $ 2,438,636 (1) Equity consideration paid to the Legacy Hostess Equityholders is summarized below: (In thousands, except share data) Class A common shares of the Company subject to six month sales restriction 22,098 Fair value per share $ 10.83 239,323 (2) The Tax Receivable Arrangement generally provides for the payment by the Company to the Legacy Hostess Equityholders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination (which periods may extend, unless the Tax Receivable Agreement is terminated early in accordance with its terms, for more than 15 years following any exchange of Class B Units of Hostess Holdings for shares of the Company’s Class A common stock or the cash equivalent thereof) as a result of (i) certain increases in tax basis resulting from the Business Combination; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the Business Combination; (iii) certain increases in tax basis resulting from exchanges of Class B Units; (iv) imputed interest deemed to be paid by the Company as a result of payments it makes under the Tax Receivable Agreement; and (v) certain increases in tax basis resulting from payments the Company makes under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash savings. Certain payments under the Tax Receivable Agreement will be made to Legacy Hostess Equityholders in accordance with specified percentages, regardless of the source of the applicable tax attribute. (3) Noncontrolling interest represents the class B units in Hostess Holdings, LP not owned by the Company. (in thousands except share data) Class B units of Hostess Holdings, LP subject to six month sales restriction 24,424 Fair value per unit $ 10.83 264,515 (in thousands except share data) Class B units of Hostess Holdings, LP not subject to sales restrictions 5,446 Fair value per unit $ 11.40 62,086 The fair value of these units was determined as follows: Per share price based on average market price on the day of the Business Combination $ 11.40 Discount for lack of marketability 5.0 % $ 10.83 The 5% discount for lack of marketability was determined by using an option pricing method (Finnerty Protective Put Model) to reflect a six month sales restriction. |
Equity Consideration | Equity consideration paid to the Legacy Hostess Equityholders is summarized below: (In thousands, except share data) Class A common shares of the Company subject to six month sales restriction 22,098 Fair value per share $ 10.83 239,323 The fair value of these units was determined as follows: Per share price based on average market price on the day of the Business Combination $ 11.40 Discount for lack of marketability 5.0 % $ 10.83 |
Pro Forma Financial Information | The following unaudited pro forma combined financial information presents the Company’s results as though the Business Combination had occurred at January 1, 2015. The unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP: Year Ended December 31, 2016 Year Ended December 31, 2015 (In thousands) (pro forma) (pro forma) (unaudited) (unaudited) Net Revenue $ 727,586 $ 620,815 Net Income $ 82,442 $ 44,604 |
Purchase Price Allocation | The Company recorded a preliminary allocation of the purchase price to Predecessor’s tangible and identified intangible assets acquired and liabilities assumed, excluding long-term debt, based on their fair values as of the closing date. The preliminary purchase price allocation is as follows (in thousands): Cash $ 58,519 Accounts receivable 58,474 Inventories 39,338 Prepaids and other assets 2,998 Property and equipment 155,076 Accounts payable and accrued expenses (56,197 ) Deferred tax liabilities (358,891 ) Trade name and trademarks (1) 1,408,848 Customer relationships (2) 542,011 Goodwill 588,460 Total assets acquired and liabilities assumed $ 2,438,636 (1) The trade names were valued through application of the income approach, involving the estimation of likely future sales and an appropriate royalty rate. The trade name and trademarks are preliminarily estimated to have indefinite useful lives as the Company expects a market participant would use the trade name and trademarks in perpetuity based on their historical strength and consumer recognition. (2) Customer relationships were valued through application of the income approach. Under this approach, revenue, operating expenses and other costs associated with existing customers were estimated in order to derive cash flows attributable to the existing customer relationships. The resulting cash flows were then discounted to present value to arrive at the fair value of existing customer relationships as of the valuation date. The preliminarily estimated useful lives by operating segment ranging from 18 to 23 years represent the approximate point in the projection period in which a majority of the assets’ cash flows are expected to be realized based on assumed attrition rates. The following is a summary of the allocation of the purchase price: May 10, 2016 (In thousands) (Predecessor) Cash $ 1,009 Accounts receivable 2,122 Inventories 2,300 Prepaids and other current assets 112 Property and equipment (1) 7,075 Intangible assets (2) 29,370 Goodwill (3) 24,227 Accounts payable (2,920 ) Accrued expenses (552 ) Capital lease obligation (799 ) Deferred tax liability (10,844 ) Total assets acquired and liabilities assumed $ 51,100 (1) Amounts recorded for property and equipment includes land, building, plant machinery and equipment. (2) Amounts recorded for intangible assets includes customer relationships, trade names and trademarks. (3) Amounts recorded for goodwill are generally not expected to be deductible for tax purposes. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Land and buildings $ 30,275 $ 27,936 Machinery and equipment 112,221 109,800 Construction in progress 12,334 3,249 154,830 140,985 Less accumulated depreciation (1,606 ) (12,907 ) $ 153,224 $ 128,078 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Segment Operations and Total Assets | Information regarding the operations of these reportable segments is as follows: (In thousands) From November 4, 2016 From Year Ended December 31, 2015 Year Ended December 31, 2014 (Successor) (Predecessor) (Predecessor) (Predecessor) Net revenue: Sweet Baked Goods $ 101,319 $ 569,086 $ 609,895 $ 554,695 Other 10,679 46,502 10,920 — Net revenue $ 111,998 $ 615,588 $ 620,815 $ 554,695 Depreciation & amortization: Sweet Baked Goods $ 5,245 $ 9,221 $ 9,836 $ 7,113 Other 598 1,044 — — Depreciation & amortization $ 5,843 $ 10,265 $ 9,836 $ 7,113 Gross profit: Sweet Baked Goods $ 36,524 $ 252,432 $ 258,248 $ 233,932 Other 2,190 14,097 3,955 — Gross profit $ 38,714 $ 266,529 $ 262,203 $ 233,932 Capital expenditures (1): Sweet Baked Goods $ 7,544 $ 31,254 $ 27,252 $ 56,452 Other 83 223 — — Capital expenditures $ 7,627 $ 31,477 $ 27,252 $ 56,452 (1) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets. Information regarding total assets by reportable segment is as follows: (In thousands) December 31, December 31, (Successor) (Predecessor) Total segment assets: Sweet Baked Goods $ 2,633,758 $ 641,201 Other 214,134 2,328 Total segment assets $ 2,847,892 $ 643,529 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Activity of Goodwill | Activity of goodwill is presented below by reportable segment: (In thousands) Sweet Baked Goods Other Total (Predecessor) Balance as of December 31, 2015 $ 56,992 $ — $ 56,992 Acquisition of Superior — 24,227 24,227 Elimination of Predecessor goodwill (56,992 ) (24,227 ) (81,219 ) Business combination 518,759 69,701 588,460 Balance as of December 31, 2016 (Successor) $ 518,759 $ 69,701 $ 588,460 |
Schedule of Indefinite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,848 $ 254,681 Intangible assets with definite lives (Customer Relationships) 542,011 10,598 Less accumulated amortization (Customer Relationships) (3,916 ) (1,700 ) Intangible assets, net $ 1,946,943 $ 263,579 |
Schedule of Finite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,848 $ 254,681 Intangible assets with definite lives (Customer Relationships) 542,011 10,598 Less accumulated amortization (Customer Relationships) (3,916 ) (1,700 ) Intangible assets, net $ 1,946,943 $ 263,579 |
Future Amortization Expense of Customer Relationships | Amortization is estimated as follows (in thousands): 2017 $ 23,977 2018 23,977 2019 23,977 2020 23,977 2021 23,977 2022 and thereafter $ 418,087 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Included in accrued expenses are the following: (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Payroll, vacation and other compensation $ 11,489 $ 4,521 Self-insurance reserves 1,720 1,643 Accrued interest 4,885 11,730 Taxes, management fees, and other 921 1,330 Workers compensation reserve 1,321 1,364 Deferred revenue and litigation 1,320 574 $ 21,656 $ 21,162 |
Tax Receivable Agreement (Table
Tax Receivable Agreement (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Future Expected Payments Under Tax Receivable Arrangement | As of December 31, 2016 the future expected payments under the Tax Receivable Arrangement are as follows: (In thousands) 2017 $ — 2018 13,838 2019 9,744 2020 9,475 2021 9,236 Thereafter $ 123,091 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Summary of Debt and Capital Lease Obligation | A summary of the carrying value of the debt and the capital lease obligation is as follows (in thousands): (In thousands) December 31, 2016 December 31, (Successor) (Predecessor) First Lien Term Loan (4.0% as of December 31, 2016) Principal $ 998,750 $ 922,688 Unamortized debt premium and issuance costs 5,396 (13,817 ) $ 1,004,146 $ 908,871 Second Lien Term Loan (8.5% as of December 31, 2015) Principal $ — $ 300,000 Unamortized debt premium and issuance costs — (5,954 ) — 294,046 Capital lease obligation (6.8%) 724 $ — Total debt and capital lease obligation 1,004,870 1,202,917 Less: Amounts due within one year (11,496 ) (9,250 ) Long-term portion $ 993,374 $ 1,193,667 |
Schedule of Maturities of Long-term Debt | Minimum debt repayments under the New First Lien Term Loan are due as follows: (In thousands) 2017 $ 9,988 2018 9,988 2019 9,988 2020 9,988 2021 9,988 2022 and thereafter $ 948,813 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Basic and diluted net loss per share | Below are basic and diluted net loss per share for the periods indicated: Successor (In thousands, except share data) From November 4, 2016 through December 31, 2016 Numerator: Net loss attributable to Class A shareholders $ (4,404 ) Denominator: Weighted-average Class A shares outstanding - basic 97,791,658 (1 ) Net loss per Class A share - basic and diluted $ (0.05 ) (1) Excludes the weighted average impact of 2,573,386 shares due to the potential exercise of outstanding warrants because the net effect of their inclusion would be anti-dilutive. |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | The income tax expense (benefit) consisted of the following: 2016 (In thousands) November 4, 2016 January 1, 2016 (Successor) (Predecessor) Current tax expense (benefit) Federal $ 9 $ 35 State and local 43 12 Total Current $ 52 $ 47 Deferred tax expense (benefit) Federal $ (6,751 ) $ 343 State and local (1,063 ) 49 Total Deferred $ (7,814 ) $ 392 Income tax expense (benefit), net $ (7,762 ) $ 439 |
Schedule of Effective Income Tax Rate Reconciliation | For the periods from November 4 through December 31, 2016 (Successor) and January 1 through November 3, 2016 (Predecessor), the effective income tax rate differs from the federal statutory income tax rate as explained below: 2016 November 4, 2016 January 1, 2016 (Successor) (Predecessor) U. S. federal statutory income tax rate 35.0 % 35.0 % State and local income taxes, net of federal benefit 4.1 0.1 Income attributable to noncontrolling interest (8.8 ) — Nontaxable partnerships — (34.4 ) Valuation allowance 17.2 — Other/permanent differences 0.3 — Effective income tax rate 47.8 % 0.7 % |
Schedule of Deferred Tax Assets and Liabilities | Details of the Company’s deferred tax assets and liabilities are summarized as follows: 2016 2015 (In thousands) December 31, 2016 December 31, 2015 (Successor) (Predecessor) Deferred tax assets Imputed interest $ 10,113 $ — Net operating loss carryforwards 9,574 — Tax credits 2,019 — Other 1,472 — Subtotal $ 23,178 $ — Valuation allowance (205 ) — Total deferred tax assets $ 22,973 $ — Deferred tax liabilities Investment in partnership (363,439 ) — Property and equipment (1,857 ) — Goodwill and intangible assets (11,474 ) — Total deferred tax liabilities $ (376,770 ) $ — Total deferred tax assets and liabilities $ (353,797 ) $ — |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Non-Cancellable Rental Payments | Future minimum non-cancellable rental payments as of December 31, 2016 are as follows: (In thousands) 2017 $ 2,042 2018 2,017 2019 568 2020 — 2021 — Thereafter — Total $ 4,627 |
Schedule of Future Minimum Lease Payments Under Capital Leases | Future minimum lease payments under capital leases were as follows: (In thousands) 2017 $ 200 2018 200 2019 200 2020 200 2021 33 Thereafter — Total $ 833 |
Schedule of Long-term Purchase Commitments | Contractual Commitments Total Committed Commitments within 1 year Commitments beyond 1 year Ingredients $ 79.0 $ 71.0 $ 8.0 Packaging $ 12.0 $ 9.0 $ 3.0 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Fair Value of Compensation | The Company determined the fair value of this compensation as follows: (In thousands, except share data) Number of Class B units granted 2,496 Closing price of equivalent shares of Class A common stock on date of grant $ 11.40 28,454 Discount for lack of marketability 6 % $ 26,747 |
Unaudited Quarterly Financial36
Unaudited Quarterly Financial Data (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of Quarterly Financial Data | Summarized quarterly financial data: (In thousands) Successor Predecessor From November 4, 2016 through December 31, 2016 From October 1, 2016 through November 3, 2016 Quarter Ended September 30, 2016 Quarter Ended June 30, 2016 Quarter Ended March 31, 2016 Net revenue $ 111,998 $ 66,831 $ 196,197 $ 192,342 $ 160,218 Operating income (9,607 ) (15,022 ) 47,661 52,590 37,643 Net income (loss) (8,485 ) (21,084 ) 33,509 29,465 18,535 Loss) per Class A share: Basic $ (0.05 ) Diluted $ (0.05 ) Year Ended December 31, 2015 Quarter Ended December 31, 2015 Quarter Ended September 30, 2015 Quarter Ended June 30, 2015 Quarter Ended March 31, 2015 Total revenue $ 620,815 $ 147,026 $ 158,212 $ 168,887 $ 146,690 Income from operations 155,908 35,295 31,598 47,487 41,528 Net income (loss) $ 88,760 $ 17,155 $ (4,066 ) $ 43,234 $ 32,437 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies - Description of Business (Details) | 12 Months Ended |
Dec. 31, 2016segment | |
Accounting Policies [Abstract] | |
Number of reportable segments | 2 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Principles of Consolidation (Details) | 2 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Ownership percentage in the general partnership | 100.00% |
Summary of Significant Accoun39
Summary of Significant Accounting Policies - Management Profits Interest Plan (Predecessor) (Details) $ / shares in Units, $ in Thousands | Mar. 18, 2016USD ($)$ / sharesshares | Mar. 31, 2016shares | Nov. 03, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Dec. 31, 2013classshares | Dec. 31, 2016class |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Common units, number of classes | class | 2 | ||||||
Predecessor | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Ownership interest, percentage | 9.00% | ||||||
Common units, number of classes | class | 3 | ||||||
Ownership percentage in the predecessor | 9.00% | 7.00% | |||||
Deferred partner distributions | $ 21,900 | ||||||
Current restricted cash balance | 4,655 | ||||||
Long-term restricted cash balance | 17,225 | ||||||
Predecessor | Class C Units | Executive Chairman | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Authorized units (shares) | shares | 916,096 | ||||||
Predecessor | Class C Units | Management | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting rate of units | 20.00% | ||||||
Predecessor | Class A Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Authorized units (shares) | shares | 1,652,759 | 1,282,534 | |||||
Number of Class A units issued (shares) | shares | 370,225 | ||||||
Predecessor | Class B Units | General and administrative | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Unit-based compensation expense | $ 3,900 | $ 1,400 | $ 400 | ||||
Expense due to a grant agreement provision which caused the accelerated vesting of units | $ 3,200 | ||||||
Predecessor | Class B Units | Management | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Authorized units (shares) | shares | 1,652,759,000 | 1,282,534 | |||||
Number of Class B units granted (shares) | shares | 593,630 | 593,630 | |||||
Vesting period of units | 5 years | ||||||
Unit value (usd per share) | $ / shares | $ 4.25 | $ 4.25 | |||||
Total estimated grant date fair value | $ 2,500 |
Summary of Significant Accoun40
Summary of Significant Accounting Policies - Schedule of Nonvested Units Activity (Details) - Predecessor - Class B Units - Management - $ / shares | Mar. 18, 2016 | Nov. 03, 2016 |
Units | ||
Beginning balance at January 1, 2016 (shares) | 368,332 | |
Granted (shares) | 593,630 | 593,630 |
Vested (shares) | (50,845) | |
Forfeited (shares) | 0 | |
Redeemed (shares) | (911,117) | |
Nonvested at November 3, 2016 (shares) | 0 | |
Weighted Average Grant Date Fair Value | ||
Beginning balance at January 1, 2016 (usd per share) | $ 2.87 | |
Granted (usd per share) | $ 4.25 | 4.25 |
Vested (usd per share) | 1.61 | |
Forfeited (usd per share) | 0 | |
Redeemed (usd per share) | (3.84) | |
Nonvested at November 3, 2016 (usd per share) | $ 0 |
Summary of Significant Accoun41
Summary of Significant Accounting Policies - Employee Benefit Plans (Details) - USD ($) $ in Millions | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Predecessor | ||||
Business Acquisition, Contingent Consideration [Line Items] | ||||
Amounts contributed to the plan | $ 6.3 | $ 5.8 | $ 5.4 | |
Accrual of annual incentive plan | $ 1.5 | |||
Successor | ||||
Business Acquisition, Contingent Consideration [Line Items] | ||||
Amounts contributed to the plan | $ 1 | |||
Accrual of annual incentive plan | 5.9 | |||
Successor | Changes on certain ownership levels | ||||
Business Acquisition, Contingent Consideration [Line Items] | ||||
Total that could be payable in the future under the plan | $ 2.6 |
Summary of Significant Accoun42
Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 89,200 | $ 68,500 |
Reserve to cover allowances for damages occurring during shipment, quality claims and doubtful accounts | 1,900 | 2,000 |
Successor | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | 89,237 | |
Customer trade allowances | $ 36,691 | |
Predecessor | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | 68,518 | |
Customer trade allowances | $ 29,638 |
Summary of Significant Accoun43
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Successor | ||
Inventory [Line Items] | ||
Ingredients and packaging | $ 12,712 | |
Finished goods | 14,229 | |
Inventory in transit to customers | 3,503 | |
Inventories | $ 30,444 | |
Predecessor | ||
Inventory [Line Items] | ||
Ingredients and packaging | $ 12,353 | |
Finished goods | 10,054 | |
Inventory in transit to customers | 2,723 | |
Inventories | $ 25,130 |
Summary of Significant Accoun44
Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands | 10 Months Ended | 12 Months Ended | ||
Nov. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Predecessor | ||||
Property, Plant and Equipment [Line Items] | ||||
Impairment loss related to equipment | $ 7,300 | $ 2,700 | $ 13,241 | |
Building and land improvements | Minimum | ||||
Property, Plant and Equipment [Line Items] | ||||
Estimated useful lives | 10 years | |||
Building and land improvements | Maximum | ||||
Property, Plant and Equipment [Line Items] | ||||
Estimated useful lives | 50 years | |||
Machinery and equipment | Predecessor | ||||
Property, Plant and Equipment [Line Items] | ||||
Impairment loss related to equipment | $ 7,300 | |||
Machinery and equipment | Minimum | ||||
Property, Plant and Equipment [Line Items] | ||||
Estimated useful lives | 3 years | |||
Machinery and equipment | Maximum | ||||
Property, Plant and Equipment [Line Items] | ||||
Estimated useful lives | 20 years |
Summary of Significant Accoun45
Summary of Significant Accounting Policies - Software Costs (Details) - USD ($) $ in Millions | 2 Months Ended | 10 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Capitalized Computer Software [Line Items] | |||||
Capitalized software, estimated useful life | 5 years | ||||
Successor | |||||
Capitalized Computer Software [Line Items] | |||||
Capitalized software | $ 7.4 | $ 7.4 | |||
Software amortization expense | $ 0.3 | ||||
Predecessor | |||||
Capitalized Computer Software [Line Items] | |||||
Capitalized software | $ 6.5 | ||||
Software amortization expense | $ 1.5 | $ 1.4 | $ 1 |
Summary of Significant Accoun46
Summary of Significant Accounting Policies - Bakery Shutdown Costs (Details) - USD ($) $ in Millions | 10 Months Ended | 12 Months Ended |
Nov. 03, 2016 | Dec. 31, 2015 | |
Predecessor | ||
Restructuring Cost and Reserve [Line Items] | ||
Bakery shutdown costs | $ 0.3 | $ 1.2 |
Summary of Significant Accoun47
Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Billions | Dec. 31, 2016 | Dec. 31, 2015 |
Successor | Fair value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Debt | $ 1 | |
Successor | Cost | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Debt | $ 1 | |
Predecessor | Fair value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Debt | $ 1.2 | |
Predecessor | Cost | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Debt | $ 1.2 |
Summary of Significant Accoun48
Summary of Significant Accounting Policies - Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Successor | ||
Goodwill [Line Items] | ||
Goodwill | $ 588,460 | |
Predecessor | ||
Goodwill [Line Items] | ||
Goodwill | $ 56,992 | |
Trademarks and Trade Names | Successor | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Carrying value of indefinite-lived intangibles | 1,408,848 | |
Trademarks and Trade Names | Predecessor | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Carrying value of indefinite-lived intangibles | 254,681 | |
Customer Relationships | Successor | ||
Finite-Lived Intangible Assets [Line Items] | ||
Definite-lived intangible assets | $ 538,100 | |
Customer Relationships | Predecessor | ||
Finite-Lived Intangible Assets [Line Items] | ||
Definite-lived intangible assets | $ 8,900 |
Summary of Significant Accoun49
Summary of Significant Accounting Policies - Reserves for Self-Insurance Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Self Insurance Reserve [Line Items] | ||
Stop-loss amount | $ 300 | |
Predecessor | ||
Self Insurance Reserve [Line Items] | ||
Reserve for healthcare claims | $ 1,643 | |
Reserve for workers’ compensation claims | $ 1,364 | |
Successor | ||
Self Insurance Reserve [Line Items] | ||
Reserve for healthcare claims | 1,720 | |
Reserve for workers’ compensation claims | $ 1,321 |
Summary of Significant Accoun50
Summary of Significant Accounting Policies - Customer Concentration Risk (Details) - Customer concentration risk - Net revenues | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 20.00% | |||
Successor | Sweet Baked Goods | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 19.30% | |||
Successor | Other | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 0.70% | |||
Predecessor | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 21.60% | 21.00% | 24.00% | |
Predecessor | Sweet Baked Goods | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 20.20% | 21.00% | 24.00% | |
Predecessor | Other | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 1.40% | 0.00% | 0.00% |
Summary of Significant Accoun51
Summary of Significant Accounting Policies - Advertising and Marketing Costs (Details) - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Marketing and Advertising [Line Items] | ||||
Advertising and marketing costs | $ 5,245 | |||
Predecessor | ||||
Marketing and Advertising [Line Items] | ||||
Advertising and marketing costs | $ 30,626 | $ 31,967 | $ 32,197 |
Summary of Significant Accoun52
Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Income Taxes [Line Items] | ||||
Income tax expense (benefit) | $ (7,762) | |||
Pretax book income (loss) | $ (16,247) | |||
U.S. federal statutory rate | 35.00% | |||
Predecessor | ||||
Income Taxes [Line Items] | ||||
Income tax expense (benefit) | $ 439 | $ 0 | $ 0 | |
Pretax book income (loss) | $ 60,864 | $ 88,760 | $ 81,464 | |
U.S. federal statutory rate | 35.00% |
Business Combinations - Conside
Business Combinations - Consideration Paid (Details) - Hostess Holdings $ in Thousands | Nov. 03, 2016USD ($) |
Business Acquisition [Line Items] | |
Cash paid | $ 479,761 |
Equity consideration paid to Selling Equityholders | 239,323 |
Tax receivable arrangement payable to Selling Equityholders | 164,697 |
Total consideration | 883,781 |
Hostess Holdings debt assumed by Gores Holdings, Inc | 1,228,254 |
Noncontrolling interest | 326,601 |
Estimated fair value of the Business Combination | $ 2,438,636 |
Business Combinations - Consi54
Business Combinations - Consideration Paid (Footnotes) (Details) - Hostess Holdings $ / shares in Units, $ in Thousands | Nov. 03, 2016USD ($)$ / sharesshares |
Equity consideration paid to the Legacy Hostess Equityholders: | |
Fair value per share (usd per share) | $ 10.83 |
Noncontrolling interest: | |
Fair value per share (usd per share) | 10.83 |
Per share price based on average market price on the day of the Business Combination (usd per share) | $ 11.40 |
Noncontrolling interest | $ | $ 326,601 |
Discount for lack of marketability | 5.00% |
Tax Receivable Arrangement, tax savings percent owed | 85.00% |
Tax Receivable Arrangement, term (more than) | 15 years |
Tax Receivable Arrangement, tax savings percent retained | 15.00% |
Class B | |
Equity consideration paid to the Legacy Hostess Equityholders: | |
Equity interest, number of shares | shares | 5,446,000 |
Noncontrolling interest: | |
Equity interest, number of shares | shares | 5,446,000 |
Per share price based on average market price on the day of the Business Combination (usd per share) | $ 11.40 |
Noncontrolling interest | $ | $ 62,086 |
Subject to Six Month Sales Restriction | Class B | |
Equity consideration paid to the Legacy Hostess Equityholders: | |
Equity interest, number of shares | shares | 24,424,259 |
Fair value per share (usd per share) | $ 10.83 |
Noncontrolling interest: | |
Equity interest, number of shares | shares | 24,424,259 |
Fair value per share (usd per share) | $ 10.83 |
Noncontrolling interest | $ | $ 264,515 |
Subject to Six Month Sales Restriction | Class A | |
Equity consideration paid to the Legacy Hostess Equityholders: | |
Equity interest, number of shares | shares | 22,098,139 |
Fair value per share (usd per share) | $ 10.83 |
Equity consideration paid | $ | $ 239,323 |
Noncontrolling interest: | |
Equity interest, number of shares | shares | 22,098,139 |
Fair value per share (usd per share) | $ 10.83 |
Business Combinations - Additio
Business Combinations - Additional Information (Details) - USD ($) $ in Thousands | Nov. 03, 2016 | May 10, 2016 | Nov. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2016 | Sep. 30, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Successor | |||||||||
Business Acquisition [Line Items] | |||||||||
Business combination transaction costs | $ 0 | ||||||||
Deferred underwriting costs | 13,125 | ||||||||
Purchase of stock, net of cash acquired | 421,242 | ||||||||
Predecessor | |||||||||
Business Acquisition [Line Items] | |||||||||
Business combination transaction costs | $ 31,832 | $ 0 | $ 0 | ||||||
Deferred underwriting costs | 0 | 0 | 0 | ||||||
Purchase of stock, net of cash acquired | 49,735 | $ 0 | $ 0 | ||||||
Hostess Holdings | |||||||||
Business Acquisition [Line Items] | |||||||||
Discount for lack of marketability | 5.00% | ||||||||
Sales restriction, period | 6 months | ||||||||
Deferred underwriting costs | $ 13,100 | ||||||||
Repayment of working capital loan | $ 200 | ||||||||
Hostess Holdings | Gores Holdings | |||||||||
Business Acquisition [Line Items] | |||||||||
Business combination transaction costs | $ 6,700 | 4,000 | |||||||
Hostess Holdings | Predecessor | |||||||||
Business Acquisition [Line Items] | |||||||||
Business combination transaction costs | 31,300 | ||||||||
Superior | Successor | |||||||||
Business Acquisition [Line Items] | |||||||||
Net revenue of acquiree | 6,800 | ||||||||
Net income (loss) of acquiree | $ (100) | ||||||||
Superior | Predecessor | |||||||||
Business Acquisition [Line Items] | |||||||||
Business combination transaction costs | 600 | ||||||||
Total consideration | $ 51,100 | ||||||||
Purchase of stock, net of cash acquired | $ 49,700 | ||||||||
Working capital and other purchase price adjustments | $ 100 | ||||||||
Purchase price adjustments | $ 400 | ||||||||
Net revenue of acquiree | 19,900 | ||||||||
Net income (loss) of acquiree | $ 700 |
Business Combinations - Purchas
Business Combinations - Purchase Price Allocation (Details) - USD ($) $ in Thousands | Nov. 03, 2016 | Dec. 31, 2016 | May 10, 2016 | Dec. 31, 2015 |
Predecessor | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 56,992 | |||
Customer Relationships | ||||
Business Acquisition [Line Items] | ||||
Estimated useful lives | 22 years 6 months | |||
Customer Relationships | Minimum | Predecessor | ||||
Business Acquisition [Line Items] | ||||
Estimated useful lives | 18 years | |||
Customer Relationships | Maximum | Predecessor | ||||
Business Acquisition [Line Items] | ||||
Estimated useful lives | 23 years | |||
Hostess Holdings | ||||
Business Acquisition [Line Items] | ||||
Total assets acquired and liabilities assumed | $ 2,438,636 | |||
Hostess Holdings | Predecessor | ||||
Business Acquisition [Line Items] | ||||
Cash | 58,519 | |||
Accounts receivable | 58,474 | |||
Inventories | 39,338 | |||
Prepaids and other assets | 2,998 | |||
Property and equipment | 155,076 | |||
Goodwill | 588,460 | |||
Accounts payable and accrued expenses | (56,197) | |||
Deferred tax liabilities | (358,891) | |||
Trade name and trademarks | 1,408,848 | |||
Customer relationships | 542,011 | |||
Total assets acquired and liabilities assumed | $ 2,438,636 | |||
Superior | Predecessor | ||||
Business Acquisition [Line Items] | ||||
Cash | $ 1,009 | |||
Accounts receivable | 2,122 | |||
Inventories | 2,300 | |||
Prepaids and other assets | 112 | |||
Property and equipment | 7,075 | |||
Intangible assets | 29,370 | |||
Goodwill | 24,227 | |||
Accounts payable | (2,920) | |||
Accrued expenses | (552) | |||
Capital lease obligation | (799) | |||
Deferred tax liabilities | (10,844) | |||
Total assets acquired and liabilities assumed | $ 51,100 |
Business Combinations - Pro For
Business Combinations - Pro Forma Information (Details) - Hostess Holdings - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Business Acquisition [Line Items] | ||
Net Revenue | $ 727,586 | $ 620,815 |
Net Income | $ 82,442 | $ 44,604 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Successor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 154,830 | |
Less accumulated depreciation | (1,606) | |
Property and equipment, net | 153,224 | |
Depreciation expense | 1,600 | |
Predecessor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 140,985 | |
Less accumulated depreciation | (12,907) | |
Property and equipment, net | 128,078 | |
Depreciation expense | 7,600 | 7,800 |
Land and buildings | Successor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 30,275 | |
Land and buildings | Predecessor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 27,936 | |
Machinery and equipment | Successor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 112,221 | |
Machinery and equipment | Predecessor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 109,800 | |
Construction in progress | Successor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 12,334 | |
Construction in progress | Predecessor | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 3,249 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 10 Months Ended | 12 Months Ended | ||||||||
Nov. 03, 2016USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Nov. 03, 2016USD ($) | Dec. 31, 2016USD ($)segment | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Segment Reporting [Abstract] | |||||||||||||
Number of reportable segments | segment | 2 | ||||||||||||
Successor | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Net revenue | $ 111,998 | ||||||||||||
Depreciation & amortization | 5,843 | ||||||||||||
Gross profit | 38,714 | ||||||||||||
Capital expenditures | 7,627 | ||||||||||||
Total segment assets | 2,847,892 | $ 2,847,892 | |||||||||||
Successor | Sweet Baked Goods | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Net revenue | 101,319 | ||||||||||||
Depreciation & amortization | 5,245 | ||||||||||||
Gross profit | 36,524 | ||||||||||||
Capital expenditures | 7,544 | ||||||||||||
Total segment assets | 2,633,758 | 2,633,758 | |||||||||||
Successor | Other | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Net revenue | 10,679 | ||||||||||||
Depreciation & amortization | 598 | ||||||||||||
Gross profit | 2,190 | ||||||||||||
Capital expenditures | 83 | ||||||||||||
Total segment assets | $ 214,134 | $ 214,134 | |||||||||||
Predecessor | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Net revenue | $ 66,831 | $ 196,197 | $ 192,342 | $ 160,218 | $ 147,026 | $ 158,212 | $ 168,887 | $ 146,690 | $ 615,588 | $ 620,815 | $ 554,695 | ||
Depreciation & amortization | 10,265 | 9,836 | 7,113 | ||||||||||
Gross profit | 266,529 | 262,203 | 233,932 | ||||||||||
Capital expenditures | 31,477 | 27,252 | 56,452 | ||||||||||
Total segment assets | 643,529 | 643,529 | |||||||||||
Predecessor | Sweet Baked Goods | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Net revenue | 569,086 | 609,895 | 554,695 | ||||||||||
Depreciation & amortization | 9,221 | 9,836 | 7,113 | ||||||||||
Gross profit | 252,432 | 258,248 | 233,932 | ||||||||||
Capital expenditures | 31,254 | 27,252 | 56,452 | ||||||||||
Total segment assets | 641,201 | 641,201 | |||||||||||
Predecessor | Other | |||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||
Net revenue | 46,502 | 10,920 | 0 | ||||||||||
Depreciation & amortization | 1,044 | 0 | 0 | ||||||||||
Gross profit | 14,097 | 3,955 | 0 | ||||||||||
Capital expenditures | $ 223 | 0 | $ 0 | ||||||||||
Total segment assets | $ 2,328 | $ 2,328 |
Goodwill and Intangible Asset60
Goodwill and Intangible Assets - Goodwill Activity (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Predecessor | |
Goodwill [Roll Forward] | |
Balance as of beginning of period | $ 56,992 |
Elimination of Predecessor goodwill | (81,219) |
Predecessor | Superior | |
Goodwill [Roll Forward] | |
Business combination | 24,227 |
Successor | |
Goodwill [Roll Forward] | |
Balance as of end of period | 588,460 |
Successor | Hostess Holdings | |
Goodwill [Roll Forward] | |
Business combination | 588,460 |
Sweet Baked Goods | Predecessor | |
Goodwill [Roll Forward] | |
Balance as of beginning of period | 56,992 |
Elimination of Predecessor goodwill | (56,992) |
Sweet Baked Goods | Predecessor | Superior | |
Goodwill [Roll Forward] | |
Business combination | 0 |
Sweet Baked Goods | Successor | |
Goodwill [Roll Forward] | |
Balance as of end of period | 518,759 |
Sweet Baked Goods | Successor | Hostess Holdings | |
Goodwill [Roll Forward] | |
Business combination | 518,759 |
Other | Predecessor | |
Goodwill [Roll Forward] | |
Balance as of beginning of period | 0 |
Elimination of Predecessor goodwill | (24,227) |
Other | Predecessor | Superior | |
Goodwill [Roll Forward] | |
Business combination | 24,227 |
Other | Successor | |
Goodwill [Roll Forward] | |
Balance as of end of period | 69,701 |
Other | Successor | Hostess Holdings | |
Goodwill [Roll Forward] | |
Business combination | $ 69,701 |
Goodwill and Intangible Asset61
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of customer relationships | $ 3,922 | |||
Intangible assets, net | 1,946,943 | |||
Predecessor | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of customer relationships | $ 1,185 | $ 851 | $ 623 | |
Intangible assets, net | 263,579 | |||
Customer Relationships | Successor | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets with definite lives (Customer Relationships) | 542,011 | |||
Less accumulated amortization (Customer Relationships) | (3,916) | |||
Customer Relationships | Predecessor | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets with definite lives (Customer Relationships) | 10,598 | |||
Less accumulated amortization (Customer Relationships) | (1,700) | |||
Trademarks and Trade Names | Successor | ||||
Indefinite-lived Intangible Assets [Line Items] | ||||
Intangible assets with indefinite lives (Trademarks and Trade Names) | $ 1,408,848 | |||
Trademarks and Trade Names | Predecessor | ||||
Indefinite-lived Intangible Assets [Line Items] | ||||
Intangible assets with indefinite lives (Trademarks and Trade Names) | $ 254,681 |
Goodwill and Intangible Asset62
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands | Nov. 03, 2016 | Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Successor | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Amortization expense | $ 3,922 | |||||
Successor | Trademarks and Trade Names | ||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||
Carrying value of indefinite-lived intangibles | 1,408,848 | $ 1,408,848 | ||||
Predecessor | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Amortization expense | $ 1,185 | $ 851 | $ 623 | |||
Predecessor | Trademarks and Trade Names | ||||||
Indefinite-lived Intangible Assets [Line Items] | ||||||
Carrying value of indefinite-lived intangibles | 254,681 | |||||
Customer Relationships | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted-average amortization period | 22 years 6 months | |||||
Customer Relationships | Minimum | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Remaining amortization period | 18 years | |||||
Customer Relationships | Maximum | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Remaining amortization period | 23 years | |||||
Customer Relationships | Successor | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Net carrying value | $ 538,100 | $ 538,100 | ||||
Customer Relationships | Predecessor | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Net carrying value | $ 8,900 | |||||
Customer Relationships | Predecessor | Minimum | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted-average amortization period | 18 years | |||||
Customer Relationships | Predecessor | Maximum | ||||||
Finite-Lived Intangible Assets [Line Items] | ||||||
Weighted-average amortization period | 23 years |
Goodwill and Intangible Asset63
Goodwill and Intangible Assets - Future Amortization (Details) - Customer Relationships $ in Thousands | Dec. 31, 2016USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
2,017 | $ 23,977 |
2,018 | 23,977 |
2,019 | 23,977 |
2,020 | 23,977 |
2,021 | 23,977 |
2022 and thereafter | $ 418,087 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Successor | ||
Accrued Expenses [Line Items] | ||
Payroll, vacation and other compensation | $ 11,489 | |
Self-insurance reserves | 1,720 | |
Accrued interest | 4,885 | |
Taxes, management fees, and other | 921 | |
Workers compensation reserve | 1,321 | |
Deferred revenue and litigation | 1,320 | |
Accrued expenses and other current liabilities | $ 21,656 | |
Predecessor | ||
Accrued Expenses [Line Items] | ||
Payroll, vacation and other compensation | $ 4,521 | |
Self-insurance reserves | 1,643 | |
Accrued interest | 11,730 | |
Taxes, management fees, and other | 1,330 | |
Workers compensation reserve | 1,364 | |
Deferred revenue and litigation | 574 | |
Accrued expenses and other current liabilities | $ 21,162 |
Tax Receivable Agreement (Detai
Tax Receivable Agreement (Details) - Hostess Holdings $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Business Acquisition [Line Items] | |
Significant inputs, tax savings rate | 40.00% |
Significant inputs, imputed interest rate | 8.00% |
Future expected payments under the Tax Receivable Arrangement: | |
2,017 | $ 0 |
2,018 | 13,838 |
2,019 | 9,744 |
2,020 | 9,475 |
2,021 | 9,236 |
Thereafter | $ 123,091 |
Debt - Schedule of Long-Term De
Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Nov. 18, 2016 | Dec. 31, 2015 |
Term Loan | First Lien Term Loan (4.0% as of December 31, 2016) | |||
Debt Instrument [Line Items] | |||
Interest rate on aggregate principal balance (as percent) | 0.25% | 0.25% | |
Capital lease obligation | |||
Debt Instrument [Line Items] | |||
Interest rate on aggregate principal balance (as percent) | 6.80% | ||
Successor | |||
Debt Instrument [Line Items] | |||
Capital lease obligation (6.8%) | $ 724 | ||
Total debt and capital lease obligation | 1,004,870 | ||
Less: Amounts due within one year | (11,496) | ||
Long-term portion | 993,374 | ||
Successor | Term Loan | First Lien Term Loan (4.0% as of December 31, 2016) | |||
Debt Instrument [Line Items] | |||
Principal | 998,750 | ||
Unamortized debt premium and issuance costs | 5,396 | ||
Long-term debt | $ 1,004,146 | ||
Effective rate (as percent) | 4.00% | ||
Successor | Term Loan | Second Lien Term Loan (8.5% as of December 31, 2015) | |||
Debt Instrument [Line Items] | |||
Principal | $ 0 | ||
Unamortized debt premium and issuance costs | 0 | ||
Long-term debt | $ 0 | ||
Predecessor | |||
Debt Instrument [Line Items] | |||
Capital lease obligation (6.8%) | $ 0 | ||
Total debt and capital lease obligation | 1,202,917 | ||
Less: Amounts due within one year | (9,250) | ||
Long-term portion | 1,193,667 | ||
Predecessor | Term Loan | First Lien Term Loan (4.0% as of December 31, 2016) | |||
Debt Instrument [Line Items] | |||
Principal | 922,688 | ||
Unamortized debt premium and issuance costs | (13,817) | ||
Long-term debt | 908,871 | ||
Predecessor | Term Loan | Second Lien Term Loan (8.5% as of December 31, 2015) | |||
Debt Instrument [Line Items] | |||
Principal | 300,000 | ||
Unamortized debt premium and issuance costs | (5,954) | ||
Long-term debt | $ 294,046 | ||
Effective rate (as percent) | 8.50% |
Debt - First and Second Lien Te
Debt - First and Second Lien Term Loans (Details) - USD ($) $ in Thousands | Nov. 18, 2016 | Nov. 18, 2016 | Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Predecessor | Revolver | ||||||
Debt Instrument [Line Items] | ||||||
Deferred financing costs | $ 1,800 | $ 1,800 | ||||
Debt fee amortization | $ 300 | $ 100 | ||||
LIBOR | Minimum | Revolver | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 2.00% | |||||
LIBOR | Maximum | Revolver | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 2.50% | |||||
Base Rate | Revolver | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 1.00% | |||||
Second Lien Term Loan | Predecessor | Revolver | ||||||
Debt Instrument [Line Items] | ||||||
Debt fee amortization | $ 300 | |||||
Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Premiums on debt | $ 7,700 | $ 7,700 | $ 8,900 | |||
Capitalized discount costs | 200 | 200 | ||||
Deferred financing costs | 2,000 | $ 2,000 | ||||
Term Loan | Hostess Brands, LLC | ||||||
Debt Instrument [Line Items] | ||||||
Prepayment penalties | $ 3,000 | |||||
Term Loan | First Lien Term Loan | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate on aggregate principal balance (as percent) | 0.25% | 0.25% | 0.25% | |||
Term Loan | First Lien Term Loan | Hostess Brands, LLC | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount outstanding | $ 915,700 | $ 915,700 | ||||
Term Loan | First Lien Term Loan | Successor | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount outstanding | $ 1,004,146 | 1,004,146 | ||||
Interest rate during the period (as a percent) | 4.50% | 4.00% | ||||
Debt fee amortization | 40 | |||||
Term Loan | First Lien Term Loan | Predecessor | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount outstanding | $ 908,871 | |||||
Interest rate during the period (as a percent) | 4.50% | |||||
Debt fee amortization | 1,830 | |||||
Term Loan | First Lien Term Loan | LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 1.00% | |||||
Term Loan | First Lien Term Loan | LIBOR Floor | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 3.00% | 3.50% | ||||
Term Loan | First Lien Term Loan | Base Rate | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 2.25% | |||||
Term Loan | First Lien Term Loan | Base Rate | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 2.50% | |||||
Term Loan | Second Lien Term Loan | Hostess Brands, LLC | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount outstanding | $ 83,000 | $ 83,000 | ||||
Term Loan | Second Lien Term Loan | Successor | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount outstanding | $ 0 | 0 | ||||
Interest rate during the period (as a percent) | 8.50% | |||||
Term Loan | Second Lien Term Loan | Predecessor | ||||||
Debt Instrument [Line Items] | ||||||
Aggregate principal amount outstanding | $ 294,046 | |||||
Interest rate during the period (as a percent) | 8.50% | |||||
Debt fee amortization | $ 600 | |||||
Term Loan | Second Lien Term Loan | LIBOR Floor | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 7.50% | |||||
Term Loan | Second Lien Term Loan | Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate (as percent) | 6.50% |
Debt - Schedule of Maturities o
Debt - Schedule of Maturities of Long-term Debt (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Minimum debt repayments: | |
2,017 | $ 9,988 |
2,018 | 9,988 |
2,019 | 9,988 |
2,020 | 9,988 |
2,021 | 9,988 |
2022 and thereafter | $ 948,813 |
Debt - Revolving Credit Facilit
Debt - Revolving Credit Facility (Details) - Revolving Credit Facility - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Aug. 03, 2015 | |
Line of Credit Facility [Line Items] | |||
Line of credit, amount to be issued | $ 100,000,000 | ||
Predecessor | |||
Line of Credit Facility [Line Items] | |||
Debt issuance costs | $ 1,800,000 | ||
Amortization of debt issuance costs | $ 300,000 | $ 100,000 | |
Base Rate | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as percent) | 1.00% | ||
Minimum | |||
Line of Credit Facility [Line Items] | |||
Line of credit, unused capacity, commitment fee (as percent) | 0.375% | ||
Minimum | LIBOR | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as percent) | 2.00% | ||
Maximum | |||
Line of Credit Facility [Line Items] | |||
Line of credit, unused capacity, commitment fee (as percent) | 0.50% | ||
Maximum | LIBOR | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as percent) | 2.50% |
Equity (Details)
Equity (Details) | Jun. 01, 2015$ / sharesshares | Dec. 31, 2016class$ / sharesshares | Dec. 31, 2016classday$ / sharesshares | Nov. 03, 2016shares |
Class of Stock [Line Items] | ||||
Common stock, number of classes | class | 2 | 2 | ||
Period after completion of Business Combination warrants become exercisable | 30 days | |||
Warrants expiration term | 5 years | |||
Warrants redemption price (usd per share) | $ / shares | $ 0.01 | |||
Share price (usd per share) | $ / shares | $ 24 | $ 24 | ||
Warrants trading days threshold | day | 20 | |||
Warrants trading day period before redemption | 30 days | |||
Gores Holdings | ||||
Class of Stock [Line Items] | ||||
Common stock, issued (shares) | 46,875,000 | |||
Common stock, outstanding (shares) | 46,875,000 | |||
Temporary shares outstanding | 46,875,000 | |||
Temporary shares issued | 46,875,000 | |||
Gores Holdings | IPO | ||||
Class of Stock [Line Items] | ||||
Temporary shares outstanding | 37,500,000 | |||
Temporary shares issued | 37,500,000 | |||
Common stock redemption price (usd per share) | $ / shares | $ 10 | |||
Number of shares reclassified to equity | 2,168,404 | |||
Gores Holdings | IPO | Hostess Holdings | ||||
Class of Stock [Line Items] | ||||
Number of shares reclassified to equity | 35,331,596 | |||
Stock redeemed (shares) | 0 | |||
Gores Holdings | Founder Shares | ||||
Class of Stock [Line Items] | ||||
Common stock, issued (shares) | 9,375,000 | |||
Gores Holdings | Founder Shares | Hostess Holdings | ||||
Class of Stock [Line Items] | ||||
Shares canceled during period | 9,375,000 | |||
Public warrants | ||||
Class of Stock [Line Items] | ||||
Warrants outstanding (shares) | 37,500,000 | 37,500,000 | ||
Private placement warrants | ||||
Class of Stock [Line Items] | ||||
Warrants outstanding (shares) | 19,000,000 | 19,000,000 | ||
Common Class A | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (shares) | 200,000,000 | 200,000,000 | ||
Common stock, issued (shares) | 98,250,917 | 98,250,917 | ||
Common stock, outstanding (shares) | 98,250,917 | 98,250,917 | ||
Exercise price of warrant (usd per share) | $ / shares | $ 5.75 | $ 5.75 | ||
Number of shares called by each warrant | 0.5 | 0.5 | ||
Common Class A | Successor | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (shares) | 200,000,000 | 200,000,000 | ||
Common stock, issued (shares) | 98,250,917 | 98,250,917 | ||
Common stock, outstanding (shares) | 98,250,917 | 98,250,917 | ||
Shares issued upon unit conversion (shares) | 661,700 | |||
Common Class B | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (shares) | 50,000,000 | 50,000,000 | ||
Common stock, issued (shares) | 31,704,988 | 31,704,988 | ||
Common stock, outstanding (shares) | 31,704,988 | 31,704,988 | ||
Common Class B | Successor | ||||
Class of Stock [Line Items] | ||||
Common stock, authorized (shares) | 50,000,000 | 50,000,000 | ||
Common stock, issued (shares) | 31,704,988 | 31,704,988 | ||
Common stock, outstanding (shares) | 31,704,988 | 31,704,988 | ||
Units converted (shares) | 661,700 |
Earnings per Share (Details)
Earnings per Share (Details) - Successor $ / shares in Units, $ in Thousands | 2 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Numerator: | |
Net loss attributable to Class A shareholders | $ | $ (4,404) |
Denominator: | |
Weighted-average Class A shares outstanding - basic (shares) | 97,791,658 |
Net loss per Class A share - basic and diluted (in usd per share) | $ / shares | $ (0.05) |
Warrant | |
Denominator: | |
Antidilutive securities | 2,573,386 |
Income Taxes - Components of I
Income Taxes - Components of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||
Current tax expense (benefit) | ||||
Federal | $ 9 | |||
State and local | 43 | |||
Total Current | 52 | |||
Deferred tax expense (benefit) | ||||
Federal | (6,751) | |||
State and local | (1,063) | |||
Total Deferred | (7,814) | |||
Income tax expense (benefit), net | $ (7,762) | |||
Predecessor | ||||
Current tax expense (benefit) | ||||
Federal | $ 35 | |||
State and local | 12 | |||
Total Current | 47 | |||
Deferred tax expense (benefit) | ||||
Federal | 343 | |||
State and local | 49 | |||
Total Deferred | 392 | |||
Income tax expense (benefit), net | $ 439 | $ 0 | $ 0 |
Income Taxes - Effective Incom
Income Taxes - Effective Income Tax Rate Reconciliation (Details) | 2 Months Ended | 10 Months Ended |
Dec. 31, 2016 | Nov. 03, 2016 | |
Successor | ||
Income Taxes [Line Items] | ||
U. S. federal statutory income tax rate | 35.00% | |
State and local income taxes, net of federal benefit | 4.10% | |
Income attributable to noncontrolling interest | (8.80%) | |
Nontaxable partnerships | (0.00%) | |
Valuation allowance | 17.20% | |
Other/permanent differences | 0.30% | |
Effective income tax rate | 47.80% | |
Predecessor | ||
Income Taxes [Line Items] | ||
U. S. federal statutory income tax rate | 35.00% | |
State and local income taxes, net of federal benefit | 0.10% | |
Income attributable to noncontrolling interest | (0.00%) | |
Nontaxable partnerships | (34.40%) | |
Valuation allowance | 0.00% | |
Other/permanent differences | 0.00% | |
Effective income tax rate | 0.70% |
Income Taxes - Deferred Tax As
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Successor | ||
Deferred tax assets | ||
Imputed interest | $ 10,113 | |
Net operating loss carryforwards | 9,574 | |
Tax credits | 2,019 | |
Other | 1,472 | |
Subtotal | 23,178 | |
Valuation allowance | (205) | |
Total deferred tax assets | 22,973 | |
Deferred tax liabilities | ||
Investment in partnership | (363,439) | |
Property and equipment | (1,857) | |
Goodwill and intangible assets | (11,474) | |
Total deferred tax liabilities | (376,770) | |
Total deferred tax assets and liabilities | $ (353,797) | |
Predecessor | ||
Deferred tax assets | ||
Imputed interest | $ 0 | |
Net operating loss carryforwards | 0 | |
Tax credits | 0 | |
Other | 0 | |
Subtotal | 0 | |
Valuation allowance | 0 | |
Total deferred tax assets | 0 | |
Deferred tax liabilities | ||
Investment in partnership | 0 | |
Property and equipment | 0 | |
Goodwill and intangible assets | 0 | |
Total deferred tax liabilities | 0 | |
Total deferred tax assets and liabilities | $ 0 |
Income Taxes - Additional Info
Income Taxes - Additional Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Operating Loss Carryforwards [Line Items] | ||||
Reversal of valuation allowance | $ 2,800,000 | |||
Unrecognized tax benefits that would impact effective tax rate | 0 | $ 0 | ||
Income tax penalties and interest expense | 0 | $ 0 | $ 0 | |
Income tax penalties and interest accrued | 0 | 0 | $ 0 | $ 0 |
Federal Tax Authority | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards | 20,800,000 | 20,800,000 | ||
State Tax Authority | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards | 25,200,000 | 25,200,000 | ||
Operating loss carryforwards due to change in ownership, subject to annual limitation | 25,200,000 | 25,200,000 | ||
Tax credit carryforwards | 2,000,000 | 2,000,000 | ||
C Corporation | Federal Tax Authority | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards | 2,800,000 | 2,800,000 | ||
Operating loss carryforwards subject to annual limitations | 2,800,000 | 2,800,000 | ||
C Corporation | State Tax Authority | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards | 4,200,000 | 4,200,000 | ||
Operating loss carryforwards subject to annual limitations | 4,200,000 | 4,200,000 | ||
C Corporation | State Tax Authority | Operating Loss Carryforwards | ||||
Operating Loss Carryforwards [Line Items] | ||||
Valuation allowance | $ 200,000 | $ 200,000 |
Commitments and Contingencies -
Commitments and Contingencies - Accruals and the Potential Effect of Litigation (Details) $ in Millions | 1 Months Ended |
Nov. 30, 2015USD ($) | |
National Frozen Distribution Consultants, LLC (NFDC) | Breach of Contract | Minimum | |
Loss Contingencies [Line Items] | |
Amount of damages claimed | $ 15 |
Commitments and Contingencies77
Commitments and Contingencies - Lease Commitments, Narrative (Details) - USD ($) $ in Thousands | 2 Months Ended | 10 Months Ended | 12 Months Ended | ||
Dec. 31, 2016 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | May 10, 2016 | |
Successor | |||||
Operating Leased Assets [Line Items] | |||||
Rent expense | $ 300 | ||||
Capital Leased Assets [Line Items] | |||||
Capital lease obligation (6.8%) | 724 | ||||
Predecessor | |||||
Operating Leased Assets [Line Items] | |||||
Rent expense | $ 1,300 | $ 400 | $ 100 | ||
Capital Leased Assets [Line Items] | |||||
Capital lease obligation (6.8%) | $ 0 | ||||
Development Authority of Columbus | Maximum | |||||
Operating Leased Assets [Line Items] | |||||
Tax-exempt bond | $ 18,000 | ||||
Superior | Southbridge, Massachusetts | |||||
Capital Leased Assets [Line Items] | |||||
Capital lease obligation (6.8%) | $ 800 |
Commitments and Contingencies78
Commitments and Contingencies - Future Minimum Operating Lease Payment (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,017 | $ 2,042 |
2,018 | 2,017 |
2,019 | 568 |
2,020 | 0 |
2,021 | 0 |
Thereafter | 0 |
Total | $ 4,627 |
Commitments and Contingencies79
Commitments and Contingencies - Future Minimum Capital Lease Payments (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,017 | $ 200 |
2,018 | 200 |
2,019 | 200 |
2,020 | 200 |
2,021 | 33 |
Thereafter | 0 |
Total | $ 833 |
Commitments and Contingencies80
Commitments and Contingencies - Letters of Credit (Details) - USD ($) $ in Millions | Apr. 30, 2016 | Apr. 30, 2013 |
Standby Letters of Credit | ||
Line of Credit Facility [Line Items] | ||
Line of credit, amount to be issued | $ 1 | $ 1.8 |
Commitments and Contingencies81
Commitments and Contingencies - Product Recall (Details) - Grain Craft Flour - Snack Cakes and Donuts case in Thousands, $ in Millions | Jun. 03, 2016case | Nov. 03, 2016USD ($) |
Product Liability Contingency [Line Items] | ||
Number of product cases recalled | 710 | |
Number of product cases destroyed | 200 | |
Predecessor | ||
Product Liability Contingency [Line Items] | ||
Gain on settlement | $ | $ 0.8 |
Commitments and Contingencies82
Commitments and Contingencies - Contractual Commitments (Details) $ in Millions | Dec. 31, 2016USD ($) |
Ingredients | |
Long-term Purchase Commitment [Line Items] | |
Total Committed | $ 79 |
Commitments within 1 year | 71 |
Commitments beyond 1 year | 8 |
Packaging | |
Long-term Purchase Commitment [Line Items] | |
Total Committed | 12 |
Commitments within 1 year | 9 |
Commitments beyond 1 year | $ 3 |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) - USD ($) | Nov. 03, 2016 | Nov. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Aug. 31, 2015 |
Minimum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 0 | ||||
Maximum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 2,700,000 | ||||
Executive Chairman | |||||
Related Party Transaction [Line Items] | |||||
Compensation expense | $ 3,500,000 | $ 4,300,000 | |||
Rent expense | $ 0 | $ 0 | |||
Executive Chairman | Term Loan | Second Lien Term Loan | |||||
Related Party Transaction [Line Items] | |||||
Aggregate principal amount outstanding | $ 90,000,000 | ||||
Executive Chairman | Common Class B | |||||
Related Party Transaction [Line Items] | |||||
Common stock issued (shares) | 2,496,000 | ||||
Executive Chairman | Hostess Holdings units | |||||
Related Party Transaction [Line Items] | |||||
Fully vested units granted (shares) | 2,496,000 | ||||
Estimated employment expense | $ 300,000 | ||||
Executive Chairman | Hostess Holdings units | Minimum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 0 | ||||
Executive Chairman | Hostess Holdings units | Maximum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 5,500,000 |
Related Party Transactions - Fa
Related Party Transactions - Fair Value of Compensation (Details) - Hostess Holdings units - Executive Chairman $ / shares in Units, $ in Thousands | Nov. 03, 2016USD ($)$ / sharesshares |
Related Party Transaction [Line Items] | |
Number of Class B units granted (shares) | shares | 2,496,000 |
Fair value before discount for lack of marketability | $ 28,454 |
Discount for lack of marketability | 6.00% |
Fair value | $ 26,747 |
Common Class A | |
Related Party Transaction [Line Items] | |
Closing price of equivalent shares of Class A common stock on date of grant (usd per share) | $ / shares | $ 11.40 |
Unaudited Quarterly Financial85
Unaudited Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 10 Months Ended | 12 Months Ended | |||||||
Nov. 03, 2016 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Nov. 03, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Successor | ||||||||||||
Effect of Fourth Quarter Events [Line Items] | ||||||||||||
Net revenue | $ 111,998 | |||||||||||
Operating income | (9,607) | |||||||||||
Net income (loss) | $ (8,485) | |||||||||||
Loss) per Class A share: | ||||||||||||
Basic (usd per share) | $ (0.05) | |||||||||||
Diluted (usd per share) | $ (0.05) | |||||||||||
Predecessor | ||||||||||||
Effect of Fourth Quarter Events [Line Items] | ||||||||||||
Net revenue | $ 66,831 | $ 196,197 | $ 192,342 | $ 160,218 | $ 147,026 | $ 158,212 | $ 168,887 | $ 146,690 | $ 615,588 | $ 620,815 | $ 554,695 | |
Operating income | (15,022) | 47,661 | 52,590 | 37,643 | 35,295 | 31,598 | 47,487 | 41,528 | 122,872 | 155,908 | 119,467 | |
Net income (loss) | $ (21,084) | $ 33,509 | $ 29,465 | $ 18,535 | $ 17,155 | $ (4,066) | $ 43,234 | $ 32,437 | $ 60,425 | $ 88,760 | $ 81,464 |