Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 03, 2017 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
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 | |
Common Class A | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 99,632,183 | |
Common Class B | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 30,398,777 |
Consolidated Balance Sheets
Consolidated Balance Sheets - Successor - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 101,171 | $ 26,855 |
Accounts receivable, net | 100,733 | 89,237 |
Inventories | 33,812 | 30,444 |
Prepaids and other current assets | 6,791 | 4,827 |
Total current assets | 242,507 | 151,363 |
Property and equipment, net | 166,931 | 153,224 |
Intangible assets, net | 1,929,082 | 1,946,943 |
Goodwill | 580,349 | 588,460 |
Other assets, net | 7,804 | 7,902 |
Total assets | 2,926,673 | 2,847,892 |
Current liabilities: | ||
Long-term debt and capital lease obligation payable within one year | 11,357 | 11,496 |
Accounts payable | 53,451 | 34,083 |
Customer trade allowances | 35,150 | 36,691 |
Accrued expenses and other current liabilities | 11,051 | 21,656 |
Total current liabilities | 111,009 | 103,926 |
Long-term debt and capital lease obligation | 988,476 | 993,374 |
Tax receivable agreement | 175,487 | 165,384 |
Deferred tax liability | 366,457 | 353,797 |
Total liabilities | 1,641,429 | 1,616,481 |
Commitments and Contingencies (Note 14) | ||
Additional paid in capital | 923,739 | 912,824 |
Accumulated other comprehensive loss | (43) | 0 |
Retained earnings (accumulated deficit) | 28,593 | (15,618) |
Stockholders’ equity | 952,302 | 897,219 |
Non-controlling interest | 332,942 | 334,192 |
Total liabilities and stockholders’ equity | 2,926,673 | 2,847,892 |
Common Class A | ||
Current liabilities: | ||
Common Stock | 10 | 10 |
Common Class B | ||
Current liabilities: | ||
Common Stock | $ 3 | $ 3 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Common Class A | ||
Common stock, authorized (shares) | 200,000,000 | |
Common stock, issued (shares) | 99,992,183 | 98,250,917 |
Common stock, outstanding (shares) | 99,992,183 | 98,250,917 |
Common Class B | ||
Common stock, authorized (shares) | 50,000,000 | |
Common stock, issued (shares) | 30,398,777 | 31,704,988 |
Common stock, outstanding (shares) | 30,398,777 | 31,704,988 |
Successor | Common Class A | ||
Common stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (shares) | 200,000,000 | 200,000,000 |
Common stock, issued (shares) | 99,992,183 | 98,250,917 |
Common stock, outstanding (shares) | 99,992,183 | 98,250,917 |
Successor | Common Class B | ||
Common stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (shares) | 50,000,000 | 50,000,000 |
Common stock, issued (shares) | 30,398,777 | 31,704,988 |
Common stock, outstanding (shares) | 30,398,777 | 31,704,988 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Other expense: | ||||
Loss on modification of debt | $ (2,100) | $ (1,600) | ||
Successor | ||||
Net revenue | 192,250 | 579,967 | ||
Cost of goods sold | 113,885 | 333,861 | ||
Gross profit | 78,365 | 246,106 | ||
Operating costs and expenses: | ||||
Advertising and marketing | 8,871 | 24,304 | ||
Selling expense | 7,606 | 24,418 | ||
General and administrative | 14,494 | 43,416 | ||
Amortization of customer relationships | 5,994 | 17,860 | ||
Business combination transaction costs | 0 | 0 | ||
Impairment of property and equipment | 1,003 | 1,003 | ||
Related party expenses | 92 | 284 | ||
Tax receivable agreement liability remeasurement | 1,589 | $ 0 | 1,589 | $ 0 |
Recall and other costs (recoveries) | 0 | 0 | ||
Total operating costs and expenses | 39,649 | 112,874 | ||
Operating income | 38,716 | 133,232 | ||
Other expense: | ||||
Interest expense, net | 9,966 | 29,831 | ||
Loss on modification of debt | 2,122 | 1,948 | ||
Other expense | 182 | 1,309 | ||
Total other expense | 12,270 | 33,088 | ||
Income before income taxes | 26,446 | 100,144 | ||
Income tax expense (benefit) | 10,316 | 31,608 | ||
Net income | 16,130 | 68,536 | ||
Less: Net income attributable to the non-controlling interest | 6,581 | 24,325 | ||
Net income attributable to Class A shareholders/partners | $ 9,549 | $ 44,211 | ||
Earnings per Class A share: | ||||
Basic (usd per share) | $ 0.10 | $ 0.45 | ||
Diluted (usd per share) | $ 0.09 | $ 0.42 | ||
Weighted-average shares outstanding: | ||||
Basic (shares) | 99,557,183 | 98,920,808 | ||
Diluted (shares) | 105,418,566 | 105,840,673 | ||
Predecessor | ||||
Net revenue | 196,197 | 548,757 | ||
Cost of goods sold | 113,618 | 309,427 | ||
Gross profit | 82,579 | 239,330 | ||
Operating costs and expenses: | ||||
Advertising and marketing | 10,381 | 27,529 | ||
Selling expense | 8,271 | 23,175 | ||
General and administrative | 10,784 | 32,015 | ||
Amortization of customer relationships | 156 | 468 | ||
Business combination transaction costs | 4,049 | 7,065 | ||
Impairment of property and equipment | 0 | 7,267 | ||
Related party expenses | 1,058 | 3,431 | ||
Recall and other costs (recoveries) | (3,787) | 473 | ||
Total operating costs and expenses | 30,912 | 101,423 | ||
Operating income | 51,667 | 137,907 | ||
Other expense: | ||||
Interest expense, net | 18,004 | 53,746 | ||
Loss on modification of debt | 0 | 0 | ||
Other expense | 173 | 2,344 | ||
Total other expense | 18,177 | 56,090 | ||
Income before income taxes | 33,490 | 81,817 | ||
Income tax expense (benefit) | (23) | 294 | ||
Net income | 33,513 | 81,523 | ||
Less: Net income attributable to the non-controlling interest | 2,329 | $ 4,110 | ||
Net income attributable to Class A shareholders/partners | $ 31,184 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Successor | ||||
Net income | $ 16,130 | $ 68,536 | ||
Other comprehensive loss: | ||||
Unrealized income (loss) on interest rate swap contract designated as a cash flow hedge | 565 | (100) | ||
Income tax (expense) benefit | (172) | 31 | ||
Comprehensive income | 16,523 | 68,467 | ||
Less: Comprehensive income attributed to non-controlling interest | 6,712 | 24,299 | ||
Comprehensive income attributed to class A shareholders/partners | $ 9,811 | $ 44,168 | ||
Predecessor | ||||
Net income | $ 33,513 | $ 81,523 | ||
Other comprehensive loss: | ||||
Unrealized income (loss) on interest rate swap contract designated as a cash flow hedge | 0 | 0 | ||
Income tax (expense) benefit | 0 | 0 | ||
Comprehensive income | 33,513 | 81,523 | ||
Less: Comprehensive income attributed to non-controlling interest | 2,329 | 4,110 | ||
Comprehensive income attributed to class A shareholders/partners | $ 31,184 | $ 77,413 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) $ in Thousands | Total | Class A | Class B | Common StockClass A | Common StockClass B | Common StockClass C | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Losses / Retained Earnings | Total Partners'/Stockholders’ Equity (Deficit) | Non-controlling Interest |
Balance – December 31, 2015 (Predecessor) at Dec. 31, 2015 | $ (276,084) | $ (346,046) | $ (622,130) | $ (37,991) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Distributions to partners | Predecessor | (2,439) | (8,134) | (10,573) | (555) | |||||||
Unit based compensation | Predecessor | 345 | 344 | 689 | 0 | |||||||
Net income | Predecessor | $ 81,523 | 38,707 | 38,706 | 4,110 | |||||||
Net Income (Loss) Attributable to Parent | Predecessor | 77,413 | ||||||||||
Balance – September 30, 2016 (Predecessor) at Sep. 30, 2016 | $ (239,471) | $ (315,130) | (554,601) | (34,436) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Comprehensive income | Predecessor | 81,523 | ||||||||||
Comprehensive income attributed to non-controlling interest | Predecessor | 4,110 | ||||||||||
Net income | Successor | 68,536 | ||||||||||
Net Income (Loss) Attributable to Parent | Successor | 44,211 | ||||||||||
Balance - December 31, 2016 (shares) (Successor) at Dec. 31, 2016 | 98,250,917 | 31,704,988 | 98,250,917 | 31,704,988 | |||||||
Balance - December 31, 2016 (shares) at Dec. 31, 2016 | 98,250,917 | 31,704,988 | |||||||||
Balance–December 31, 2016 (Successor) at Dec. 31, 2016 | $ 10 | $ 3 | $ 912,824 | $ 0 | $ (15,618) | 897,219 | 334,192 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Comprehensive income | Successor | 68,467 | (43) | 44,211 | 44,168 | |||||||
Comprehensive income attributed to non-controlling interest | Successor | $ 24,299 | 24,299 | |||||||||
Share‑based compensation (shares) | Successor | 435,000 | ||||||||||
Share-based compensation | Successor | 7,990 | 7,990 | 0 | ||||||||
Exchanges (shares) | Successor | 1,306,211 | (1,306,211) | |||||||||
Exchanges (shares) | 1,306,211 | 1,306,211 | |||||||||
Exchanges | Successor | 12,609 | 12,609 | (12,609) | ||||||||
Distributions | Successor | (12,940) | ||||||||||
Exercise of public warrants (shares) | Successor | 55 | ||||||||||
Exercise of public warrants | Successor | 1 | 1 | 0 | ||||||||
Tax receivable agreement arising from exchanges, net of income taxes of $1,845 | Successor | (9,685) | (9,685) | 0 | ||||||||
Balance - September 30, 2016 (shares) (Successor) at Sep. 30, 2017 | 99,992,183 | 30,398,777 | 99,992,183 | 30,398,777 | |||||||
Balance - September 30, 2016 (shares) at Sep. 30, 2017 | 99,992,183 | 30,398,777 | |||||||||
Balance–September 30, 2017 (Successor) at Sep. 30, 2017 | $ 10 | $ 3 | $ 923,739 | $ (43) | $ 28,593 | $ 952,302 | $ 332,942 |
Consolidated Statements of Sto7
Consolidated Statements of Stockholders' Equity (Deficit) (Parenthetical) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Statement of Stockholders' Equity [Abstract] | |
Tax receivable agreement arising from exchanges, income taxes | $ 1,845 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Successor | ||
Operating activities | ||
Net income | $ 68,536 | |
Depreciation and amortization | 28,576 | |
Impairment of property and equipment | 1,003 | |
Debt discount (premium) amortization | (647) | |
Non-cash loss on debt modification | 1,729 | |
Non-cash change in tax receivable agreement liability | 1,589 | |
Gain on sale of property and equipment | (10) | |
Share-based compensation | 7,990 | |
Deferred taxes | 19,993 | |
Change in operating assets and liabilities | ||
Accounts receivable | (11,496) | |
Inventories | (3,368) | |
Prepaids and other current assets | (1,950) | |
Accounts payable and accrued expenses | 7,369 | |
Customer trade allowances | (1,541) | |
Other | 0 | |
Net cash provided by operating activities | 117,773 | |
Investing activities | ||
Purchases of property and equipment | (22,755) | |
Acquisition of Superior | 0 | |
Proceeds from sale of assets | 85 | |
Acquisition of software assets | (1,728) | |
Net cash used in investing activities | (24,398) | |
Financing activities | ||
Repayments of long-term debt and capital lease obligation | (5,103) | |
Debt fees | (1,017) | |
Distributions to partners | 0 | |
Distributions to non-controlling interest | (12,940) | |
Proceeds from the exercise of warrants | 1 | |
Net cash used in financing activities | (19,059) | |
Net increase in cash and cash equivalents | 74,316 | |
Cash and cash equivalents at beginning of period | 26,855 | |
Cash and cash equivalents at end of period | 101,171 | |
Cash paid during the period for: | ||
Interest | 35,085 | |
Taxes paid | 12,902 | |
Supplemental disclosure of non-cash investing: | ||
Purchases of property and equipment funded by accounts payable | $ 932 | |
Predecessor | ||
Operating activities | ||
Net income | $ 81,523 | |
Depreciation and amortization | 9,054 | |
Impairment of property and equipment | 7,267 | |
Debt discount (premium) amortization | 2,486 | |
Non-cash loss on debt modification | 0 | |
Non-cash change in tax receivable agreement liability | 0 | |
Gain on sale of property and equipment | (153) | |
Share-based compensation | 689 | |
Deferred taxes | 237 | |
Change in operating assets and liabilities | ||
Accounts receivable | (13,555) | |
Inventories | (1,850) | |
Prepaids and other current assets | (9,397) | |
Accounts payable and accrued expenses | 17,098 | |
Customer trade allowances | (4,316) | |
Other | 430 | |
Net cash provided by operating activities | 89,513 | |
Investing activities | ||
Purchases of property and equipment | (23,995) | |
Acquisition of Superior | (50,091) | |
Proceeds from sale of assets | 4,350 | |
Acquisition of software assets | (1,917) | |
Net cash used in investing activities | (71,653) | |
Financing activities | ||
Repayments of long-term debt and capital lease obligation | (6,985) | |
Debt fees | 0 | |
Distributions to partners | (10,573) | |
Distributions to non-controlling interest | (555) | |
Proceeds from the exercise of warrants | 0 | |
Net cash used in financing activities | (18,113) | |
Net increase in cash and cash equivalents | (253) | |
Cash and cash equivalents at beginning of period | 64,473 | |
Cash and cash equivalents at end of period | 64,220 | |
Cash paid during the period for: | ||
Interest | 50,799 | |
Taxes paid | 0 | |
Supplemental disclosure of non-cash investing: | ||
Purchases of property and equipment funded by accounts payable | $ 2,072 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Descr i ption of Business Hostess Brands, Inc. is a Delaware corporation headquartered in Kansas City, Missouri. The consolidated financial statements include the accounts of Hostess Brands, Inc. and its wholly owned subsidiaries (collectively, the “Company”). The Company is a leading packaged food company 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 (as defined below) 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. Today, the Company produces a variety of new and classic treats primarily under the Hostess® and Dolly Madison® group of brands, including Twinkies®, CupCakes, Ding Dongs®, HoHos®, Donettes® and Fruit Pies. On November 4, 2016 (the “Closing Date”), in a transaction referred to as the “Business Combination,” the Company, then known as Gores Holdings, Inc. acquired a controlling interest in Hostess Holdings, L.P. (“Hostess Holdings”), an entity owned indirectly by C. Dean Metropoulos and certain equity funds managed by affiliates of Apollo Global Management, LLC (the “Apollo Funds”, and together with entities controlled by Mr. Metropoulos, the “Legacy Hostess Equityholders”). Our “Sponsor” refers to Gores Sponsor, LLC, a Delaware limited liability company and the principal stockholder of Gores Holdings, Inc. prior to the Business Combination, and the “The Gores Group” refers to The Gores Group LLC, an affiliate of our Sponsor. In connection with the closing of the Business Combination, Gores Holdings, Inc. changed its name to “Hostess Brands, Inc.” and its trading symbols on NASDAQ from “GRSH” and “GRSHW,” to “TWNK” and “TWNKW”. As a result of the Business Combination, for accounting purposes, Hostess Brands, Inc. is the acquirer and Hostess Holdings is the acquired party and accounting predecessor. Our financial statement presentation includes the financial statements of Hostess Holdings and its subsidiaries as “Predecessor” for periods prior to the completion of the Business Combination and of Hostess Brands, Inc., including the consolidation of Hostess Holdings and its subsidiaries, for periods from and after the Closing Date (referred to as the “Successor”). Unless the context requires otherwise, the “Company” refers to the Predecessor for periods prior to the Business Combination and to the Successor for periods after the Business Combination. On May 10, 2016, the Company 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 retailers. In the consolidated statements of operations, amortization of customer relationships (previously reported in the Predecessor’s unaudited quarterly financial statements within general and administrative) has been presented separately from general and administrative in the current period presentation, with conforming reclassifications made for the prior period presentation; recall and other costs (recoveries) (previously reported in the Predecessor‘s unaudited quarterly financial statements as a reduction of gross profit) have been presented as recall and other expenses along with amounts previously reported as loss on sale of property and equipment and bakery shutdown costs. 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. For the three and nine months ended September 30, 2017, the Company recorded adjustments to previously reported gains on debt modifications, resulting in a pre-tax charge of $2.1 million and $1.6 million , respectively. The Company has determined that these corrections of errors are immaterial to the current and prior reported periods. The Company has two reportable segments: Sweet Baked Goods and Other. Basis of Presentation 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”). In the opinion of management, the unaudited consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented, all such adjustments were of a normal and recurring nature. The results of operations are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2016. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries (including those for which the Company is the primary beneficiary of a variable interest entity), collectively referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation. 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 and 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, reserves for trade and promotional allowances, 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. Accounts Receivable Accounts receivable represents amounts invoiced to customers for goods that have been received by the customer. As of September 30, 2017 and December 31, 2016, the Company’s accounts receivable were $100.7 million and $89.2 million , respectively, which have been reduced by allowances for damages occurring during shipment, quality claims and doubtful accounts in the amount of $2.5 million and $1.9 million , respectively. In addition, there are customer trade allowances of $35.2 million and $36.7 million as of September 30, 2017 and December 31, 2016, respectively, 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. 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) September 30, December 31, 2016 (Successor) (Successor) Ingredients and packaging $ 14,474 $ 12,712 Finished goods 16,441 14,229 Inventory in transit to customers 2,897 3,503 $ 33,812 $ 30,444 Impairment of Property and Equipment For the three and nine months ended September 30, 2017 (Successor), the Company recorded an impairment loss of $1.0 million related to a production line that was idled when the related production was transitioned to a third party. During the first quarter of 2016 (Predecessor), the Company recorded an impairment loss of $7.3 million when it closed multiple production lines at the Indianapolis, Indiana bakery and transitioned production to other facilities. The measurement of this loss was based on Level 3 inputs within the fair value measurement hierarchy. Software Costs Included in the caption “Other assets” in the consolidated balance sheets is capitalized software in the amount of $7.3 million and $7.4 million at September 30, 2017 and December 31, 2016, 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 $0.6 million and $1.8 million f or the three and nine months ended September 30, 2017 (Successor), respectively, compared to $0.5 million and $1.4 million for the three and nine months ended September 30, 2016 (Predecessor), respectively. Concentrations The Company has one customer that accounted for 10% or more of the Company’s total net revenue. The percentage of total net revenues for this customer is presented below by segment: Three Months Ended Nine Months Ended (% of Consolidated Net Revenues) September 30, September 30, September 30, September 30, (Successor) (Predecessor) (Successor) (Predecessor) Sweet Baked Goods 18.8 % 18.1 % 18.9 % 20.3 % Other 0.9 % 3.1 % 0.8 % 1.5 % Total 19.7 % 21.2 % 19.7 % 21.8 % Advertising Costs Advertising costs, t hrough both national and regional media, are expensed in the period in which the advertisements are run. These costs totaled $0.3 million and $0.6 million for the three and nine months ended September 30, 2017 (Successor), and $0.4 million and $1.5 million for the three and nine months ended September 30, 2016 (Predecessor), respectively. These costs are recorded within advertising and marketing expense on the consolidated statement of operations. Derivatives In April 2017, the Company entered into an interest rate swap contract to mitigate its exposure to changes in the variable interest rate on its long-term debt. This contract was designated as a cash flow hedge. Changes in the fair value of this instrument are recognized in accumulated other comprehensive loss in the consolidated balance sheets and reclassified into earnings in the period in which the hedged transaction affects earnings. Hedging ineffectiveness, if any, is recognized in earnings in the consolidated statements of operations. Payments made under this contract are included in the supplemental disclosure of interest in the consolidated statement of cash flows. New Accounting Pronouncements In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (“ASU 2017-12”), Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities , which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. The effective date for the standard is for fiscal years beginning after December 15, 2018. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows. In May 2017, the FASB issued Accounting Standards Update No. 2017-9 (“ASU 2017-9”), Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting , which provides guidance about what changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. The Company has early adopted ASU 2017-9 for the three months ended September 30, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. In January 2017, the FASB issued Accounting Standards Update No. 2017-4 (“ASU 2017-4”), Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . ASU 2017-4 eliminates Step 2 from the goodwill impairment test. Step 2 required an entity to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in a business combination. Instead, an entity should perform its goodwill impairment test and recognize an impairment charge by comparing the fair value of a reporting unit with its carrying amount. ASU 2017-4 will become effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2017-4 and does not expect adoption to have a material impact on its consolidated financial position, results of operations or cash flows. Our goodwill impairment tests have not proceeded to Step 2 in any measurement period. 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, 2018, 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 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. The new standard is effective for the Company on January 1, 2018. The standard permits adoption retrospectively to each prior report period presented, retrospectively to each prior report period presented utilizing practical expedient(s), or retrospectively with the cumulative effect of initially applying the standard at the date of initial application. 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. The Company is in the process of completing its review of customer contracts to determine the impact that Topic 606 will have on the Company's consolidated financial statements. The Company plans to adopt the standard in the first quarter of 2018 retrospectively with the cumulative effect of initially applying the standard as of January 1, 2018. The planned adoption dates for all standards not yet implemented are based on the Company’s assessment that it will lose its status as an Emerging Growth Company, as defined in the Jumpstart Our Business Startups Act (JOBS Act), as of December 31, 2017. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Business Combination | Business Combination The purchase price for the Business Combination was allocated to the fair value of the assets acquired and liabilities assumed based on the preliminary valuations performed by the Company as of the Closing Date. During the nine months ended September 30, 2017 the Company revised its estimate of the future cash tax savings under the tax receivable agreement. This resulted in a $8.1 million decrease in goodwill, a decrease to the tax receivable agreement liability of $3.0 million , a $5.5 million decrease to deferred tax liabilities, and an increase to accrued expenses and other liabilities of $0.4 million . |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation Hostess Brands, Inc. 2016 Equity Incentive Plan (Successor) The Hostess Brands, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) provides for the grant of various equity-based incentive awards to directors of the Company, certain members of Company management, and service providers to the Company. The types of equity-based awards that may be granted under the 2016 Plan include: stock options, stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), and other stock-based awards. There are 7,150,000 registered shares of Class A common stock reserved for issuance under the 2016 Plan. All awards issued under the 2016 Plan may only be settled in shares of Class A common stock. Restricted Stock Units During the nine months ended September 30, 2017, the following RSUs were granted under the 2016 Plan: • 22,732 RSUs to directors of the Company. The units vest on November 4, 2017. These awards only contain service conditions. • 297,500 RSUs to certain members of management. One-third of the units vest at each of the following dates: January 1, 2018, November 4, 2018, and November 4, 2019. Vesting is dependent upon positive earnings per share for the fiscal year ending immediately prior to the vesting date. Management has determined it is probable that these performance conditions will be met. • 18,116 RSUs to certain members of management. One-third of the units vest at each of the following dates: June 1 of each of 2018, 2019, and 2020.These awards only contain service conditions. • 372,036 RSUs to certain members of management. One-third of the units vest at each of the following dates; November 4 of each of 2017, 2018 and 2019. These awards only contain service conditions. • 715,406 RSUs to certain members of management. The units vest on December 31, 2019. At the end of each of three annual performance periods ending December 31, 2017, 2018 and 2019, a portion of the units will be banked if the Company achieves certain EBITDA targets. Banked shares continue to be subject to continued service through the December 31, 2019 vesting date. Management has determined it is probable that a portion of the EBITDA target will be met for the 2017 annual performance period. Depending on actual performance during each performance period, award recipients have the opportunity to receive up to 225% of the granted units. For the three and nine months ended September 30, 2017 (Successor), $1.8 million and $4.1 million of compensation expense related to the RSUs was recognized within general and administrative expenses on the consolidated statement of operations, respectively. The following table summarizes the activity of the Company’s unvested RSUs for the nine months ended September 30, 2017: Restricted Stock Weighted Average Unvested units as of December 31, 2016 (Successor) — $ — Total Granted 1,425,790 15.77 Forfeited (79,543 ) 15.78 Vested — — Unvested as of September 30, 2017 (Successor) 1,346,247 $ 15.77 As of September 30, 2017, there was $17.1 million of total unrecognized compensation cost related to non-vested RSUs granted under the 2016 Plan; that cost is expected to be recognized over the vesting periods as described above. Restricted Stock Awards On March 23, 2017, the Company granted 435,000 shares of restricted stock to the Company’s Chief Executive Officer under the 2016 Plan. One-third of the shares vest on each of the following dates: January 1, 2018 and November 4 of each of 2018 and 2019. Vesting at each date is also dependent upon positive earnings per share for the fiscal year ending immediately prior to the vesting date. Each restricted stock award had a grant date fair value based on the closing price of the Company’s common stock on the grant date and management’s assumption that there will be no forfeitures. Management has determined that the shares of restricted stock are unvested stock awards as defined by accounting standards. If the vesting requirements of a restricted stock award are not satisfied, or the performance conditions not attained, the award will be forfeited and the shares of Class A common stock subject to the award shall be returned to the Company. As of September 30, 2017, there was $4.1 million of total unrecognized compensation cost related to the non-vested restricted stock; that cost is expected to be recognized over the vesting periods described above. For the three and nine months ended September 30, 2017 (Successor), the Company recognized expense of $1.3 million and $2.8 million related to the restricted stock awards within general and administrative expenses on the consolidated statement of operations, respectively. The following table summarizes the activity of the Company’s restricted stock awards for the nine months ended September 30, 2017: Shares of Weighted Average Unvested units as of December 31, 2016 (Successor) — $ — Granted 435,000 15.78 Forfeited — — Vested — — Unvested as of September 30, 2017 (Successor) 435,000 $ 15.78 Stock Options During the nine months ended September 30, 2017, the Company granted 1,155,788 stock options to certain members of management under the Plan. The weighted average grant date fair value of $5.03 per option was estimated using the Black-Scholes option-pricing model (level 3) with the following assumptions: Nine Months Ended September 30, 2017 Expected volatility (1) 27.53% Expected dividend yield (2) —% Expected option term (3) 6.25 years Risk-free rate (4) 2.1% (1) The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period based on the expected term and ending on the grant date. (2) As of September 30, 2017, we have not paid any dividends on our common stock. As of the stock option grant date, we did not anticipate paying any dividends on our common stock over the term of the stock options. Option holders have no right to dividends prior to the exercise of the options. (3) We utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. (4) The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant which corresponds to the expected term of the stock options. The stock options vest in four equal annual installments on varying dates through June 2021. As of September 30, 2017, there was $4.5 million of total unrecognized compensation cost related to non-vested stock options outstanding under the 2016 Plan; that cost is expected to be recognized over the vesting periods. For the three and nine months ended September 30, 2017 (Successor), there was $0.6 million and $1.1 million , respectively, of expense related to the stock options recognized within general and administrative costs on the consolidated statement of operations. The following table summarizes the activity of the Company’s unvested stock options for the nine months ended September 30, 2017 (Successor): Number Weighted Average Weighted Weighted Outstanding as of December 31, 2016 (Successor) — — $ — $ — Granted 1,155,788 5.77 15.85 5.03 Exercised — — — — Forfeited (44,371 ) 5.75 15.78 5.03 Outstanding as of September 30, 2017 (Successor) 1,111,417 5.77 $ 15.85 $ 5.03 Exercisable as of September 30, 2017 (Successor) — — — — Hostess Management, LLC Equity Interest Plan (Predecessor) The Company established a profits interest plan under the 2013 Hostess Management, LLC (“Hostess Management”) Equity Incentive Plan (“2013 Plan”) to allow members of the management team to participate in the success of the Company. The 2013 Plan consisted of an approximate 9% ownership interest in the Company’s subsidiary, New Hostess Holdco, LLC. Hostess Management had three classes of units and required certain returns to ranking classes before other classes participated in subsequent returns of Hostess Management. The Company recognized unit-based compensation expense of $0.3 million and $0.7 million for the three and nine months ended September 30, 2016 (Predecessor), within general and administrative expense on the consolidated statement of operations, respectively. All outstanding units under the 2013 Plan were redeemed and the 2013 Plan was terminated on November 4, 2016. As of December 31, 2016, t here were no outstanding units. Related Party Stock Awards See note 15 for information regarding additional equity awards not issued under the 2016 or 2013 Plans. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Land and buildings $ 31,296 $ 30,275 Machinery and equipment 130,778 112,221 Construction in progress 15,363 12,334 177,437 154,830 Less accumulated depreciation (10,506 ) (1,606 ) $ 166,931 $ 153,224 Depreciation expense was $3.1 million and $8.9 million for the three and nine months ended September 30, 2017 (Successor), and $2.5 million and $6.7 million for the three and nine months ended September 30, 2016 (Predecessor), respectively. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2017 | |
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, frozen retail (which consists of deep-fried Twinkies®, launched in August 2016), “In-Store Bakery,” or “ISB” (which includes Superior) and licensing. 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) Three Months Ended Three Months Ended Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 (Successor) (Predecessor) (Successor) (Predecessor) Net revenue: Sweet Baked Goods $ 173,552 $ 174,473 $ 524,731 $ 508,288 Other 18,698 21,724 55,236 40,469 Net revenue $ 192,250 $ 196,197 $ 579,967 $ 548,757 Depreciation and amortization: Sweet Baked Goods $ 8,703 $ 2,585 $ 25,587 $ 8,119 Other 1,019 583 2,989 935 Depreciation and amortization $ 9,722 $ 3,168 $ 28,576 $ 9,054 Gross profit: Sweet Baked Goods $ 72,965 $ 76,777 $ 230,217 $ 227,322 Other 5,400 5,802 15,889 12,008 Gross profit $ 78,365 $ 82,579 $ 246,106 $ 239,330 Capital expenditures (1): Sweet Baked Goods $ 9,109 $ 9,312 $ 24,772 $ 25,701 Other 205 161 643 211 Capital expenditures $ 9,314 $ 9,473 $ 25,415 $ 25,912 (1) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable during the three and nine months ended September 30, 2017 (Successor) and 2016 (Predecessor). Total assets by reportable segment are as follows: (In thousands) September 30, December 31, (Successor) (Successor) Total segment assets: Sweet Baked Goods $ 2,719,743 $ 2,633,758 Other 206,930 214,134 Total segment assets $ 2,926,673 $ 2,847,892 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and intangible assets as of September 30, 2017 and December 31, 2016 were recognized as part of the purchase price allocation of the Business Combination as of the Closing Date. The amount allocated to goodwill and other intangible assets is subject to final valuation adjustments. These adjustments could have a material impact on goodwill and other intangible assets. During the nine months ended September 30, 2017, the purchase price allocation for the Business Combination was adjusted, resulting in a $8.1 million decrease to goodwill. Activity of goodwill is presented below by reportable segment: (In thousands) Sweet Baked Goods Other Total Balance as of December 31, 2016 (Successor) $ 518,759 $ 69,701 $ 588,460 Measurement period adjustment of the Business Combination (8,111 ) — (8,111 ) Balance as of September 30, 2017 (Successor) $ 510,648 $ 69,701 $ 580,349 Intangible assets consist of the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,848 $ 1,408,848 Intangible assets with definite lives (Customer Relationships) 542,011 542,011 Less accumulated amortization (Customer Relationships) (21,777 ) (3,916 ) Intangible assets, net $ 1,929,082 $ 1,946,943 Amortization expense was $6.0 million and $17.9 million for the three and nine months ended September 30, 2017 (Successor) and $0.2 million and $0.5 million for the three and nine months ended September 30, 2016 (Predecessor), respectively. The unamortized portion of customer relationships will be expensed over their remaining useful life, from 18 to 23 years . The weighted-average amortization period as of September 30, 2017 for customer relationships was 21.8 years. Future expected amortization expense is as follows: (In thousands) Remainder of 2017 $ 5,994 2018 23,977 2019 23,977 2020 23,977 2021 23,977 2022 and thereafter 418,332 |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses Included in accrued expenses are the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Annual incentive bonuses $ 4,141 $ 5,997 Payroll, vacation and other compensation 3,496 5,121 Self-insurance reserves 1,310 2,091 Accrued interest 224 4,885 Current income taxes payable 113 2 Workers compensation reserve 1,650 1,321 Interest rate swap contract 99 — Litigation (Note 14) — 1,100 Other 18 1,139 $ 11,051 $ 21,656 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Debt | Debt On May 19, 2017, the Company’s subsidiary, Hostess Brands, LLC, and its lenders amended the New First Lien Term Loan (Second Amended First Lien Term Loan). The Second Amended First Lien Term Loan requires quarterly payments of interest at a rate of the greater of the applicable LIBOR or 0.75% per annum (LIBOR Floor) plus an applicable margin of 2.50% per annum or the base rate plus an applicable margin of 1.50% per annum. The principal is paid quarterly at a rate of 0.25% of the aggregate principal balance with the remaining principal amount due upon maturity on August 3, 2022. The Second Amended First Lien Term Loan is secured by substantially all the Company’s present and future assets through a guarantor agreement. The interest rate charged to the Company on the New First Lien Term Loan from January 1, 2017 through May 18, 2017 was 4.00% . From May 19, 2017 through September 30, 2017, the interest rate charged to the Company on the Second Amended First Lien Term Loan was 3.73% . A summary of the carrying value of the debt and the capital lease obligation is as follows: (In thousands) September 30, 2017 December 31, (Successor) (Successor) Second Amended First Lien Term Loan (3.7% as of September 30, 2017) Principal $ 993,763 $ — Unamortized debt premium and issuance costs 5,462 — 999,225 — New First Lien Term Loan (4.0%) Principal — 998,750 Unamortized debt premium and issuance costs — 5,396 — 1,004,146 Capital lease obligation (6.8%) 608 724 Total debt and capital lease obligation 999,833 1,004,870 Less: Amounts due within one year (11,357 ) (11,496 ) Long-term portion $ 988,476 $ 993,374 At September 30, 2017, minimum debt repayments under the Second Amended First Lien Term Loan are due as follows: (In thousands) Remainder of 2017 $ 2,491 2018 9,963 2019 9,963 2020 9,963 2021 9,963 2022 and thereafter 951,420 Revolving Credit Facility The Company had no outstanding borrowings under its Revolving Credit Agreement (the “Revolver”) as of September 30, 2017. See Note 14. Commitments and Contingencies for information regarding the letters of credits, which reduce the amount available for borrowing under the Revolver. Interest expense from the Revolver debt fee amortization was $0.1 million and $0.3 million for the three and nine months ended September 30, 2016 (predecessor), respectively. |
Interest Rate Swap
Interest Rate Swap | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Interest Rate Swap | Interest Rate Swap In April 2017, the Company entered into an interest rate swap contract with a counter party to make a series of payments based on a fixed interest rate of 1.78% and receive a series of payments based on the greater of LIBOR or 0.75% . Both the fixed and floating payment streams are based on a notional amount of $500 million at the inception of the contract and will be reduced by $100 million each year of the five -year contract. The Company entered into this transaction to reduce its exposure to changes in cash flows associated with its variable rate debt and has designated this derivative as a cash flow hedge. At September 30, 2017, the effective fixed interest rate on the long-term debt hedged by this contract was 4.28% . For the three and nine months ended September 30, 2017, no amounts were recorded in the consolidated statements of operations for ineffectiveness and there were no reclassifications from accumulated other comprehensive loss into earnings. As of September 30, 2017, the fair value of the interest rate swap contract of $0.1 million was reported within accrued expenses and other liabilities on the consolidated balance sheet. $1.5 million of unrealized losses recognized in accumulated other comprehensive income as of September 30, 2017 are expected to be reclassified into interest expense through September 30, 2018. The fair value of the interest rate swap contract is measured on a recurring basis by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves (Level 2). |
Equity
Equity | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Equity | Equity The Company’s authorized common shares consist of three classes: 200,000,000 shares of Class A common stock, 50,000,000 shares of Class B common stock, and 10,000,000 shares of Class F common stock ( none of which were issued and outstanding at September 30, 2017 or December 31, 2016). As of September 30, 2017 and December 31, 2016, there were 99,992,183 and 98,250,917 shares of Class A common stock issued and outstanding, respectively. At September 30, 2017 and December 31, 2016 there were 30,398,777 and 31,704,988 shares of Class B common stock issued and outstanding, respectively. 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. During the three months ended September 30, 2017, there was no activity. During the nine months ended September 30, 2017, 1,306,211 Class B shares were exchanged for Class A common shares. As of September 30, 2017 and December 31, 2016, there were 37,499,890 and 37,500,000 public warrants, respectively, 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 on December 4, 2016 ( 30 days after the completion of the Business Combination on November 4, 2016) and expire on December 4, 2021, or earlier upon redemption or liquidation. The Company may call the outstanding warrants for redemption 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 the Company’s Sponsor or its permitted transferees. During the three months ended September 30, 2017, the private placement warrants were registered with the SEC for future potential sales to the public. When sold to the public, the private placement warrants will become public warrants. |
Earnings per Share
Earnings per Share | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share Basic earnings per share is calculated by dividing net income attributable to the Company’s Class A shareholders for the period by the weighted average number of Class A common shares outstanding for the period excluding non-vested restricted stock awards. In computing dilutive earnings per share, basic earnings per share is adjusted for the assumed issuance of all applicable potentially dilutive share-based awards, including: public and private placement warrants, RSUs, restricted stock awards, and stock options. Below are basic and diluted net income per share: Three Months Ended Nine Months Ended (Successor) (Successor) Numerator: Net income attributable to Class A shareholders (in thousands) $ 9,549 $ 44,211 Denominator: Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards) 99,557,183 98,920,808 Dilutive effect of warrants 5,717,416 6,844,613 Dilutive effect of restricted stock awards and RSUs 143,967 75,252 Weighted-average shares outstanding - diluted 105,418,566 105,840,673 Net income per Class A share - basic $ 0.10 $ 0.45 Net income per Class A share - dilutive $ 0.09 $ 0.42 For both the three and nine months ended September 30, 2017, stock options were excluded from the computation of diluted net income per share because the assumed proceeds from the awards’ exercise was greater than the average market price of the common shares. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is subject to U.S. federal, state and local taxes on its allocable portion of the income of Hostess Holdings, a partnership for U.S. federal and most applicable state and local taxes. As a partnership, Hostess Holdings is itself not subject to U.S. federal and certain state and local income taxes. The operations of Hostess Holdings include those of its C Corporation subsidiaries. The income tax expense in the accompanying consolidated statement of operations is based on an estimate of the Company’s annual effective income tax rate and adjusted for discrete items, if any. The Company’s estimated annual effective tax rate based on annual projected earnings for the year ending December 31, 2017 is projected to be 29.6% prior to adjusting for discrete items. During the three months ended September 30, 2017, the Company recorded a nonrecurring discrete charge of approximately $2.2 million related to a change in state tax law. The Company’s effective tax rate differs from the statutory rate primarily due to the portion of net income attributed to the non-controlling interest which represents an ownership interest in a partnership for income tax purposes. 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. 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 is in an overall net deferred tax liability position of $366.5 million and $353.8 million as of September 30, 2017 and December 31, 2016, respectively, primarily due to temporary differences in the book basis as compared to the tax basis of its investment in Hostess Holdings. The Company does not believe it has any significant uncertain tax positions and therefore has no unrecognized tax benefits at September 30, 2017, 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. |
Tax Receivable Agreement
Tax Receivable Agreement | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Tax Receivable Agreement | Tax Receivable Agreement The tax receivable agreement was entered into by the Company in connection with the Business Combination (the “Tax Receivable Agreement”) and 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 and prior to subsequent exchanges of Class B Units; (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. Significant inputs used to preliminarily estimate the future expected payments include a tax savings rate of approximately 37% . The following table summarizes activity related to the tax receivable agreement for the nine months ended September 30, 2017: (In thousands) Balance December 31, 2016 (Successor) $ 165,384 Measurement period adjustment of the Business Combination (3,016 ) Balance arising from exchanges of Class B units for Class A shares 11,530 Remeasurement due to change in state tax rate 1,589 Balance September 30, 2017 (Successor) $ 175,487 During the three months ended September 30, 2017, the Company remeasured the Tax Receivable Agreement due to a change in a state tax law. This resulted in $1.6 million of expense on the consolidated statement of operations. As of September 30, 2017 the future expected payments under the Tax Receivable Agreement are as follows: (In thousands) Remainder of 2017 $ — 2018 14,165 2019 10,375 2020 10,097 2021 9,845 Thereafter 131,005 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
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. During the three months ended September 30, 2017, the Company paid an award in the National Frozen Distribution Consultants, Inc. (NFDC) arbitration of approximately $2.0 million . 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 resolution. Contractual Commitments The Company is a party to 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 accounting standards; therefore, the purchases under these contracts are included as a component of cost of goods sold. Contractual commitments were as follows: (In millions) Total Committed Commitments within 1 year Commitments beyond 1 year Ingredients $ 82.4 $ 69.2 $ 13.2 Packaging $ 44.3 $ 39.1 $ 5.2 Letters of Credit The Company is a party to Letter of Credit arrangements to provide for the issuance of standby letters of credit in the amount of $ 2.2 million and $ 1.7 million , respectively. The arrangements support the collateral requirements for insurance. The Letters of Credit are 100% secured through our Revolver. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
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. For the three and nine months ended September 30, 2016 (Predecessor), $1.1 million and $3.4 million was expensed by the Company for this compensation agreement. The agreement with Mr. Metropoulos was terminated in connection with the Business Combination. 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. In connection with the Business Combination, Mr. Metropoulos became party to new employment arrangements with the Company and its subsidiaries. Following the consummation of the Business Combination, the expense associated with Mr. Metropoulos’s employment arrangements is estimated to be approximately $0.3 million annually. As part of the Business Combination, the Company agreed to grant shares of Class A common stock or Class B units of Hostess Holdings and equivalent shares of Class B common stock of the Company to an entity owned by 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, for U.S. GAAP purposes the potential grants are considered to be compensation for future services to be provided by Mr. Metropoulos. In order to receive 2.75 million shares under this agreement, adjusted EBITDA, as calculated pursuant to the terms of the Master Transaction Agreement entered into in connection with the Business Combination, (“MTA EBITDA”), for the year ended December 31, 2017 must be greater than $240.5 million . If MTA EBITDA is greater than $245.5 million , an additional 2.75 million shares will be awarded. As of September 30, 2017, management determined it was not probable that the Company would meet the 2017 MTA EBITDA thresholds. Under the terms of Mr. Metropoulos’ employment 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 of Class B common stock of the Company) to Mr. Metropoulos if MTA EBITDA thresholds are met for the year ended December 31, 2018. The potential grants range from zero to 2.75 million shares. In order to receive 1.375 million shares under this agreement, MTA EBITDA for the year ended December 31, 2018 must be greater than $257.8 million . If MTA EBITDA is greater than $262.8 million , an additional 1.375 million shares will be awarded. As of September 30, 2017, management determined it w as not probable that the Co mpany would meet the 2018 MTA EBITDA thresholds. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries (including those for which the Company is the primary beneficiary of a variable interest entity), collectively referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation. |
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 and 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, reserves for trade and promotional allowances, 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. |
Accounts Receivable | Accounts Receivable Accounts receivable represents amounts invoiced to customers for goods that have been received by the customer. As of September 30, 2017 and December 31, 2016, the Company’s accounts receivable were $100.7 million and $89.2 million , respectively, which have been reduced by allowances for damages occurring during shipment, quality claims and doubtful accounts in the amount of $2.5 million and $1.9 million , respectively. In addition, there are customer trade allowances of $35.2 million and $36.7 million as of September 30, 2017 and December 31, 2016, respectively, in current liabilities in the consolidated balance sheets. |
Inventories | Inventories Inventories are stated at the lower of cost or market on a first-in first-out basis. Abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) are expensed in the period they are incurred. |
Impairment of Property and Equipment | Impairment of Property and Equipment For the three and nine months ended September 30, 2017 (Successor), the Company recorded an impairment loss of $1.0 million related to a production line that was idled when the related production was transitioned to a third party. During the first quarter of 2016 (Predecessor), the Company recorded an impairment loss of $7.3 million when it closed multiple production lines at the Indianapolis, Indiana bakery and transitioned production to other facilities. The measurement of this loss was based on Level 3 inputs within the fair value measurement hierarchy. |
Software Costs | Software Costs Included in the caption “Other assets” in the consolidated balance sheets is capitalized software in the amount of $7.3 million and $7.4 million at September 30, 2017 and December 31, 2016, 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 $0.6 million and $1.8 million f or the three and nine months ended September 30, 2017 (Successor), respectively, compared to $0.5 million and $1.4 million for the three and nine months ended September 30, 2016 (Predecessor), respectively. |
Advertising Costs | Advertising Costs Advertising costs, t hrough both national and regional media, are expensed in the period in which the advertisements are run. These costs totaled $0.3 million and $0.6 million for the three and nine months ended September 30, 2017 (Successor), and $0.4 million and $1.5 million for the three and nine months ended September 30, 2016 (Predecessor), respectively. These costs are recorded within advertising and marketing expense on the consolidated statement of operations. |
Derivatives | Derivatives In April 2017, the Company entered into an interest rate swap contract to mitigate its exposure to changes in the variable interest rate on its long-term debt. This contract was designated as a cash flow hedge. Changes in the fair value of this instrument are recognized in accumulated other comprehensive loss in the consolidated balance sheets and reclassified into earnings in the period in which the hedged transaction affects earnings. Hedging ineffectiveness, if any, is recognized in earnings in the consolidated statements of operations. Payments made under this contract are included in the supplemental disclosure of interest in the consolidated statement of cash flows. |
New Accounting Pronouncements | New Accounting Pronouncements In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (“ASU 2017-12”), Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities , which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. The effective date for the standard is for fiscal years beginning after December 15, 2018. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial position, results of operations or cash flows. In May 2017, the FASB issued Accounting Standards Update No. 2017-9 (“ASU 2017-9”), Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting , which provides guidance about what changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. The Company has early adopted ASU 2017-9 for the three months ended September 30, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. In January 2017, the FASB issued Accounting Standards Update No. 2017-4 (“ASU 2017-4”), Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . ASU 2017-4 eliminates Step 2 from the goodwill impairment test. Step 2 required an entity to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in a business combination. Instead, an entity should perform its goodwill impairment test and recognize an impairment charge by comparing the fair value of a reporting unit with its carrying amount. ASU 2017-4 will become effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2017-4 and does not expect adoption to have a material impact on its consolidated financial position, results of operations or cash flows. Our goodwill impairment tests have not proceeded to Step 2 in any measurement period. 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, 2018, 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 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. The new standard is effective for the Company on January 1, 2018. The standard permits adoption retrospectively to each prior report period presented, retrospectively to each prior report period presented utilizing practical expedient(s), or retrospectively with the cumulative effect of initially applying the standard at the date of initial application. 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. The Company is in the process of completing its review of customer contracts to determine the impact that Topic 606 will have on the Company's consolidated financial statements. The Company plans to adopt the standard in the first quarter of 2018 retrospectively with the cumulative effect of initially applying the standard as of January 1, 2018. The planned adoption dates for all standards not yet implemented are based on the Company’s assessment that it will lose its status as an Emerging Growth Company, as defined in the Jumpstart Our Business Startups Act (JOBS Act), as of December 31, 2017. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Components of Inventories | The components of inventories are as follows : (In thousands) September 30, December 31, 2016 (Successor) (Successor) Ingredients and packaging $ 14,474 $ 12,712 Finished goods 16,441 14,229 Inventory in transit to customers 2,897 3,503 $ 33,812 $ 30,444 |
Customer Concentration Risk | The Company has one customer that accounted for 10% or more of the Company’s total net revenue. The percentage of total net revenues for this customer is presented below by segment: Three Months Ended Nine Months Ended (% of Consolidated Net Revenues) September 30, September 30, September 30, September 30, (Successor) (Predecessor) (Successor) (Predecessor) Sweet Baked Goods 18.8 % 18.1 % 18.9 % 20.3 % Other 0.9 % 3.1 % 0.8 % 1.5 % Total 19.7 % 21.2 % 19.7 % 21.8 % |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of the Activity of Unvested RSUs | The following table summarizes the activity of the Company’s unvested RSUs for the nine months ended September 30, 2017: Restricted Stock Weighted Average Unvested units as of December 31, 2016 (Successor) — $ — Total Granted 1,425,790 15.77 Forfeited (79,543 ) 15.78 Vested — — Unvested as of September 30, 2017 (Successor) 1,346,247 $ 15.77 |
Summary of the Activity of Restricted Stock Awards | The following table summarizes the activity of the Company’s restricted stock awards for the nine months ended September 30, 2017: Shares of Weighted Average Unvested units as of December 31, 2016 (Successor) — $ — Granted 435,000 15.78 Forfeited — — Vested — — Unvested as of September 30, 2017 (Successor) 435,000 $ 15.78 |
Schedule of Assumptions | The weighted average grant date fair value of $5.03 per option was estimated using the Black-Scholes option-pricing model (level 3) with the following assumptions: Nine Months Ended September 30, 2017 Expected volatility (1) 27.53% Expected dividend yield (2) —% Expected option term (3) 6.25 years Risk-free rate (4) 2.1% (1) The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period based on the expected term and ending on the grant date. (2) As of September 30, 2017, we have not paid any dividends on our common stock. As of the stock option grant date, we did not anticipate paying any dividends on our common stock over the term of the stock options. Option holders have no right to dividends prior to the exercise of the options. (3) We utilized the simplified method to determine the expected term of the stock options since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. (4) The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant which corresponds to the expected term of the stock options. |
Summary of the Activity of Unvested Stock Options | The following table summarizes the activity of the Company’s unvested stock options for the nine months ended September 30, 2017 (Successor): Number Weighted Average Weighted Weighted Outstanding as of December 31, 2016 (Successor) — — $ — $ — Granted 1,155,788 5.77 15.85 5.03 Exercised — — — — Forfeited (44,371 ) 5.75 15.78 5.03 Outstanding as of September 30, 2017 (Successor) 1,111,417 5.77 $ 15.85 $ 5.03 Exercisable as of September 30, 2017 (Successor) — — — — |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Land and buildings $ 31,296 $ 30,275 Machinery and equipment 130,778 112,221 Construction in progress 15,363 12,334 177,437 154,830 Less accumulated depreciation (10,506 ) (1,606 ) $ 166,931 $ 153,224 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Operations and Total Assets | Information regarding the operations of these reportable segments is as follows: (In thousands) Three Months Ended Three Months Ended Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 (Successor) (Predecessor) (Successor) (Predecessor) Net revenue: Sweet Baked Goods $ 173,552 $ 174,473 $ 524,731 $ 508,288 Other 18,698 21,724 55,236 40,469 Net revenue $ 192,250 $ 196,197 $ 579,967 $ 548,757 Depreciation and amortization: Sweet Baked Goods $ 8,703 $ 2,585 $ 25,587 $ 8,119 Other 1,019 583 2,989 935 Depreciation and amortization $ 9,722 $ 3,168 $ 28,576 $ 9,054 Gross profit: Sweet Baked Goods $ 72,965 $ 76,777 $ 230,217 $ 227,322 Other 5,400 5,802 15,889 12,008 Gross profit $ 78,365 $ 82,579 $ 246,106 $ 239,330 Capital expenditures (1): Sweet Baked Goods $ 9,109 $ 9,312 $ 24,772 $ 25,701 Other 205 161 643 211 Capital expenditures $ 9,314 $ 9,473 $ 25,415 $ 25,912 (1) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable during the three and nine months ended September 30, 2017 (Successor) and 2016 (Predecessor). Total assets by reportable segment are as follows: (In thousands) September 30, December 31, (Successor) (Successor) Total segment assets: Sweet Baked Goods $ 2,719,743 $ 2,633,758 Other 206,930 214,134 Total segment assets $ 2,926,673 $ 2,847,892 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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 Balance as of December 31, 2016 (Successor) $ 518,759 $ 69,701 $ 588,460 Measurement period adjustment of the Business Combination (8,111 ) — (8,111 ) Balance as of September 30, 2017 (Successor) $ 510,648 $ 69,701 $ 580,349 |
Schedule of Indefinite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,848 $ 1,408,848 Intangible assets with definite lives (Customer Relationships) 542,011 542,011 Less accumulated amortization (Customer Relationships) (21,777 ) (3,916 ) Intangible assets, net $ 1,929,082 $ 1,946,943 |
Schedule of Finite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,848 $ 1,408,848 Intangible assets with definite lives (Customer Relationships) 542,011 542,011 Less accumulated amortization (Customer Relationships) (21,777 ) (3,916 ) Intangible assets, net $ 1,929,082 $ 1,946,943 |
Future Amortization Expense | Future expected amortization expense is as follows: (In thousands) Remainder of 2017 $ 5,994 2018 23,977 2019 23,977 2020 23,977 2021 23,977 2022 and thereafter 418,332 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Included in accrued expenses are the following: (In thousands) September 30, 2017 December 31, 2016 (Successor) (Successor) Annual incentive bonuses $ 4,141 $ 5,997 Payroll, vacation and other compensation 3,496 5,121 Self-insurance reserves 1,310 2,091 Accrued interest 224 4,885 Current income taxes payable 113 2 Workers compensation reserve 1,650 1,321 Interest rate swap contract 99 — Litigation (Note 14) — 1,100 Other 18 1,139 $ 11,051 $ 21,656 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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) September 30, 2017 December 31, (Successor) (Successor) Second Amended First Lien Term Loan (3.7% as of September 30, 2017) Principal $ 993,763 $ — Unamortized debt premium and issuance costs 5,462 — 999,225 — New First Lien Term Loan (4.0%) Principal — 998,750 Unamortized debt premium and issuance costs — 5,396 — 1,004,146 Capital lease obligation (6.8%) 608 724 Total debt and capital lease obligation 999,833 1,004,870 Less: Amounts due within one year (11,357 ) (11,496 ) Long-term portion $ 988,476 $ 993,374 |
Schedule of Maturities of Long-term Debt | At September 30, 2017, minimum debt repayments under the Second Amended First Lien Term Loan are due as follows: (In thousands) Remainder of 2017 $ 2,491 2018 9,963 2019 9,963 2020 9,963 2021 9,963 2022 and thereafter 951,420 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income Per Share | Below are basic and diluted net income per share: Three Months Ended Nine Months Ended (Successor) (Successor) Numerator: Net income attributable to Class A shareholders (in thousands) $ 9,549 $ 44,211 Denominator: Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards) 99,557,183 98,920,808 Dilutive effect of warrants 5,717,416 6,844,613 Dilutive effect of restricted stock awards and RSUs 143,967 75,252 Weighted-average shares outstanding - diluted 105,418,566 105,840,673 Net income per Class A share - basic $ 0.10 $ 0.45 Net income per Class A share - dilutive $ 0.09 $ 0.42 |
Tax Receivable Agreement (Table
Tax Receivable Agreement (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Summary of Tax Receivable Agreement | The following table summarizes activity related to the tax receivable agreement for the nine months ended September 30, 2017: (In thousands) Balance December 31, 2016 (Successor) $ 165,384 Measurement period adjustment of the Business Combination (3,016 ) Balance arising from exchanges of Class B units for Class A shares 11,530 Remeasurement due to change in state tax rate 1,589 Balance September 30, 2017 (Successor) $ 175,487 |
Future Expected Payments Under Tax Receivable Arrangement | As of September 30, 2017 the future expected payments under the Tax Receivable Agreement are as follows: (In thousands) Remainder of 2017 $ — 2018 14,165 2019 10,375 2020 10,097 2021 9,845 Thereafter 131,005 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual Commitments | Contractual commitments were as follows: (In millions) Total Committed Commitments within 1 year Commitments beyond 1 year Ingredients $ 82.4 $ 69.2 $ 13.2 Packaging $ 44.3 $ 39.1 $ 5.2 |
Summary of Significant Accoun35
Summary of Significant Accounting Policies - Description of Business (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($)segment | |
Accounting Policies [Abstract] | ||
Gains on debt modification | $ | $ 2.1 | $ 1.6 |
Number of reportable segments | segment | 2 |
Summary of Significant Accoun36
Summary of Significant Accounting Policies - Accounts Receivable (Details) - Successor - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 100,733 | $ 89,237 |
Reserve to cover allowances for damages occurring during shipment, quality claims and doubtful accounts | 2,500 | 1,900 |
Customer trade allowances | $ 35,150 | $ 36,691 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies - Inventories (Details) - Successor - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory [Line Items] | ||
Ingredients and packaging | $ 14,474 | $ 12,712 |
Finished goods | 16,441 | 14,229 |
Inventory in transit to customers | 2,897 | 3,503 |
Inventories | $ 33,812 | $ 30,444 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Impairment of Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Successor | |||||
Property, Plant and Equipment [Line Items] | |||||
Impairment loss related to equipment | $ 1,003 | $ 1,003 | |||
Predecessor | |||||
Property, Plant and Equipment [Line Items] | |||||
Impairment loss related to equipment | $ 0 | $ 7,267 | |||
Machinery and equipment | Predecessor | |||||
Property, Plant and Equipment [Line Items] | |||||
Impairment loss related to equipment | $ 7,300 |
Summary of Significant Accoun39
Summary of Significant Accounting Policies - Software Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Capitalized Computer Software [Line Items] | |||||
Capitalized software, estimated useful life | 5 years | ||||
Successor | |||||
Capitalized Computer Software [Line Items] | |||||
Capitalized software | $ 7.3 | $ 7.3 | $ 7.4 | ||
Software amortization expense | $ 0.6 | $ 1.8 | |||
Predecessor | |||||
Capitalized Computer Software [Line Items] | |||||
Software amortization expense | $ 0.5 | $ 1.4 |
Summary of Significant Accoun40
Summary of Significant Accounting Policies - Concentrations (Details) - Customer concentration risk - Consolidated net revenues | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Successor | ||||
Concentration Risk [Line Items] | ||||
Percentage of Consolidated Net Revenues | 19.70% | 19.70% | ||
Successor | Sweet Baked Goods | ||||
Concentration Risk [Line Items] | ||||
Percentage of Consolidated Net Revenues | 18.80% | 18.90% | ||
Successor | Other | ||||
Concentration Risk [Line Items] | ||||
Percentage of Consolidated Net Revenues | 0.90% | 0.80% | ||
Predecessor | ||||
Concentration Risk [Line Items] | ||||
Percentage of Consolidated Net Revenues | 21.20% | 21.80% | ||
Predecessor | Sweet Baked Goods | ||||
Concentration Risk [Line Items] | ||||
Percentage of Consolidated Net Revenues | 18.10% | 20.30% | ||
Predecessor | Other | ||||
Concentration Risk [Line Items] | ||||
Percentage of Consolidated Net Revenues | 3.10% | 1.50% |
Summary of Significant Accoun41
Summary of Significant Accounting Policies - Advertising Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Successor | ||||
Marketing and Advertising [Line Items] | ||||
Advertising costs | $ 0.3 | $ 0.6 | ||
Predecessor | ||||
Marketing and Advertising [Line Items] | ||||
Advertising costs | $ 0.4 | $ 1.5 |
Business Combination (Details)
Business Combination (Details) - Business Combination $ in Millions | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Business Acquisition [Line Items] | |
Decrease in goodwill | $ 8.1 |
Decrease in tax receivable agreement liability | 3 |
Decrease to deferred tax liabilities | 5.5 |
Increase in accrued expenses and other liabilities | $ 0.4 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) | Sep. 30, 2017shares |
Common Class A | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Common stock reserved for issuance (in shares) | 7,150,000 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Units, Narrative (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($)shares | |
Service-based RSUs | Directors | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | 22,732 | |
Performance-based on Positive Earnings Per Share, RSUs | Certain Members of Management | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | 297,500 | |
Performance-based on Positive Earnings Per Share, RSUs | Certain Members of Management | Vesting One | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
Performance-based on Positive Earnings Per Share, RSUs | Certain Members of Management | Vesting Two | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
Performance-based on Positive Earnings Per Share, RSUs | Certain Members of Management | Vesting Three | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
RSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total unrecognized compensation cost | $ | $ 17.1 | $ 17.1 |
RSUs | Successor | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | 1,425,790 | |
RSUs | Successor | General and Administrative Expense | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ | $ 1.8 | $ 4.1 |
RSUs | Certain Members of Management | June 1 of each 2018, 2019 and 2020 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | 18,116 | |
RSUs | Certain Members of Management | June 1 of each 2018, 2019 and 2020 | Vesting One | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
RSUs | Certain Members of Management | June 1 of each 2018, 2019 and 2020 | Vesting Two | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
RSUs | Certain Members of Management | June 1 of each 2018, 2019 and 2020 | Vesting Three | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
RSUs | Certain Members of Management | November 4 of each 2017, 2018 and 2019 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | 372,036 | |
RSUs | Certain Members of Management | November 4 of each 2017, 2018 and 2019 | Vesting One | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
RSUs | Certain Members of Management | November 4 of each 2017, 2018 and 2019 | Vesting Two | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
RSUs | Certain Members of Management | November 4 of each 2017, 2018 and 2019 | Vesting Three | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting percentage | 33.33% | |
Performance-based on EBITDA Target, RSUs | Certain Members of Management | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | 715,406 | |
Vesting period | 3 years | |
Performance-based on EBITDA Target, RSUs | Certain Members of Management | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Percentage of granted units that can be banked by awardees | 225.00% |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of the Activity of Unvested RSUs (Details) - Successor - RSUs | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Restricted Stock Units | |
Unvested as of December 31, 2016 (shares) | shares | 0 |
Total Granted (shares) | shares | 1,425,790 |
Forfeited (shares) | shares | (79,543) |
Vested (shares) | shares | 0 |
Unvested as of September 30, 2017 (shares) | shares | 1,346,247 |
Weighted Average Grant Date Fair Value | |
Unvested as of December 31, 2016 (usd per share) | $ / shares | $ 0 |
Total Granted (usd per share) | $ / shares | 15.77 |
Forfeited (usd per share) | $ / shares | 15.78 |
Vested (usd per share) | $ / shares | 0 |
Unvested as of September 30, 2017 (usd per share) | $ / shares | $ 15.77 |
Stock-Based Compensation - Re46
Stock-Based Compensation - Restricted Stock Awards, Narrative (Details) - Restricted Stock - USD ($) $ in Millions | Mar. 23, 2017 | Sep. 30, 2017 | Sep. 30, 2017 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total unrecognized compensation cost | $ 4.1 | $ 4.1 | |
Successor | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares granted | 435,000 | ||
Successor | General and Administrative Expense | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 1.3 | $ 2.8 | |
Executive | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares granted | 435,000 | ||
Executive | Vesting One | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting percentage | 33.33% | ||
Executive | Vesting Two | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting percentage | 33.33% | ||
Executive | Vesting Three | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting percentage | 33.33% |
Stock-Based Compensation - Su47
Stock-Based Compensation - Summary of the Activity of Restricted Stock Awards (Details) - Successor - Restricted Stock | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Shares of Restricted Stock | |
Unvested as of December 31, 2016 (shares) | shares | 0 |
Granted (shares) | shares | 435,000 |
Forfeited (shares) | shares | 0 |
Vested (shares) | shares | 0 |
Unvested as of September 30, 2017 (shares) | shares | 435,000 |
Weighted Average Grant Date Fair Value | |
Unvested as of December 31, 2016 (usd per share) | $ / shares | $ 0 |
Granted (usd per share) | $ / shares | 15.78 |
Forfeited (usd per share) | $ / shares | 0 |
Vested (usd per share) | $ / shares | 0 |
Unvested as of September 30, 2017 (usd per share) | $ / shares | $ 15.78 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options, Narrative (Details) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Grant date fair value per option (usd per share) | $ / shares | $ 5.03 | |
Total unrecognized compensation cost related to non-vested stock options | $ | $ 4.5 | $ 4.5 |
Successor | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | shares | 1,155,788 | |
Grant date fair value per option (usd per share) | $ / shares | $ 5.03 | |
Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 4 years | |
Option | Successor | General and Administrative Expense | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ | $ 0.6 | $ 1.1 |
Certain Members of Management | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares granted | shares | 1,155,788 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Assumptions (Details) - Option | 9 Months Ended |
Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected volatility (as a percent) | 27.53% |
Expected dividend yield (as a percent) | 0.00% |
Expected option term | 6 years 3 months |
Risk-free rate (as a percent) | 2.10% |
Stock-Based Compensation - Su50
Stock-Based Compensation - Summary of the Activity of Unvested Stock Options (Details) | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Weighted Average Grant Date Fair Value | |
Granted (usd per share) | $ 5.03 |
Successor | |
Number of Options | |
Outstanding as of December 31, 2016 (shares) | shares | 0 |
Granted (shares) | shares | 1,155,788 |
Exercised (shares) | shares | 0 |
Forfeited (shares) | shares | (44,371) |
Outstanding as of September 30, 2017 (shares) | shares | 1,111,417 |
Number of Options, Exercisable as of September 30, 2017 (shares) | shares | 0 |
Weighted Average Remaining Contractual Life (years) | |
Granted | 5 years 281 days |
Forfeited | 5 years 274 days |
Outstanding as of September 30, 2017 (Successor) | 5 years 281 days |
Weighted Average Exercise Price | |
Outstanding as of December 31, 2016 (usd per share) | $ 0 |
Granted (usd per share) | 15.85 |
Exercised (usd per share) | 0 |
Forfeited (usd per share) | 15.78 |
Outstanding as of September 30, 2017 (usd per share) | 15.85 |
Weighted Average Exercise Price, Exercisable as of September 30, 2017 (usd per share) | 0 |
Weighted Average Grant Date Fair Value | |
Outstanding as of December 31, 2016 (usd per share) | 0 |
Granted (usd per share) | 5.03 |
Exercised (usd per share) | 0 |
Forfeited (usd per share) | 5.03 |
Outstanding as of September 30, 2017 (usd per share) | 5.03 |
Weighted Average Grant Date Fair Value, Exercisable as of September 30, 2017 (usd per share) | $ 0 |
Stock-Based Compensation - Host
Stock-Based Compensation - Hostess Management, LLC Equity Interest Plan (Predecessor) (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2013class | Sep. 30, 2017class | Dec. 31, 2016shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Common units, number of classes | 3 | ||||
2013 Plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Outstanding units (shares) | shares | 0 | ||||
2013 Plan | Predecessor | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Ownership interest, percentage | 9.00% | ||||
Common units, number of classes | 3 | ||||
2013 Plan | Predecessor | General and Administrative Expense | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Unit-based compensation expense | $ | $ 0.3 | $ 0.7 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Successor | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 177,437 | $ 177,437 | $ 154,830 | ||
Less accumulated depreciation | (10,506) | (10,506) | (1,606) | ||
Property and equipment, net | 166,931 | 166,931 | 153,224 | ||
Depreciation expense | 3,100 | 8,900 | |||
Successor | Land and buildings | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 31,296 | 31,296 | 30,275 | ||
Successor | Machinery and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 130,778 | 130,778 | 112,221 | ||
Successor | Construction in progress | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 15,363 | $ 15,363 | $ 12,334 | ||
Predecessor | |||||
Property, Plant and Equipment [Line Items] | |||||
Depreciation expense | $ 2,500 | $ 6,700 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)segment | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Segment Reporting [Abstract] | |||||
Number of reportable segments | segment | 2 | ||||
Successor | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 192,250 | $ 579,967 | |||
Depreciation and amortization | 9,722 | 28,576 | |||
Gross profit | 78,365 | 246,106 | |||
Capital expenditures | 9,314 | 25,415 | |||
Total segment assets | 2,926,673 | 2,926,673 | $ 2,847,892 | ||
Successor | Sweet Baked Goods | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 173,552 | 524,731 | |||
Depreciation and amortization | 8,703 | 25,587 | |||
Gross profit | 72,965 | 230,217 | |||
Capital expenditures | 9,109 | 24,772 | |||
Total segment assets | 2,719,743 | 2,719,743 | 2,633,758 | ||
Successor | Other | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 18,698 | 55,236 | |||
Depreciation and amortization | 1,019 | 2,989 | |||
Gross profit | 5,400 | 15,889 | |||
Capital expenditures | 205 | 643 | |||
Total segment assets | $ 206,930 | $ 206,930 | $ 214,134 | ||
Predecessor | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 196,197 | $ 548,757 | |||
Depreciation and amortization | 3,168 | 9,054 | |||
Gross profit | 82,579 | 239,330 | |||
Capital expenditures | 9,473 | 25,912 | |||
Predecessor | Sweet Baked Goods | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 174,473 | 508,288 | |||
Depreciation and amortization | 2,585 | 8,119 | |||
Gross profit | 76,777 | 227,322 | |||
Capital expenditures | 9,312 | 25,701 | |||
Predecessor | Other | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 21,724 | 40,469 | |||
Depreciation and amortization | 583 | 935 | |||
Gross profit | 5,802 | 12,008 | |||
Capital expenditures | $ 161 | $ 211 |
Goodwill and Intangible Asset54
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Decrease in goodwill | $ 8,100 | |||
Customer Relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted-average amortization period | 21 years 9 months 18 days | |||
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 | |||
Successor | ||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Decrease in goodwill | $ 8,111 | |||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 5,994 | $ 17,860 | ||
Predecessor | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 156 | $ 468 |
Goodwill and Intangible Asset55
Goodwill and Intangible Assets - Goodwill Activity (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Goodwill [Roll Forward] | |
Measurement period adjustment of the Business Combination | $ (8,100) |
Successor | |
Goodwill [Roll Forward] | |
Balance as of December 31, 2016 (Successor) | 588,460 |
Measurement period adjustment of the Business Combination | (8,111) |
Balance as of September 30, 2017 (Successor) | 580,349 |
Successor | Sweet Baked Goods | |
Goodwill [Roll Forward] | |
Balance as of December 31, 2016 (Successor) | 518,759 |
Measurement period adjustment of the Business Combination | (8,111) |
Balance as of September 30, 2017 (Successor) | 510,648 |
Successor | Other | |
Goodwill [Roll Forward] | |
Balance as of December 31, 2016 (Successor) | 69,701 |
Measurement period adjustment of the Business Combination | 0 |
Balance as of September 30, 2017 (Successor) | $ 69,701 |
Goodwill and Intangible Asset56
Goodwill and Intangible Assets - Intangible Assets (Details) - Successor - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | $ 1,929,082 | $ 1,946,943 |
Trademarks and Trade Names | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Intangible assets with indefinite lives (Trademarks and Trade Names) | 1,408,848 | 1,408,848 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets with definite lives (Customer Relationships) | 542,011 | 542,011 |
Less accumulated amortization (Customer Relationships) | $ (21,777) | $ (3,916) |
Goodwill and Intangible Asset57
Goodwill and Intangible Assets - Future Amortization (Details) - Customer Relationships $ in Thousands | Sep. 30, 2017USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
Remainder of 2017 | $ 5,994 |
2,018 | 23,977 |
2,019 | 23,977 |
2,020 | 23,977 |
2,021 | 23,977 |
2022 and thereafter | $ 418,332 |
Accrued Expenses (Details)
Accrued Expenses (Details) - Successor - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accrued Expenses [Line Items] | ||
Annual incentive bonuses | $ 4,141 | $ 5,997 |
Payroll, vacation and other compensation | 3,496 | 5,121 |
Self-insurance reserves | 1,310 | 2,091 |
Accrued interest | 224 | 4,885 |
Current income taxes payable | 113 | 2 |
Workers compensation reserve | 1,650 | 1,321 |
Interest rate swap contract | 99 | 0 |
Litigation (Note 14) | 0 | 1,100 |
Other | 18 | 1,139 |
Accrued expenses and other current liabilities | $ 11,051 | $ 21,656 |
Debt - Narrative (Details)
Debt - Narrative (Details) - Term Loan | May 19, 2017 | Sep. 30, 2017 | May 18, 2017 |
Second Amended First Lien Term Loan | |||
Debt Instrument [Line Items] | |||
Interest rate during the period | 3.73% | ||
First Lien Term Loan | |||
Debt Instrument [Line Items] | |||
Interest rate during the period | 4.00% | ||
Hostess Brands, LLC | Second Amended First Lien Term Loan | |||
Debt Instrument [Line Items] | |||
Interest rate on aggregate principal balance | 0.25% | ||
Hostess Brands, LLC | Second Amended First Lien Term Loan | LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 0.75% | ||
Hostess Brands, LLC | Second Amended First Lien Term Loan | LIBOR Floor | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.50% | ||
Hostess Brands, LLC | Second Amended First Lien Term Loan | Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 1.50% |
Debt - Schedule of Long-Term De
Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Capital lease obligation | ||
Debt Instrument [Line Items] | ||
Effective rate | 6.80% | |
Successor | ||
Debt Instrument [Line Items] | ||
Capital lease obligation (6.8%) | $ 608 | $ 724 |
Total debt and capital lease obligation | 999,833 | 1,004,870 |
Less: Amounts due within one year | (11,357) | (11,496) |
Long-term portion | 988,476 | 993,374 |
Successor | Term Loan | Second Amended First Lien Term Loan (3.7% as of September 30, 2017) | ||
Debt Instrument [Line Items] | ||
Principal | 993,763 | 0 |
Unamortized debt premium and issuance costs | 5,462 | 0 |
Long-term debt | $ 999,225 | 0 |
Effective rate | 3.70% | |
Successor | Term Loan | New First Lien Term Loan (4.0%) | ||
Debt Instrument [Line Items] | ||
Principal | $ 0 | 998,750 |
Unamortized debt premium and issuance costs | 0 | 5,396 |
Long-term debt | $ 0 | $ 1,004,146 |
Effective rate | 4.00% |
Debt - Schedule of Maturities o
Debt - Schedule of Maturities of Long-term Debt (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Debt Disclosure [Abstract] | |
Remainder of 2017 | $ 2,491 |
2,018 | 9,963 |
2,019 | 9,963 |
2,020 | 9,963 |
2,021 | 9,963 |
2022 and thereafter | $ 951,420 |
Debt - Revolving Credit Facilit
Debt - Revolving Credit Facility (Details) - Revolving Credit Facility - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2017 | |
Line of Credit Facility [Line Items] | |||
Outstanding borrowings | $ 0 | ||
Predecessor | |||
Line of Credit Facility [Line Items] | |||
Interest expense from debt fee amortization | $ 100,000 | $ 300,000 |
Interest Rate Swap (Details)
Interest Rate Swap (Details) - Designated as Hedging Instrument - Interest Rate Swap - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended |
Apr. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2017 | |
Derivative [Line Items] | |||
Unrealized losses expected to be reclassified | $ 1,500,000 | $ 1,500,000 | |
Cash Flow Hedge | |||
Derivative [Line Items] | |||
Fixed interest rate | 1.78% | ||
Notional amount | $ 500,000,000 | ||
Reduction in notional amount per year | $ 100,000,000 | ||
Term of contract | 5 years | ||
Effective fixed interest rate on long-term debt | 4.28% | 4.28% | |
Hedge ineffectiveness, net | $ 0 | $ 0 | |
Interest rate cash flow hedge gain (loss) reclassified into earnings | 0 | 0 | |
Cash Flow Hedge | Accrued Expenses and Other Liabilities | |||
Derivative [Line Items] | |||
Fair value of derivative | $ 100,000 | $ 100,000 | |
Cash Flow Hedge | LIBOR | |||
Derivative [Line Items] | |||
Basis spread on variable rate | 0.75% |
Equity (Details)
Equity (Details) | 9 Months Ended | |
Sep. 30, 2017classday$ / sharesshares | Dec. 31, 2016shares | |
Class of Stock [Line Items] | ||
Common stock, number of classes | class | 3 | |
Period after completion of Business Combination warrants become exercisable | 30 days | |
Warrants redemption price (usd per share) | $ / shares | $ 0.01 | |
Share price (usd per share) | $ / shares | $ 24 | |
Warrants trading days threshold | day | 20 | |
Warrants trading day period before redemption | 30 days | |
Public warrants | ||
Class of Stock [Line Items] | ||
Warrants outstanding (shares) | 37,499,890 | 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 | |
Common stock, issued (shares) | 99,992,183 | 98,250,917 |
Common stock, outstanding (shares) | 99,992,183 | 98,250,917 |
Number of shares exchanged | 1,306,211 | |
Number of shares called by each warrant | 0.5 | |
Exercise price of warrant (usd per share) | $ / shares | $ 5.75 | |
Common Class B | ||
Class of Stock [Line Items] | ||
Common stock, authorized (shares) | 50,000,000 | |
Common stock, issued (shares) | 30,398,777 | 31,704,988 |
Common stock, outstanding (shares) | 30,398,777 | 31,704,988 |
Number of shares exchanged | 1,306,211 | |
Common Class F | ||
Class of Stock [Line Items] | ||
Common stock, authorized (shares) | 10,000,000 | |
Common stock, issued (shares) | 0 | 0 |
Common stock, outstanding (shares) | 0 | 0 |
Earnings per Share (Details)
Earnings per Share (Details) - Successor - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Numerator: | ||
Net income attributable to Class A shareholders (in thousands) | $ 9,549 | $ 44,211 |
Denominator: | ||
Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards) | 99,557,183 | 98,920,808 |
Dilutive effect of warrants (in shares) | 5,717,416 | 6,844,613 |
Dilutive effect of restricted stock awards and RSUs (in shares) | 143,967 | 75,252 |
Weighted-average shares outstanding - diluted | 105,418,566 | 105,840,673 |
Net income per Class A share - basic (usd per share) | $ 0.10 | $ 0.45 |
Net income per Class A share - dilutive (usd per share) | $ 0.09 | $ 0.42 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes [Line Items] | |||
Nonrecurring discrete charge, related to change in state tax law | $ 2,200,000 | ||
Unrecognized tax benefits | 0 | ||
Forecast | |||
Income Taxes [Line Items] | |||
Effective income tax rate | 29.60% | ||
Successor | |||
Income Taxes [Line Items] | |||
Net deferred tax liability | $ 366,457,000 | $ 353,797,000 |
Tax Receivable Agreement - Narr
Tax Receivable Agreement - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Hostess Holdings | ||||
Business Acquisition [Line Items] | ||||
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% | |||
Significant inputs, tax savings rate | 37.00% | |||
Successor | ||||
Business Acquisition [Line Items] | ||||
Remeasurement due to change in state tax rate | $ (1,589) | $ 0 | $ (1,589) | $ 0 |
Tax Receivable Agreement - Summ
Tax Receivable Agreement - Summary of Activity (Details) - Successor - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Reconciliation of Tax Receivable Agreement Liability [Roll Forward] | ||||
Balance December 31, 2016 (Successor) | $ 165,384 | |||
Measurement period adjustment of the Business Combination | (3,016) | |||
Balance arising from exchanges of Class B units for Class A shares | 11,530 | |||
Remeasurement due to change in state tax rate | $ (1,589) | $ 0 | (1,589) | $ 0 |
Balance September 30, 2017 (Successor) | $ 175,487 | $ 175,487 |
Tax Receivable Agreement - Futu
Tax Receivable Agreement - Future Expected Payments (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Income Tax Disclosure [Abstract] | |
Remainder of 2017 | $ 0 |
2,018 | 14,165 |
2,019 | 10,375 |
2,020 | 10,097 |
2,021 | 9,845 |
Thereafter | $ 131,005 |
Commitments and Contingencies -
Commitments and Contingencies - Accruals and the Potential Effect of Litigation (Details) $ in Millions | 3 Months Ended |
Sep. 30, 2017USD ($) | |
National Frozen Distribution Consultants, LLC (NFDC) | Breach of Contract | |
Loss Contingencies [Line Items] | |
Amount of damages awarded | $ 2 |
Commitments and Contingencies71
Commitments and Contingencies - Contractual Commitments (Details) $ in Millions | Sep. 30, 2017USD ($) |
Ingredients | |
Long-term Purchase Commitment [Line Items] | |
Total Committed | $ 82.4 |
Commitments within 1 year | 69.2 |
Commitments beyond 1 year | 13.2 |
Packaging | |
Long-term Purchase Commitment [Line Items] | |
Total Committed | 44.3 |
Commitments within 1 year | 39.1 |
Commitments beyond 1 year | $ 5.2 |
Commitments and Contingencies72
Commitments and Contingencies - Letters of Credit (Details) | Sep. 30, 2017USD ($) |
$1.0 Million Standby Letters of Credit | |
Line of Credit Facility [Line Items] | |
Line of credit, amount to be issued | $ 2,190,000 |
$1.7 Million Standby Letters of Credit | |
Line of Credit Facility [Line Items] | |
Line of credit, amount to be issued | $ 1,700,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - Executive Chairman - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | |
Minimum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 0 | ||||
Maximum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 2,750,000 | ||||
Hostess Holdings units | |||||
Related Party Transaction [Line Items] | |||||
Estimated employment expense | $ 0.3 | ||||
Hostess Holdings units | Minimum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 0 | ||||
Hostess Holdings units | Maximum | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 5,500,000 | ||||
Predecessor | |||||
Related Party Transaction [Line Items] | |||||
Compensation expense | $ 1.1 | $ 3.4 | |||
Forecast | Adjusted EBITDA Greater Than $257.8 million | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 1,375,000 | ||||
Forecast | Adjusted EBITDA Greater Than $262.8 million | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 1,375,000 | ||||
Forecast | Minimum | Adjusted EBITDA Greater Than $257.8 million | |||||
Related Party Transaction [Line Items] | |||||
Adjusted EBITDA | $ 257.8 | ||||
Forecast | Minimum | Adjusted EBITDA Greater Than $262.8 million | |||||
Related Party Transaction [Line Items] | |||||
Adjusted EBITDA | $ 262.8 | ||||
Forecast | Hostess Holdings units | Adjusted EBITDA Greater Than $240.5 million | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 2,750,000 | ||||
Forecast | Hostess Holdings units | Adjusted EBITDA Greater Than $245.5 million | |||||
Related Party Transaction [Line Items] | |||||
Potential grants (shares) | 2,750,000 | ||||
Forecast | Hostess Holdings units | Minimum | Adjusted EBITDA Greater Than $240.5 million | |||||
Related Party Transaction [Line Items] | |||||
Adjusted EBITDA | $ 240.5 | ||||
Forecast | Hostess Holdings units | Minimum | Adjusted EBITDA Greater Than $245.5 million | |||||
Related Party Transaction [Line Items] | |||||
Adjusted EBITDA | $ 245.5 |