Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 21, 2020 | Jun. 30, 2019 | |
Class of Stock [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Transition Report | false | ||
Entity File Number | 001-37540 | ||
Entity Registrant Name | HOSTESS BRANDS, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 47-4168492 | ||
Entity Address, Address Line One | 7905 Quivira Road, | ||
Entity Address, City or Town | Lenexa, | ||
Entity Address, State or Province | KS | ||
Entity Address, Postal Zip Code | 66215 | ||
City Area Code | 816 | ||
Local Phone Number | 701-4600 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 1,568,915,646 | ||
Documents Incorporated by Reference | Portions of the Registrant’s definitive proxy statement relating to its 2020 annual meeting of stockholders (the “2020 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2020 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Central Index Key | 0001644406 | ||
Current Fiscal Year End Date | --12-31 | ||
Common Class A | |||
Class of Stock [Line Items] | |||
Title of 12(b) Security | Class A Common Stock, par value of $0.0001 per share | ||
Trading Symbol | TWNK | ||
Security Exchange Name | NASDAQ | ||
Entity Common Stock, Shares Outstanding | 123,186,308 | ||
Warrant | |||
Class of Stock [Line Items] | |||
Title of 12(b) Security | 56,499,790 Warrants, each exercisable for half share of Class A Common Stock | ||
Trading Symbol | TWNKW | ||
Security Exchange Name | NASDAQ | ||
Common Class B | |||
Class of Stock [Line Items] | |||
Entity Common Stock, Shares Outstanding | 7,440,587 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 285,087 | $ 146,377 |
Accounts receivable, net | 104,892 | 105,679 |
Inventories | 47,608 | 38,580 |
Prepaids and other current assets | 15,569 | 8,806 |
Total current assets | 453,156 | 299,442 |
Property and equipment, net | 242,384 | 220,349 |
Intangible assets, net | 1,853,315 | 1,901,215 |
Goodwill | 535,853 | 575,645 |
Other assets, net | 12,993 | 14,062 |
Total assets | 3,097,701 | 3,010,713 |
Current liabilities: | ||
Long-term debt and lease obligations payable within one year | 11,883 | 11,268 |
Tax receivable agreement obligations payable within one year | 12,100 | 4,400 |
Accounts payable | 68,566 | 65,288 |
Customer trade allowances | 45,715 | 42,010 |
Accrued expenses and other current liabilities | 21,661 | 18,137 |
Total current liabilities | 159,925 | 141,103 |
Long-term debt and lease obligations | 975,405 | 976,736 |
Tax receivable agreement obligations | 126,096 | 64,663 |
Deferred tax liability | 256,051 | 277,954 |
Total liabilities | 1,517,477 | 1,460,456 |
Commitments and Contingencies (Note 15) | ||
Additional paid in capital | 1,152,055 | 925,902 |
Accumulated other comprehensive income (loss) | (756) | 2,523 |
Retained earnings | 334,480 | 271,365 |
Stockholders’ equity | 1,485,792 | 1,199,803 |
Non-controlling interest | 94,432 | 350,454 |
Total liabilities, stockholders’ equity and non-controlling interest | 3,097,701 | 3,010,713 |
Common Class A | ||
Current liabilities: | ||
Common Stock | 12 | 10 |
Common Class B | ||
Current liabilities: | ||
Common Stock | $ 1 | $ 3 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
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) | 122,108,086 | 100,046,392 |
Common stock, outstanding (shares) | 122,108,086 | 100,046,392 |
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) | 8,409,834 | 30,255,184 |
Common stock, outstanding (shares) | 8,409,834 | 30,255,184 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | |||
Net revenue | $ 907,675 | $ 850,389 | $ 776,188 |
Cost of goods sold | 607,841 | 583,112 | 449,290 |
Gross profit | 299,834 | 267,277 | 326,898 |
Operating costs and expenses: | |||
Advertising and marketing | 39,775 | 35,069 | 33,004 |
Selling expense | 30,719 | 30,071 | 32,086 |
General and administrative | 69,423 | 52,760 | 52,943 |
Amortization of customer relationships | 23,377 | 24,057 | 23,855 |
Business combination transaction costs | 1,914 | 297 | 0 |
Tax receivable agreement liability remeasurement | 186 | (1,866) | (50,222) |
Gain on foreign currency contract | (7,128) | 0 | 0 |
Other operating expense | 5,472 | 5,331 | 1,240 |
Total operating costs and expenses | 163,738 | 145,719 | 92,906 |
Operating Income (Loss), Total | 136,096 | 121,558 | 233,992 |
Other (income) expense: | |||
Interest Expense | 39,870 | 39,404 | 39,174 |
Gain on buyout of tax receivable agreement | 0 | (12,372) | 0 |
Other expense | 1,769 | 146 | 3,914 |
Total other expense | 41,639 | 27,178 | 43,088 |
Income before income taxes | 94,457 | 94,380 | 190,904 |
Income Tax Expense (Benefit) | 16,892 | 12,954 | (67,204) |
Net income | 77,565 | 81,426 | 258,108 |
Less: Net income attributable to the non-controlling interest | 14,450 | 18,531 | 34,211 |
Net Income (Loss) Attributable to Parent, Total | $ 63,115 | $ 62,895 | $ 223,897 |
Earnings per Class A share: | |||
Basic (usd per share) | $ 0.57 | $ 0.63 | $ 2.26 |
Diluted (usd per share) | $ 0.55 | $ 0.61 | $ 2.13 |
Weighted-average shares outstanding: | |||
Basic (shares) | 110,540,264 | 99,957,049 | 99,109,629 |
Diluted (shares) | 114,699,447 | 103,098,394 | 105,307,293 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 77,565 | $ 81,426 | $ 258,108 |
Other comprehensive income: | |||
Unrealized gain (loss) on interest rate swap designated as a cash flow hedge | (5,768) | 2,187 | 2,878 |
Income tax benefit (expense) | 1,222 | (470) | (890) |
Comprehensive income | 73,019 | 83,143 | 260,096 |
Less: Comprehensive income attributed to non-controlling interest | 13,292 | 19,050 | 34,881 |
Comprehensive income attributed to Class A shareholders | $ 59,727 | $ 64,093 | $ 225,215 |
Consolidated Statements of Equi
Consolidated Statements of Equity (Deficit) - USD ($) $ in Thousands | Total | Class A | Class B | Common StockClass A | Common StockClass B | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Losses / Retained Earnings | Total Stockholders’ Equity | Non-controlling Interest |
Beginning balance (shares) at Dec. 31, 2016 | 98,250,917 | 31,704,988 | ||||||||
Beginning balance at Dec. 31, 2016 | $ 10 | $ 3 | $ 912,824 | $ 0 | $ (15,618) | $ 897,219 | $ 334,192 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income | $ 260,096 | 1,318 | 223,897 | 225,215 | 34,881 | |||||
Share‑based compensation (shares) | 154,849 | |||||||||
Share-based compensation, net of income taxes | 4,803 | 4,803 | ||||||||
Exchanges (shares) | 1,385,424 | (1,385,424) | ||||||||
Exchanges | 13,848 | 13,848 | (13,848) | |||||||
Distributions | (12,985) | |||||||||
Payment of taxes for employee stock awards | (436) | (436) | ||||||||
Exercise of public warrants (shares) | 55 | |||||||||
Exercise of public warrants | 1 | 1 | ||||||||
Tax receivable agreement arising from exchanges, net of income taxes | (10,317) | (10,317) | ||||||||
Ending balance at Dec. 31, 2017 | $ 10 | $ 3 | 920,723 | 1,318 | 208,279 | 1,130,333 | 342,240 | |||
Ending balance (shares) at Dec. 31, 2017 | 99,791,245 | 30,319,564 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income | 83,143 | 1,198 | 62,895 | 64,093 | 19,050 | |||||
Share‑based compensation (shares) | 190,767 | |||||||||
Share-based compensation, net of income taxes | 5,095 | 5,095 | ||||||||
Exchanges (shares) | 64,380 | (64,380) | ||||||||
Exchanges | 1,370 | 1,370 | (1,370) | |||||||
Distributions | (9,551) | |||||||||
Payment of taxes for employee stock awards | (1,025) | (1,025) | ||||||||
Tax receivable agreement arising from exchanges, net of income taxes | (261) | (261) | ||||||||
Ending balance at Dec. 31, 2018 | $ 10 | $ 3 | 925,902 | 2,523 | 271,365 | 1,199,803 | 350,454 | |||
Ending balance (shares) at Dec. 31, 2018 | 100,046,392 | 30,255,184 | 100,046,392 | 30,255,184 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income | $ 73,019 | (3,388) | 63,115 | 59,727 | 13,292 | |||||
Share‑based compensation (shares) | 208,831 | |||||||||
Share-based compensation, net of income taxes | 7,877 | 7,877 | ||||||||
Exchanges (shares) | 21,845,350 | (21,845,350) | ||||||||
Exchanges | $ 2 | $ (2) | 262,547 | 109 | 262,656 | (262,656) | ||||
Distributions | (6,658) | |||||||||
Exercise of employee stock options (shares) | 7,463 | 7,463 | ||||||||
Exercise of employee stock options | 23 | 23 | ||||||||
Payment of taxes for employee stock awards | (1,431) | (1,431) | ||||||||
Exercise of public warrants (shares) | 50 | |||||||||
Exercise of public warrants | 0 | |||||||||
Tax receivable agreement arising from exchanges, net of income taxes | (42,863) | (42,863) | ||||||||
Ending balance at Dec. 31, 2019 | $ 12 | $ 1 | $ 1,152,055 | $ (756) | $ 334,480 | $ 1,485,792 | $ 94,432 | |||
Ending balance (shares) at Dec. 31, 2019 | 122,108,086 | 8,409,834 | 122,108,086 | 8,409,834 |
Consolidated Statements of Eq_2
Consolidated Statements of Equity (Deficit) (Parenthetical) - USD ($) $ in Thousands | Jan. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Stockholders' Equity [Abstract] | ||||
Tax receivable agreement arising from exchanges, income taxes | $ 28,817 | $ 33 | $ 1,898 | |
Income tax, share-based compensation | $ 1,354 | $ 505 | $ 2,610 | |
Adoption of new accounting standards, income tax | $ 83 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating activities | |||
Net income | $ 77,565 | $ 81,426 | $ 258,108 |
Depreciation and amortization | 43,334 | 41,411 | 38,170 |
Impairment of property, goodwill and intangibles | 1,505 | 4,717 | 1,003 |
Non-cash loss on debt modification | 531 | 0 | 1,453 |
Debt premium amortization | (747) | (1,079) | (925) |
Tax receivable agreement remeasurement and gain on buyout | 185 | (14,237) | (50,222) |
Non-cash fees on sale of business | 1,414 | 0 | 0 |
Gain on foreign currency contract | (7,128) | 0 | 0 |
Share-based compensation | 9,231 | 5,600 | 7,413 |
Loss on sale/abandonment of property and equipment | 471 | 253 | 11 |
Deferred taxes | 14,121 | 10,255 | (81,270) |
Change in operating assets and liabilities, net of acquisitions and dispositions: | |||
Accounts receivable | (2,570) | (3,667) | (11,775) |
Inventories | (12,477) | 3,569 | (3,901) |
Prepaids and other current assets | 265 | (510) | (3,039) |
Accounts payable and accrued expenses | 14,072 | 14,418 | 4,839 |
Customer trade allowances | 4,202 | 1,499 | 3,820 |
Net cash provided by operating activities | 143,974 | 143,655 | 163,685 |
Investing activities | |||
Purchases of property and equipment | (34,875) | (44,585) | (32,913) |
Acquisition of business, net of cash | 0 | (23,160) | 0 |
Proceeds from sale of business, net of cash | 63,345 | 0 | 0 |
Proceeds from sale of assets | 0 | 639 | 85 |
Acquisition and development of software assets | (5,609) | (3,839) | (2,381) |
Net cash provided by (used in) investing activities | 22,861 | (70,945) | (35,209) |
Financing activities | |||
Repayments of long-term debt and capital lease obligations | (9,894) | (10,105) | (5,144) |
Debt refinancing costs | (7,433) | 0 | (1,066) |
Distributions to non-controlling interest | (6,658) | (9,551) | (12,985) |
Payment of taxes related to the net issuance of employee stock awards | (1,431) | (1,025) | (436) |
Payments on tax receivable agreement | (2,732) | (41,353) | 0 |
Proceeds from the exercise of warrants | 23 | 0 | 1 |
Net cash used in financing activities | (28,125) | (62,034) | (19,630) |
Net increase in cash and cash equivalents | 138,710 | 10,676 | 108,846 |
Cash and cash equivalents at beginning of period | 146,377 | 135,701 | 26,855 |
Cash and cash equivalents at end of period | 285,087 | 146,377 | 135,701 |
Supplemental Disclosures of Cash Flow Information | |||
Interest paid | 43,986 | 37,617 | 45,431 |
Taxes paid | 1,840 | 3,422 | 16,617 |
Supplemental disclosure of non-cash investing | |||
Accrued capital expenditures | $ 2,910 | $ 7,858 | $ 1,089 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
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 Lenexa, Kansas. The consolidated financial statements include the accounts of Hostess Brands, Inc. and its wholly owned subsidiaries, including Hostess Holdings, L.P. (“Hostess Holdings”) (collectively, the “Company”). The Company is a leading packaged food company primarily focused on developing, manufacturing, marketing, selling and distributing baked goods in North America. 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 and other assets 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®, Dolly Madison®, Cloverhill®, and Big Texas® brands, including Donettes®, Twinkies®, CupCakes, Ding Dongs®, Zingers®, Danishes, Honey Buns and Coffee Cakes. In January 2020, the Company acquired Voortman Cookies, Limited (“Voortman”), which produces a variety of cookies and creme wafers under the Voortman® brand. The Company's trading symbols on NASDAQ are “TWNK” and “TWNKW”. 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 the Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation. The Company has determined that Hostess Holdings, a limited partnership, is a variable interest entity (“VIE”) and that the Company is the primary beneficiary of the VIE. The Company determined that, due to its ownership of Hostess Holdings’ general partnership units, the Company has the power to direct all of the activities of Hostess Holdings, with no substantive kick-out rights or participating rights by the limited partners individually or as a group. Hostess Holdings constitutes the majority of the assets of the Company. C. Dean Metropoulos and entities under his control (the “Metropoulos Entities”) hold their equity investment in the Company primarily through Class B limited partnership units in Hostess Holdings (“Class B Units”) and an equal number of shares of the Company’s Class B common stock (“Class B Stock”). The Company’s Class B Stock has voting, but no economic rights, while Hostess Holdings’ Class B Units have economic, but no voting rights. Each Class B Unit, together with a share of Class B Stock held by the Metropoulos Entities, is exchangeable for a share of the Company’s Class A common stock (or at the option of the Company, the cash equivalent thereof). The interest of the Metropoulos Entities in Hostess Holdings’ Class B Units is reflected in the consolidated financial statements as a non-controlling interest. The Company has two reportable segments: Sweet Baked Goods and In-Store Bakery. The Company sold its In-Store Bakery operations on August 30, 2019. 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 VIE), collectively referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation. Adoption of New Accounting Standards On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, along with the related ASUs 2018-01, 2018-10 and 2018-11 (collectively, “Topic 842”). Topic 842 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. To adopt this standard, the Company utilized a modified retrospective transition method. Under this approach, the results for reporting periods beginning January 1, 2019 are presented under Topic 842. Prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting standards. There was no cumulative effect of applying Topic 842 to the opening balance of retained earnings. The Company has elected to apply the practical expedients under Topic 842 which allow entities to not reassess the lease classification for expired or existing leases and to not reassess if expired or existing contracts contain leases under the Topic 842 definition. The Company has also elected to use hindsight when determining the lease term of existing leases. As a result of the adoption, on January 1, 2019, the Company recognized right of use assets of $8.2 million, offset by associated accumulated amortization of $5.2 million and corresponding lease liabilities of $3.0 million. The recognition of leases subsequent to the adoption of Topic 842 is further described in Note 15. Commitments and Contingencies. On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective transition method. Under this method, results for reporting periods beginning January 1, 2018 are presented under Topic 606. Prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605, with the cumulative effect of applying Topic 606 to prior period amounts recognized as an adjustment to opening retained earnings. The Company has elected to apply the new standard to contracts that were not complete as of January 1, 2018. Under this transition method, the Company deemed contracts to be not complete if, as of the date of transition, the Company had not fulfilled its performance obligations. On January 1, 2018, the Company adopted ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The adoption of this standard did not have a material impact on the consolidated financial statements. In March 2018, the Company adopted ASU 2018-05, Income Taxes: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“Topic 740”), which updates the income tax accounting in U.S. GAAP to reflect the SEC’s interpretive guidance released on December 22, 2017, when the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform”) was signed into law. Additional information regarding the adoption of this standard is contained in Note 13. Income Taxes. In September 2018, the Company adopted ASU 2018-15, Intangibles-Goodwill and Other Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“Subtopic 350-40”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard did not have a material impact on the consolidated financial statements. 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, inputs used to calculate the Tax Receivable Agreement liability including increases in tax basis related to exchanges, future cash tax savings rate, and the allocation of the liability between short-term and long-term based on when the Company realizes certain tax attributes and reserves for trade and promotional allowances. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less when purchased as cash equivalents and are recorded at cost. Under the Company’s cash management system, checks that have been issued and are out of the control of the Company, but which have not cleared the bank by the balance sheet date, are reported as a reduction of cash. Accounts Receivable Accounts receivable represents amounts invoiced to customers for which the Company’s obligation to the customer has been satisfied. As of December 31, 2019 and 2018, the Company’s accounts receivable were $104.9 million and $105.7 million, respectively, which have been reduced by allowances for damages occurring during shipment, quality claims and doubtful accounts in the amount of $2.7 million and $2.6 million, respectively. 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) December 31, December 31, Ingredients and packaging $ 21,439 $ 18,865 Finished goods 22,513 16,446 Inventory in transit to customers 3,656 3,269 $ 47,608 $ 38,580 Property and Equipment Property and equipment acquired in Business Combinations were assigned useful lives for purposes of depreciation that the Company believes to be the remaining useful life of such assets. Additions to property and equipment are recorded at cost and depreciated straight line over estimated useful lives of 15 to 50 years for buildings and land improvements and 3 to 20 years for machinery and equipment. In order to maximize the efficiency of the Company’s operations and to operate the acquired equipment, occasionally the Company will remove and relocate equipment between bakeries. Such removal and relocation costs are expensed as incurred. Reinstallation costs are capitalized if the useful life is extended or the equipment is significantly improved. Otherwise, reinstallation costs are expensed as incurred. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the balance sheet and any resulting gain or loss is recognized in the consolidated statements of operations. The Company assesses property, plant and equipment for impairment when circumstances arise which could change its use or expected life. For the years ended December 31, 2019, 2018 and 2017 the Company recorded impairment losses of $0.5 million, $1.4 million and $1.0 million, respectively, in the Sweet Baked Goods segment. Software Costs Costs associated with computer software projects during the preliminary project stage are expensed as incurred. Once management authorizes and commits to funding a project, appropriate application development stage costs are capitalized. Capitalization ceases when the project is substantially complete and the software is ready for its intended use. Upgrades and enhancements to software are capitalized when such enhancements are determined to provide additional functionality. Training and maintenance costs associated with software applications are expensed as incurred. Included in the caption “Other assets” in the consolidated balance sheets is capitalized software in the amount of approximately $11.9 million and $8.5 million at December 31, 2019 and 2018, 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 expense in the consolidated statements of operations was $2.7 million for both years ended December 31, 2019 and 2018, and $2.5 million for the year ended December 31, 2017. Goodwill and Intangible Assets At December 31, 2019 and 2018, the goodwill balances of $535.9 million and $575.6 million, respectively, represent the excess of the amount the Company paid for the acquisition of Hostess Holdings from the Metropoulos Entities and other former equity holders in a 2016 transaction over the fair value of the assets acquired and liabilities assumed. The resulting goodwill was allocated to the Sweet Baked Goods reporting unit and the In-Store Bakery reporting unit. No goodwill was recorded in connection with the acquisition of the Cloverhill Business during the year ended December 31, 2018 as the fair value of net assets approximated the consideration paid. During the year ended December 31, 2019, the Company divested the In-Store Bakery operations and removed all allocated goodwill. Goodwill by reporting unit is tested for impairment annually by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company may elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment test. For the 2019 annual impairment test, the Company elected to perform the qualitative test. No indicators of impairment were noted. For the 2018 annual impairment test, the Company elected to perform a quantitative impairment test. For this test, fair value was determined based on a combination of an income approach utilizing the discounted cash flow method and the market approach using the market comparable method. Significant assumptions used to determine fair value under the discounted cash flow method included future trends in sales, operating expenses, capital expenditures and changes in working capital, along with an appropriate discount rate based on our estimated cost of equity capital, after-tax cost of debt and future economic and market conditions. To the extent the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired and an impairment charge was recorded to reduce the reporting unit to fair value. The Company’s indefinite-lived intangible assets consist of trademarks and trade names. The $1,408.6 million and $1,409.9 million balances at December 31, 2019 and 2018, respectively, were recognized as part of the 2016 acquisition of Hostess Holdings and the 2018 acquisition of the Cloverhill Business. The trademarks and trade names are integral to the Company’s identity and are expected to contribute indefinitely to its corporate cash flows. Fair value for trademarks and tradenames was determined using the income approach, which is considered to be Level 3 within the fair value hierarchy. The application of the income approach was premised on a royalty savings method, whereby the trademark and tradenames are valued by reference to the amount of royalty income they could generate if they were licensed, in an arm’s-length transaction, to a third party. These assets have been assigned an indefinite life and therefore are not amortized but rather evaluated for impairment annually using the qualitative or quantitative methods similar to goodwill. For the quantitative assessment, the valuation of trademarks and trade names are determined using the relief of royalty method. significant assumptions used in this method include future trends in sales, a royalty rate and a discount rate to be applied to the forecast revenue stream. During the years ended December 31, 2019 and 2018, the Company recognized impairment charges of $1.0 million and $3.3 million, respectively, to the In-Store Bakery goodwill and intangibles. See Note 7. Goodwill and Intangible Assets for more information on impairment charges. Also, the Company has finite-lived intangible assets, net of accumulated amortization of $444.7 million and $491.3 million balances on December 31, 2019 and 2018 respectively, that consist of customer relationships that were recognized as part of the Hostess Holdings and Cloverhill acquisitions. For customer relationships, the application of the income approach (Level 3) was premised on an excess earnings method, whereby the customer relationships are valued by the earnings expected to be generated from those customers after other capital charges. Definite-lived intangible assets are being amortized on a straight-line basis over the estimated remaining useful lives of the assets. Reserves for Self-Insurance Benefits The Company’s employee health plan is self-insured by the Company up to a stop-loss amount of $0.3 million for each participant per plan year. In addition, the Company maintains insurance programs covering its exposure to workers’ compensation. Such programs include the retention of certain levels of risks and costs through high deductibles and other risk retention strategies. Included in the accrued expenses in the consolidated balance sheets is a reserve for healthcare claims in the amount of approximately $2.0 million and $1.6 million at December 31, 2019 and 2018, respectively, and a reserve for workers’ compensation claims of $2.7 million and $1.9 million at December 31, 2019 and 2018, respectively. Leases Subsequent to its adoption of Topic 842 on January 1, 2019, the Company recognizes a right of use asset and corresponding lease liability on the consolidated balance sheet for all lease transactions with terms of more than 12 months. Agreements are determined to contain a lease if they convey the use and control of an underlying physical asset. Based on the nature of the lease transaction, leases are either classified as financing or operating. Under both classifications, the right of use asset and liability are initially valued based on the present value of the future minimum lease payments using an effective borrowing rate at the inception of the lease. The Company determined the effective borrowing rate based on its expected incremental borrowing rate on collateralized debt. At December 31, 2019, 4.4% was the weighted average effective borrowing rates for outstanding operating leases. Under a financing lease, interest expense related to the lease liability is recognized over the lease term using an effective interest rate method and right of use assets are amortized straight-line over the term of the lease. Under an operating lease, minimum lease payments are expensed straight-line over the lease term. Lease liabilities are amortized using an effective interest rate method and right of use assets are reduced based on the excess of the sum of the straight-line lease expense and the reduction of the lease liability over the actual lease payments. At December 31, 2019, the average remaining terms on operating leases were approximately six years. Variable lease payments, such as taxes and insurance, are expensed as incurred. Expenses related to leases with original terms less than 12 months (short-term leases) are expensed as incurred. For all leases related to distribution, bakery and corporate facilities, the Company has elected not to separate non-lease components from lease components. At December 31, 2019, right of use assets related to operating leases are included in property and equipment, net on the consolidated balance sheet (see Note 5. Property and Equipment). Lease liabilities for operating leases are included in the current and non-current portions of long-term debt and lease obligations on the consolidated balance sheet (see Note 10. Debt). Revenue Recognition Net revenue consists primarily of sales of packaged food products. The Company recognizes revenue when the obligations under the terms of its agreements with customers have been satisfied. The Company’s obligation is satisfied when control of the product is transferred to its customers along with the title, risk of loss and rewards of ownership. Depending on the arrangement with the customer, these criteria are met either at the time the product is shipped or when the product is received by such customer. Customers are invoiced at the time of shipment or customer pickup based on credit terms established in accordance with industry practice. Invoices generally require payment within 30 days. Net revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for that product. Amounts billed to customers related to shipping and handling are classified as net revenue. A provision for payment discounts and other allowances is estimated based on the Company’s historical performance or specific terms with the customer. The Company generally does not accept product returns and provides these allowances for anticipated expired or damaged products. Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue in the same period when the sale is recognized. The Company also offers rebates based on purchase levels, product placement locations in retail stores and advertising placed by customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is the subject of significant management estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue in the same period as the underlying program. For product produced by third parties, management evaluates whether the Company is the principal (i.e., report revenue on a gross basis) or agent (i.e., report revenue on a net basis). Management has determined that it is the principal in all cases, since it establishes its own pricing for such product, generally assumes the credit risk for amounts billed to its customers, and often takes physical control of the product before it is shipped to customers. The Company utilizes a practical expedient approach under Topic 606 and does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed. See Note 6. Segment Reporting for a disaggregation of net revenue. 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: Year Ended Year Ended Year Ended Sweet Baked Goods 23.3 % 20.4 % 19.7 % In-Store Bakery 0.3 % 0.6 % 0.7 % Total 23.6 % 21.0 % 20.4 % Equity Compensation The grant date fair values of stock options are valued using the Black-Scholes option-pricing model, including a simplified method to estimate the number of periods to exercise date (i.e., the expected option term). Management has determined that the equity plan has not been in place for a sufficient amount of time to estimate the post vesting exercise behavior. Therefore, it will continue to use this simplified method until such time as it has sufficient history to provide a reasonable basis to estimate the expected term. Forfeitures are recognized as a reduction of expense as incurred. For awards which have performance and market conditions, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance or market criteria will be met. The equity-based compensation expense, net of forfeitures, is recognized using a straight-line basis over the requisite service period of the awards, which corresponds to the vesting periods of the awards. For performance-based awards, compensation expense is remeasured throughout the vesting period as probability is reassessed. For market-based awards, probability is not reassessed and compensation expense is not remeasured subsequent to the initial assessment on the grant date. Collective Bargaining Agreements As of December 31, 2019, approximately 44%, of the Company’s em ployees are covered by collective bargaining agreements. None of these agreements expire before December 31, 2020. Employee Benefit Plans The Company provides several benefit plans for employees depending upon employee eligibility. The Company has a health care plan, a defined contribution retirement plan (401(k)), company-sponsored life insurance, and other benefit plans. The Company’s contributions to the defined contribution retirement plan were $1.8 million, $1.9 million and $1.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company offers an annual incentive plan based upon annual operating targets. Final payout is approved by the board of directors. As of December 31, 2019 there was $6.8 million accrued for this plan. No amounts were accrued for this plan at December 31, 2018. Income Taxes Hostess Brands, Inc. owns a controlling interest in Hostess Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hostess Holdings is not directly subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Hostess Holdings is passed through to and included in the taxable income or loss of its partners, including the Company. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Hostess Holdings. During the year ended December 31, 2017, the Tax Reform was signed into law. The Company has recognized the tax impacts related to the revaluation of deferred tax assets and liabilities. Further information on the tax impacts of Tax Reform is included in Note 14. Income Taxes Derivatives The Company has 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 income 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 as a component of interest expense in the consolidated statements of operations. Payments made under this contract are included in the supplemental disclosure of interest paid in the consolidated statements of cash flows. During the year ended December 31, 2019, the Company used foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to future commitments denominated in currencies other than the US dollar. The foreign currency contract outstanding as of December 31, 2019 did not qualify as a cash flow hedge. Fair Value Measurements The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the best extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: • Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. • Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. • Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. New Accounting Pronouncements In June 2016, ASU 2016-13 Financial Instruments-Credit Losses : Measurement of Credit Losses on Financial Instruments ( “Topic 326” ) was issued. This ASU requires entities to measure the impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. The Company adopted this ASU on January 1, 2020. Based on its assessment, the Company does not expect the adoption will have a material impact on its consolidated financial statements. |
Divestiture of In-Store Bakery
Divestiture of In-Store Bakery Operations | 12 Months Ended |
Dec. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Divestiture of In-Store Bakery Operations | Divestiture of In-Store Bakery OperationsOn August 30, 2019, the Company sold its In-Store Bakery operations, including relevant trademarks and licensing agreements, to an unrelated party. The operations included products that were primarily sold in the in-store bakery section of U.S. retail channels. The Company divested the operations to provide more focus on future investment in areas of its business that better leverage its core competencies. The Company received proceeds from the divestiture of $65.0 million prior to transaction expenses and subject to certain post-closing adjustments. In connection with the sale, during the year ended December 31, 2019, the Company recognized transaction expenses of $2.1 million and a loss on disposal of $0.3 million within other operating expenses on the consolidated statements of operations. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations On February 1, 2018 (the “Purchase Date”), the Company acquired certain U.S. breakfast assets from Aryzta, LLC, including a bakery and the Cloverhill ® and Big Texas ® brand names (the “Cloverhill Business”). The Company acquired the Cloverhill Business to expand its breakfast product portfolio and to gain previously outsourced manufacturing capabilities for its existing product portfolio. The assets acquired and liabilities assumed constitute a business and were recorded at their fair values as of the Purchase Date under the acquisition method of accounting. Consideration for this acquisition included cash payments of $23.2 million. The following is a summary of the allocation of the purchase price: (In thousands) Inventory $ 8,335 Other current assets 500 Property and equipment 13,272 Trade name and trademarks 1,648 Customer relationships 1,136 Other current liabilities (1,731) Net assets acquired $ 23,160 No goodwill was recognized as part of this acquisition. During the year ended December 31, 2018, the Company incurred $0.3 million of expenses related to this acquisition. These expenses are classified as business combination transaction costs on the consolidated statements of operations. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation Hostess Brands, Inc. 2016 Equity Incentive Plan The Hostess Brands, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) provides for the granting of various equity-based incentive awards to members of the Board of Directors of the Company, employees 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. As of December 31, 2019, 3,490,775 shares remained available for issuance under the 2016 Plan. Share-based compensation expense totaled approximately $9.2 million, $5.6 million and $7.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Restricted Stock Units (“RSUs”) The fair value of RSU awards is calculated based on the closing market price of the Company’s Class A Common Stock on the date of grant. Compensation expense is recognized straight-line over the requisite service period of the awards, ranging from one three The vesting of certain RSU awards is contingent upon the Company attaining 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. For certain RSU awards, a portion of the granted units are banked at each annual performance period if the Company achieves certain EBITDA targets. Banked shares continue to be subject to the requisite service period under the terms of the awards. Depending on actual performance during each of the three annual performance periods, award recipients have the opportunity to receive up to 225% of the granted units. At December 31, 2019 there were no RSU awards with EBITDA performance conditions outstanding. As of December 31, 2018 there were 0.3 million RSU awards with EBITDA performance conditions outstanding. The vesting of certain RSU awards is contingent upon the Company’s Class A stock achieving a certain total stockholder return (“TSR”) in relation to a group of its peers, measured over a two three Upon an employee’s termination, certain RSU awards provided that unvested awards will be forfeited and the shares of common stock underlying such award will become available for issuance under the 2016 Plan. Other RSU awards provide for accelerated vesting upon an employee's termination under certain circumstances. The following table summarizes the activity of the Company’s unvested RSUs: Restricted Stock Weighted Average Unvested as of December 31, 2017 915,894 $ 15.73 Total Granted 440,883 12.92 Forfeited (172,257) 15.46 Vested(1) (288,736) 15.61 Unvested as of December 31, 2018 895,784 $ 14.46 Total Granted 721,985 12.76 Forfeited (298,601) 14.96 Vested(2) (415,033) 14.26 Unvested as of December 31, 2019 904,135 $ 12.99 (1) Includes 81,960 shares withheld to satisfy $1.0 million of employee tax obligations upon vesting. (2) Includes 108,012 shares withheld to satisfy $1.4 million of employee tax obligations upon vesting. As of December 31, 2019 and 2018, there was $7.6 million and $6.4 million of total unrecognized compensation cost, respectively, related to non-vested RSUs granted under the 2016 Plan that are considered probable to vest; that cost is expected to be recognized over a weighted average remaining period of approximately 1.8 years and 1.5 years, respectively. As of December 31, 2019 there were no awards outstanding for which it was not probable that the performance conditions would be met. As of December 31, 2018 the grant date fair value of such awards was $4.1 million. For the years ended December 31, 2019 and 2018, $7.2 million and $4.3 million, respectively, of compensation expense related to the RSUs was recognized within general and administrative expenses on the consolidated statements of operations. Restricted Stock Awards ( “ RSAs ” ) During the year ended December 31, 2017, the Company granted 0.4 million shares of restricted stock to the Company’s Chief Executive Officer under the 2016 Plan. The fair value of the restricted stock was calculated based on the closing market price of the Company’s Class A common stock on the grant date. Also during 2017, in connection with the announcement of the Company’s Chief Executive Officer’s retirement, the grant was reduced so 0.1 million shares would vest on January 1, 2018. For the year ended December 31, 2017, the Company recognized expense of $1.0 million related to the restricted stock awards within general and administrative expenses on the consolidated statements of operations. No restricted stock awards were issued by the Company during 2019 or 2018. As of December 31, 2019 and 2018, there were no outstanding shares of restricted stock. Stock Options The following table includes the significant inputs used to determine the fair value of options issued under the 2016 plan. Year Ended Year Ended Expected volatility (1) 26.66% 27.13% Expected dividend yield (2) —% —% Expected option term (3) 6.00 years 6.25 years Risk-free rate (4) 1.8% 3.0% (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) From its inception through December 31, 2019, the Company has not paid any dividends on its common stock. As of the stock option grant date, the Company does not anticipate paying any dividends on common stock over the term of the stock options. Option holders have no right to dividends prior to the exercise of the options. (3) The Company utilized the simplified method to determine the expected term of the stock options since the Company does 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 equal annual installments on varying dates through 2022. The maximum term under the grant agreement is ten years. As of December 31, 2019, there was $3.7 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 years ended December 31, 2019 and 2018, there was $2.0 million and $1.3 million, respectively, of expense related to the stock options recognized within general and administrative costs on the consolidated statements of operations. The following table summarizes the activity of the Company’s unvested stock options. Number Weighted Average Weighted Weighted Outstanding as of December 31, 2017 827,620 5.54 $ 15.74 $ 4.97 Granted 382,070 0 15.78 5.04 Forfeited (265,751) 0 14.7 5.24 Outstanding as of December 31, 2018 943,939 5.54 $ 13.54 $ 4.97 Exercisable as of December 31, 2018 273,759 4.53 $ 15.47 $ 5.00 Granted 905,421 — 11.59 3.76 Exercised (7,463) — 13.11 4.17 Forfeited (124,226) — 12.42 4.13 Outstanding as of December 31, 2019 1,717.671 8.35 $ 13.35 $ 4.15 Exercisable as of December 31, 2019 486,663 7.35 $ 15.43 $ 4.80 Related Party Stock Awards Under the terms of its employment agreement with C. Dean Metropoulos, the Company was obligated to grant additional equity to Mr. Metropoulos if certain EBITDA thresholds were met for 2017 and 2018. These thresholds were not met and no additional equity was granted to Mr. Metropoulos under these arrangements. The agreements expired by their terms on December 31, 2018. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following: (In thousands) December 31, December 31, Land and buildings $ 53,683 $ 47,418 Right of use assets - operating 23,771 — Machinery and equipment 209,382 194,830 Construction in progress 5,878 6,059 292,714 248,307 Less accumulated depreciation (50,330) (27,958) $ 242,384 $ 220,349 Depreciation expense was $17.2 million, $14.6 million and $11.8 million for the years ended December 31, 2019, 2018, 2017, respectively. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company has two reportable segments: Sweet Baked Goods and In-Store Bakery. The Company’s Sweet Baked Goods segment consists of fresh and frozen baked goods and bread products that are sold under the Hostess®, Dolly Madison®, Cloverhill®, and Big Texas® brands. The In-Store Bakery segment consists primarily of Superior on Main® branded products sold through the in-store bakery section of grocery and club stores. During the year ended December 31, 2019, the Company divested its In-Store Bakery business. As of December 31, 2019, there were no assets related to the In-Store Bakery business. 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) Year Ended Year Ended Year Ended Net revenue: Sweet Baked Goods $ 878,973 $ 808,355 $ 733,827 In-Store Bakery 28,702 42,034 42,361 Net revenue $ 907,675 $ 850,389 $ 776,188 Depreciation and amortization (1): Sweet Baked Goods $ 41,732 $ 38,607 $ 35,441 In-Store Bakery 1,602 2,804 2,729 Depreciation and amortization $ 43,334 $ 41,411 $ 38,170 Gross profit: Sweet Baked Goods $ 293,648 $ 258,995 $ 316,916 In-Store Bakery 6,186 8,282 9,982 Gross profit $ 299,834 $ 267,277 $ 326,898 Capital expenditures (2): Sweet Baked Goods $ 35,354 $ 53,394 $ 35,609 In-Store Bakery 182 354 774 Capital expenditures $ 35,536 $ 53,748 $ 36,383 (1) Depreciation and amortization include charges to net income classified as costs of goods sold and general and administrative expenses on the consolidated statements of operations. (2) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable. Total assets by reportable segment are as follows: (In thousands) December 31, December 31, Total segment assets: Sweet Baked Goods $ 3,097,701 $ 2,924,333 In-Store Bakery — 86,380 Total segment assets $ 3,097,701 $ 3,010,713 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and intangible assets as of December 31, 2019 and 2018 were recognized as part of the 2016 purchase of Hostess Holdings from the Metropoulos Entities and other legacy equity holders, as well as the acquisition of the Cloverhill Business in 2018. During the years ended December 31, 2019 and 2018, the Company recognized goodwill impairment charges related to its In-Store Bakery reporting unit of $1.0 million and $2.7 million, respectively, within other operating expense on the consolidated statements of operations. During the year ended December 31, 2019, the Company divested its In-Store Bakery segment (see Note 2. Divestiture of In-Store Bakery Operations). Goodwill activity is presented below by reportable segment: (In thousands) Sweet Baked Goods In-Store Bakery Total Balance as of December 31, 2017 $ 529,423 $ 50,023 $ 579,446 Impairment — (2,700) (2,700) Other reclassifications and tax adjustments 6,430 (7,531) (1,101) Balance as of December 31, 2018 $ 535,853 $ 39,792 $ 575,645 Impairment — (1,000) (1,000) Divestiture — (38,792) (38,792) Balance as of December 31, 2019 $ 535,853 $ — $ 535,853 Intangible assets consist of the following: (In thousands) December 31, December 31, Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,630 $ 1,410,497 Intangible assets with definite lives (Customer Relationships) 515,713 543,120 Less accumulated amortization (Customer Relationships) (71,028) (51,802) Less accumulated impairment charges (Trademarks and Trade Names) — (600) Intangible assets, net $ 1,853,315 $ 1,901,215 During the year ended December 31, 2019,the Company divested of its In-Store Bakery segment, resulting in a reduction of intangible assets, net of $24.5 million. Amortization expense was $23.4 million, $24.1 million and $23.9 million for the years ended December 31, 2019, 2018 and 2017 respectively. The unamortized portion of customer relationships will be expensed over their remaining useful life, from 19 to 23 years. The weighted-average amortization period as of December 31, 2019 for customer relationships was 19.8 years. Future expected amortization expense is as follows: (In thousands) 2020 $ 22,513 2021 22,513 2022 22,513 2023 22,513 2024 22,513 2025 and thereafter 332,120 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses Included in accrued expenses are the following: (In thousands) December 31, December 31, Incentive compensation $ 6,840 $ 3,261 Accrued interest 4,870 4,849 Payroll, vacation and other compensation 3,389 6,104 Workers compensation reserve 2,665 1,866 Self-insurance reserves 1,938 1,646 Taxes 1,255 411 Interest rate swap contract 704 — $ 21,661 $ 18,137 |
Tax Receivable Agreement
Tax Receivable Agreement | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Tax Receivable Agreement | Tax Receivable Agreement The tax receivable agreement generally provides for the payment by the Company to the legacy Hostess Equity Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income taxes that the Company realizes (or is deemed to realize in certain circumstances) in periods after the closing of the 2016 acquisition (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 2016 acquisition; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the 2016 acquisition 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 the Metropoulos Entities in accordance with specified percentages, regardless of the source of the applicable tax attribute. The Company recognizes a liability on the consolidated balance sheet based on the undiscounted estimated future payments under the Tax Receivable Agreement. Significant inputs used to estimate the future expected payments include a 26.4% cash tax savings rate. The following table summarizes activity related to the Tax Receivable Agreement obligations: (In thousands) Balance December 31, 2017 $ 124,360 Exchange of Class B units for Class A shares 294 Reduction of future payments due to Buyout (46,372) Remeasurement due to change in estimated state tax rate (1,866) Payments (7,353) Balance December 31, 2018 $ 69,063 Exchange of Class B units for Class A shares 71,679 Remeasurement due to disposal of In-Store Bakery operations 1,779 Remeasurement due to change in estimated state tax rate (1,593) Payments (2,732) Balance December 31, 2019 $ 138,196 The Tax Receivable Agreement obligations increased $71.7 million during the year ended December 31, 2019, due to additional tax basis realized from the exchange of Class B Units. During the year ended December 31, 2019, the Company remeasured the Tax Receivable Agreement obligations due to changes in state tax rates resulting in a $1.6 million benefit as the Company decreased its estimated cash tax savings rate from 26.9% to 26.4%. Additionally, the disposition of the In-Store Bakery operations resulted in a $1.8 million expense recognized on the consolidated statement of operations. On January 26, 2018, the Company entered into an agreement to terminate all future payments payable under the Tax Receivable Agreement to the Apollo Funds in exchange for a payment of $34.0 million (the “Buyout”). Subsequent to the Buyout, the Company will retain a greater portion of the future cash tax savings subject to the Tax Receivable Agreement. The Buyout did not affect the portion of the rights under the Tax Receivable Agreement payable to the Metropoulos Entities, including those previously assigned by the Apollo Funds. During the year ended December 31, 2018, the Company also recognized a gain due to a change in the estimated state tax rate which decreased the Company’s estimated cash tax savings rate from approximately 27.5% to 26.9%. As of December 31, 2019 the future expected payments under the Tax Receivable Agreement are as follows: (In thousands) 2020 $ 12,100 2021 7,400 2022 7,400 2023 7,800 2024 8,100 Thereafter 95,396 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Debt | Debt A term loan was originated on October 1, 2019 through the Company’s subsidiary, Hostess Brands, LLC (referred to below as the “Fourth Term Loan”). It requires quarterly payments of interest at a rate of the greater of the applicable LIBOR or 0.75% per annum (“New LIBOR Floor”) plus a margin of 2.25% per annum and principal at a rate of 0.25% of the aggregate principal balance with the remaining principal amount due upon maturity on August 3, 2025. The Fourth Term Loan is secured by substantially all of Hostess Brands, LLC’s present and future assets. The Fourth Term Loan refinanced the remaining balance of $976.4 million on the Third New First Lien Term Loan (“Third Term Loan”) through a non-cash refinancing transaction. The Third Term Loan was originated by Hostess Brands, LLC on November 20, 2017 and required quarterly payments of interest at a rate equal to the the New LIBOR Floor plus a margin of 2.50% per annum and principal at a rate of 0.25% of the aggregate principal balance with the remaining principal amount due upon maturity on August 3, 2022. A summary of the carrying value of the debt and the lease obligations is as follows: (In thousands) December 31, December 31, Term Loan (4.14% as of December 31, 2019) Principal $ 973,930 $ 983,825 Unamortized debt premium and issuance costs (3,094) 3,778 970,836 987,603 Lease obligations 16,452 401 Total debt and lease obligations 987,288 988,004 Less: Amounts due within one year (11,883) (11,268) Long-term portion $ 975,405 $ 976,736 At December 31, 2019 and 2018, the approximate fair value of the Company’s debt was $977.6 million and $927.3 million, respectively. The fair value is calculated using current interest rates and pricing from financial institutions (Level 2 inputs). At December 31, 2019, minimum debt repayments under the Fourth Term Loan are due as follows: (In thousands) 2020 $ 9,764 2021 9,764 2022 9,764 2023 9,764 2024 9,764 2025 and thereafter 925,110 Revolving Credit Facility On October 1, 2019, Hostess Brands, LLC amended its Revolving Credit Agreement (the “Revolver”), providing for borrowings up to $100.0 million, a stated maturity date of August 3, 2024 and secured by liens on substantially all of Hostess Brands, LLC’s present and future assets, including accounts receivable and inventories, as defined in the Revolver. The Revolver is ranked equally with the Fourth Term Loan in regards to secured liens. The Revolver has an annual commitment fee on the unused portion of between 0.375% and 0.50% annually based upon the unused percentage. Interest on borrowings under the Revolver is, at Hostess Brands, LLC’s option, either the applicable LIBOR plus a margin of 2.25% per annum or the base rate plus a margin of 1.25% per annum. |
Derivative Contracts
Derivative Contracts | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Contracts | Derivative Contracts To reduce the effect of interest rate fluctuations, 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 are reduced by $100 million each year of the five As of December 31, 2019, the fair value of the interest rate swap contract of $0.7 million was reported within accrued expenses and other current liabilities on the consolidated balance sheets. As of 43465, the fair value of the interest rate swap contract of $5.1 million was reported within other assets, net on the consolidated balance sheet. The $0.4 million of unrealized expense recognized in accumulated other comprehensive income as of December 31, 2019 is expected to be reclassified into interest expense through December 31, 2020. 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). In connection with the agreement to purchase Voortman as described in Note 15. Commitments and Contingencies, the Company entered into a deal-contingent foreign currency contract to hedge the $440 million Canadian Dollars (“CAD”) forecasted purchase price and a portion of the subsequent expected conversion costs. The contract was settled in cash following the completion of the purchase on January 3, 2020. At December 31, 2019, the contract had a value of $7.1 million recognized within other current assets on the consolidated balance sheet based on available market information on similar contracts (Level 2) and a corresponding gain of $7.1 million was recognized in gain on foreign currency contract within the consolidated statements of operations. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Equity | Equity The Company’s authorized common stock consists of three classes: 200,000,000 shares of Class A common stock, 50,000,000 shares of Class B Stock, and 10,000,000 shares of Class F common stock (none of which were issued and outstanding at December 31, 2019 or 2018). As of December 31, 2019 and 2018, there were 122,108,086 and 100,046,392 shares of Class A common stock issued and outstanding, respectively. As of December 31, 2019 and 2018 there were 8,409,834 and 30,255,184 shares of Class B common stock issued and outstanding, respectively. Shares of Class A common stock and Class B Stock have identical voting rights. However, shares of Class B Stock do not participate in earnings or dividends of the Company. Ownership of shares of Class B 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 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. |
Earnings per Share
Earnings per Share | 12 Months Ended |
Dec. 31, 2019 | |
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 stockholders 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 earnings per share: Year Ended Year Ended Year Ended Numerator: Net income attributable to Class A stockholders (in thousands) $ 63,115 $ 62,895 $ 223,897 Denominator: Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards) 110,540,264 99,957,049 99,109,629 Dilutive effect of warrants 3,693,758 3,021,239 6,113,053 Dilutive effect of RSAs and RSUs 465,425 120,106 84,611 Weighted-average shares outstanding - diluted 114,699,447 103,098,394 105,307,293 Earnings per Class A share - basic $ 0.57 $ 0.63 $ 2.26 Earnings per Class A share - dilutive $ 0.55 $ 0.61 $ 2.13 For all years presented, the dilutive effect of stock options were excluded from the computation of diluted earnings per share because the assumed proceeds from the awards’ exercise were greater than the average market price of the common shares. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Additionally, the impact of changes in the enacted tax rates and laws on deferred taxes, if any, is reflected in the financial statements in the period of enactment. The income tax expense (benefit) consisted of the following: (In thousands) Year Ended Year Ended Year Ended Current tax expense (benefit) Federal $ 1,724 $ 622 $ 11,163 State and local 1,047 2,077 2,903 Total Current 2,771 2,699 14,066 Deferred tax expense (benefit) Federal 14,859 14,476 (93,457) State and local (738) (4,221) 12,187 Total Deferred 14,121 10,255 (81,270) Income tax expense (benefit), net $ 16,892 $ 12,954 $ (67,204) The Company owns a controlling interest in Hostess Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hostess Holdings is not itself subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Hostess Holdings is passed through and included in the taxable income or loss of its partners. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Hostess Holdings. The operations of Hostess Holdings include those of its C corporation subsidiaries. These C corporation subsidiaries are subject to U.S. federal, state and local income taxes. The Company’s tax provision includes income taxes for the share of Hostess Holdings income or loss passed through to the Company, the income or loss of the Company’s C corporation subsidiaries and the deferred tax impact of outside basis differences in its investments in subsidiaries. For the years ended December 31, 2019, 2018, and 2017, the effective income tax rate differs from the federal statutory income tax rate as explained below: Year Ended Year Ended Year Ended U. S. federal statutory income tax rate 21.0 % 21.0 % 35.0 % State and local income taxes, net of federal benefit 4.6 4.3 3.8 Income attributable to non-controlling interest (3.2) (4.1) (6.3) Tax Cuts and Jobs Act — — (66.2) Change in state tax rate (4.8) (6.0) 1.2 Gain on TRA buyout — (1.4) — Other 0.3 (0.1) (2.7) Effective income tax rate 17.9 % 13.7 % (35.2) % Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the accompanying consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years. Details of the Company’s deferred tax assets and liabilities are summarized as follows: (In thousands) As of As of Deferred tax assets Imputed interest $ 6,198 $ 3,064 Tax credits 2,599 2,696 Disallowed interest carryforward — 2,374 Net operating loss carryforwards 249 1,000 Other 1,343 1,252 Total deferred tax assets 10,389 10,386 Deferred tax liabilities Investment in partnership (266,440) (279,015) Goodwill and intangible assets — (7,023) Property and equipment — (1,261) Other — (1,041) Total deferred tax liabilities (266,440) (288,340) Total deferred tax assets and liabilities $ (256,051) $ (277,954) The recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax benefits associated with temporary differences, net operating loss carryforwards and tax credits will be utilized. The Company assesses the recoverability of the deferred tax assets on an ongoing basis. In making this assessment, the Company considers all positive and negative evidence, and all potential sources of taxable income including scheduled reversals of deferred tax liabilities, tax-planning strategies, projected future taxable income and recent financial performance. The Company and its C corporation subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. For federal and state tax purposes, the Company and its C corporation subsidiaries are generally subject to examination for three years after the income tax returns are filed. As such, income tax returns filed since 2016 remain open for examination by tax authorities. The Company’s C corporation subsidiaries utilized U.S. loss carryforwards which date back to 2005, therefore those carryforwards are subject to examination as well. Hostess Holdings is under IRS examination for the 2017 tax year. At December 31, 2019, the Company has gross state net operating losses of approximately $4.0 million and state credits of approximately $3.3 million. Unless utilized, the state net operating losses carryforwards expire from 2030 to 2036 and the state credits expire from 2028 to 2035. The Company does not have any significant uncertain tax positions and therefore has no unrecognized tax benefits as of December 31, 2019 or 2018 that if recognized, would affect the annual effective tax rate. Therefore,the Company has not recorded any penalties and interest during the years ended December 31, 2019 or 2018. Interest and penalties related to income tax liabilities, if incurred, are included in income tax expense in the consolidated statements of operations. Tax Reform significantly changed U.S. tax law by lowering the corporate income tax rate permanently from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under Tax Reform, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a non-cash tax benefit of $111.3 million in the Company’s consolidated statements of operations for the year ended December 31, 2017. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Share Purchase Agreement On November 29, 2019, a subsidiary of the Company entered into a share purchase agreement to acquire all of the shares of the parent company of Voortman, a Canadian manufacturer of premium, branded wafers, as well as sugar-free and specialty cookies for approximately $320 million ($425 million CAD), subject to customary adjustments for net indebtedness of the acquired business and working capital. This agreement contains customary representations, warranties and covenants of the parties. Subject to certain exceptions and other provisions, the parties have agreed to indemnify each other for breaches of representations and warranties, breaches of covenants and certain other matters. Approximately $10.8 million CAD of the purchase price was deposited into an escrow account to satisfy amounts in respect of purchase price adjustments and to provide for payment of indemnity claims, if any. The transaction closed on January 3, 2020. A preliminary allocation of the purchase price to the net assets acquired in this business combination is expected to be made during the first quarter of 2020. The transaction was financed with cash on hand and incremental debt. On January 3, 2020, Hostess Brands, LLC entered into $140.0 million of incremental term loans through an amendment to its existing credit agreement. The terms, conditions and covenants applicable to the new term loans were the same as the terms, conditions and covenants applicable to the existing term loans described in Note 10. Debt. Accruals and the Potential Effect of Litigation From time to time, the Company is subject to various 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. 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 low end of the range 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. Lease Commitments Operating Leases In 2019, the Company leased facilities for its commercial office and primary distribution centers under noncancelable operating lease arrangements. The future minimum lease payments under these agreements as of December 31, 2019 are shown below. (In thousands) 2020 $ 3,541 2021 $ 2,222 2022 $ 2,494 2023 $ 2,735 2024 $ 3,848 Thereafter $ 4,081 Financing Leases The Company entered into a bond-lease agreement with the Development Authority of Columbus, Georgia on December 1, 2013, which was amended in December, 2016. The bond-lease transaction required the Company to exchange its property to the taxing jurisdiction for tax-exempt bonds issued in the name of the Company not to exceed $18 million. As the issuer and holder of the bonds, the Company is not required to make lease payments. On December 16, 2013, the Company received an ad valorem tax agreement from the Columbus, Georgia Board of Tax Assessors granting tax abatement for the real and personal property located at the Company’s Columbus, Georgia bakery through 2023. The Company has elected to use the right of offset under ASC 210-20 to net the asset and the liability. The table below shows the composition of lease expenses for the period subsequent to the adoption of Topic 842: (In thousands) Year Ended Reduction of right of use asset, financing lease $ 133 Interest, financing lease $ 16 Operating lease expense $ 3,070 Short-term lease expense $ 968 Variable lease expense $ 1,076 $ 5,263 For short-term leases, Hostess records rent expense in its consolidated statements of operations on a straight-line basis over the lease term. Variable lease payments, which primarily include taxes, insurance and common area maintenance, are expensed as incurred. During the year ended December 31, 2019, the Company entered into a lease agreement for its new distribution center in Edgerton, Kansas. The agreement has a base term of six and a half years with two five 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 and packaging components 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; and the purchases under these contracts are included as a component of cost of goods sold. Contractual commitments were as follows: (In thousands) Total Committed Commitments within 1 year Commitments beyond 1 year Ingredients $ 76,441 $ 75,280 $ 1,161 Packaging $ 49,260 $ 49,260 $ — 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 $4.2 million and $3.0 million for the years ended 2019 and 2018, respectively. The arrangements support the collateral requirements for insurance. The Letters of Credit are 100% secured through our Revolver. |
Unaudited Quarterly Financial D
Unaudited Quarterly Financial Data | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Unaudited Quarterly Financial Data | Unaudited Quarterly Financial Data Summarized quarterly financial data: Three Months Ended (In thousands, expect per share data) December 31, September 30, June 30, March 31, Net revenue $ 216,666 $ 227,211 $ 241,060 $ 222,738 Operating income 39,534 23,571 36,881 36,110 Net income 23,555 10,729 16,669 26,612 Net income attributable to Class A stockholders 21,721 8,785 11,483 21,126 Earnings per Class A share: Basic 0.18 0.08 0.11 0.21 Diluted 0.17 0.07 0.10 0.21 Three Months Ended (In thousands, except per share data) December 31, September 30, June 30, March 31, Net revenue $ 214,815 $ 210,982 $ 215,849 $ 208,743 Operating income 30,344 23,693 34,649 32,872 Net income 16,352 11,152 24,620 29,302 Net Income attributable to Class A stockholders 11,830 7,941 19,283 23,841 Earnings per Class A share: Basic 0.12 0.08 0.19 0.24 Diluted 0.12 0.08 0.18 0.23 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsIn February 2020 the Company entered into five |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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 the Securities and Exchange Commission (“SEC”). The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries, collectively referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation. The Company has determined that Hostess Holdings, a limited partnership, is a variable interest entity (“VIE”) and that the Company is the primary beneficiary of the VIE. The Company determined that, due to its ownership of Hostess Holdings’ general partnership units, the Company has the power to direct all of the activities of Hostess Holdings, with no substantive kick-out rights or participating rights by the limited partners individually or as a group. Hostess Holdings constitutes the majority of the assets of the Company. C. Dean Metropoulos and entities under his control (the “Metropoulos Entities”) hold their equity investment in the Company primarily through Class B limited partnership units in Hostess Holdings (“Class B Units”) and an equal number of shares of the Company’s Class B common stock (“Class B Stock”). The Company’s Class B Stock has voting, but no economic rights, while Hostess Holdings’ Class B Units have economic, but no voting rights. Each Class B Unit, together with a share of Class B Stock held by the Metropoulos Entities, is exchangeable for a share of the Company’s Class A common stock (or at the option of the Company, the cash equivalent thereof). The interest of the Metropoulos Entities in Hostess Holdings’ Class B Units is reflected in the consolidated financial statements as a non-controlling interest. The Company has two reportable segments: Sweet Baked Goods and In-Store Bakery. The Company sold its In-Store Bakery operations on August 30, 2019. |
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 VIE), collectively referred to as the Company. All intercompany balances and transactions have been eliminated in consolidation. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, along with the related ASUs 2018-01, 2018-10 and 2018-11 (collectively, “Topic 842”). Topic 842 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. To adopt this standard, the Company utilized a modified retrospective transition method. Under this approach, the results for reporting periods beginning January 1, 2019 are presented under Topic 842. Prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting standards. There was no cumulative effect of applying Topic 842 to the opening balance of retained earnings. The Company has elected to apply the practical expedients under Topic 842 which allow entities to not reassess the lease classification for expired or existing leases and to not reassess if expired or existing contracts contain leases under the Topic 842 definition. The Company has also elected to use hindsight when determining the lease term of existing leases. As a result of the adoption, on January 1, 2019, the Company recognized right of use assets of $8.2 million, offset by associated accumulated amortization of $5.2 million and corresponding lease liabilities of $3.0 million. The recognition of leases subsequent to the adoption of Topic 842 is further described in Note 15. Commitments and Contingencies. On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective transition method. Under this method, results for reporting periods beginning January 1, 2018 are presented under Topic 606. Prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605, with the cumulative effect of applying Topic 606 to prior period amounts recognized as an adjustment to opening retained earnings. The Company has elected to apply the new standard to contracts that were not complete as of January 1, 2018. Under this transition method, the Company deemed contracts to be not complete if, as of the date of transition, the Company had not fulfilled its performance obligations. On January 1, 2018, the Company adopted ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The adoption of this standard did not have a material impact on the consolidated financial statements. In March 2018, the Company adopted ASU 2018-05, Income Taxes: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“Topic 740”), which updates the income tax accounting in U.S. GAAP to reflect the SEC’s interpretive guidance released on December 22, 2017, when the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform”) was signed into law. Additional information regarding the adoption of this standard is contained in Note 13. Income Taxes. In September 2018, the Company adopted ASU 2018-15, Intangibles-Goodwill and Other Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“Subtopic 350-40”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard did not have a material impact on the consolidated financial statements. New Accounting Pronouncements In June 2016, ASU 2016-13 Financial Instruments-Credit Losses : Measurement of Credit Losses on Financial Instruments ( “Topic 326” ) was issued. This ASU requires entities to measure the impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. The Company adopted this ASU on January 1, 2020. Based on its assessment, the Company does not expect the adoption will have a material impact on its consolidated financial statements. |
Use of Estimates | Use of EstimatesThe 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, inputs used to calculate the Tax Receivable Agreement liability including increases in tax basis related to exchanges, future cash tax savings rate, and the allocation of the liability between short-term and long-term based on when the Company realizes certain tax attributes and reserves for trade and promotional allowances. Actual results could differ from these estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less when purchased as cash equivalents and are recorded at cost. Under the Company’s cash management system, checks that have been issued and are out of the control of the Company, but which have not cleared the bank by the balance sheet date, are reported as a reduction of cash. |
Accounts Receivable | Accounts ReceivableAccounts receivable represents amounts invoiced to customers for which the Company’s obligation to the customer has been satisfied. |
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. |
Property and Equipment | Property and Equipment Property and equipment acquired in Business Combinations were assigned useful lives for purposes of depreciation that the Company believes to be the remaining useful life of such assets. Additions to property and equipment are recorded at cost and depreciated straight line over estimated useful lives of 15 to 50 years for buildings and land improvements and 3 to 20 years for machinery and equipment. In order to maximize the efficiency of the Company’s operations and to operate the acquired equipment, occasionally the Company will remove and relocate equipment between bakeries. Such removal and relocation costs are expensed as incurred. Reinstallation costs are capitalized if the useful life is extended or the equipment is significantly improved. Otherwise, reinstallation costs are expensed as incurred. Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment, are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and related accumulated depreciation are removed from the balance sheet and any resulting gain or loss is recognized in the consolidated statements of operations. |
Software Costs | Software Costs Costs associated with computer software projects during the preliminary project stage are expensed as incurred. Once management authorizes and commits to funding a project, appropriate application development stage costs are capitalized. Capitalization ceases when the project is substantially complete and the software is ready for its intended use. Upgrades and enhancements to software are capitalized when such enhancements are determined to provide additional functionality. Training and maintenance costs associated with software applications are expensed as incurred. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets At December 31, 2019 and 2018, the goodwill balances of $535.9 million and $575.6 million, respectively, represent the excess of the amount the Company paid for the acquisition of Hostess Holdings from the Metropoulos Entities and other former equity holders in a 2016 transaction over the fair value of the assets acquired and liabilities assumed. The resulting goodwill was allocated to the Sweet Baked Goods reporting unit and the In-Store Bakery reporting unit. No goodwill was recorded in connection with the acquisition of the Cloverhill Business during the year ended December 31, 2018 as the fair value of net assets approximated the consideration paid. During the year ended December 31, 2019, the Company divested the In-Store Bakery operations and removed all allocated goodwill. Goodwill by reporting unit is tested for impairment annually by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company may elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment test. For the 2019 annual impairment test, the Company elected to perform the qualitative test. No indicators of impairment were noted. For the 2018 annual impairment test, the Company elected to perform a quantitative impairment test. For this test, fair value was determined based on a combination of an income approach utilizing the discounted cash flow method and the market approach using the market comparable method. Significant assumptions used to determine fair value under the discounted cash flow method included future trends in sales, operating expenses, capital expenditures and changes in working capital, along with an appropriate discount rate based on our estimated cost of equity capital, after-tax cost of debt and future economic and market conditions. To the extent the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired and an impairment charge was recorded to reduce the reporting unit to fair value. The Company’s indefinite-lived intangible assets consist of trademarks and trade names. The $1,408.6 million and $1,409.9 million balances at December 31, 2019 and 2018, respectively, were recognized as part of the 2016 acquisition of Hostess Holdings and the 2018 acquisition of the Cloverhill Business. The trademarks and trade names are integral to the Company’s identity and are expected to contribute indefinitely to its corporate cash flows. Fair value for trademarks and tradenames was determined using the income approach, which is considered to be Level 3 within the fair value hierarchy. The application of the income approach was premised on a royalty savings method, whereby the trademark and tradenames are valued by reference to the amount of royalty income they could generate if they were licensed, in an arm’s-length transaction, to a third party. These assets have been assigned an indefinite life and therefore are not amortized but rather evaluated for impairment annually using the qualitative or quantitative methods similar to goodwill. For the quantitative assessment, the valuation of trademarks and trade names are determined using the relief of royalty method. significant assumptions used in this method include future trends in sales, a royalty rate and a discount rate to be applied to the forecast revenue stream. During the years ended December 31, 2019 and 2018, the Company recognized impairment charges of $1.0 million and $3.3 million, respectively, to the In-Store Bakery goodwill and intangibles. See Note 7. Goodwill and Intangible Assets for more information on impairment charges. |
Reserves for Self-Insurance Benefits | Reserves for Self-Insurance BenefitsThe Company’s employee health plan is self-insured by the Company up to a stop-loss amount of $0.3 million for each participant per plan year. In addition, the Company maintains insurance programs covering its exposure to workers’ compensation. Such programs include the retention of certain levels of risks and costs through high deductibles and other risk retention strategies. |
Leases | Leases Subsequent to its adoption of Topic 842 on January 1, 2019, the Company recognizes a right of use asset and corresponding lease liability on the consolidated balance sheet for all lease transactions with terms of more than 12 months. Agreements are determined to contain a lease if they convey the use and control of an underlying physical asset. Based on the nature of the lease transaction, leases are either classified as financing or operating. Under both classifications, the right of use asset and liability are initially valued based on the present value of the future minimum lease payments using an effective borrowing rate at the inception of the lease. The Company determined the effective borrowing rate based on its expected incremental borrowing rate on collateralized debt. At December 31, 2019, 4.4% was the weighted average effective borrowing rates for outstanding operating leases. Under a financing lease, interest expense related to the lease liability is recognized over the lease term using an effective interest rate method and right of use assets are amortized straight-line over the term of the lease. Under an operating lease, minimum lease payments are expensed straight-line over the lease term. Lease liabilities are amortized using an effective interest rate method and right of use assets are reduced based on the excess of the sum of the straight-line lease expense and the reduction of the lease liability over the actual lease payments. At December 31, 2019, the average remaining terms on operating leases were approximately six years. Variable lease payments, such as taxes and insurance, are expensed as incurred. Expenses related to leases with original terms less than 12 months (short-term leases) are expensed as incurred. For all leases related to distribution, bakery and corporate facilities, the Company has elected not to separate non-lease components from lease components. At December 31, 2019, right of use assets related to operating leases are included in property and equipment, net on the consolidated balance sheet (see Note 5. Property and Equipment). Lease liabilities for operating leases are included in the current and non-current portions of long-term debt and lease obligations on the consolidated balance sheet (see Note 10. Debt). |
Revenue Recognition | Revenue Recognition Net revenue consists primarily of sales of packaged food products. The Company recognizes revenue when the obligations under the terms of its agreements with customers have been satisfied. The Company’s obligation is satisfied when control of the product is transferred to its customers along with the title, risk of loss and rewards of ownership. Depending on the arrangement with the customer, these criteria are met either at the time the product is shipped or when the product is received by such customer. Customers are invoiced at the time of shipment or customer pickup based on credit terms established in accordance with industry practice. Invoices generally require payment within 30 days. Net revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for that product. Amounts billed to customers related to shipping and handling are classified as net revenue. A provision for payment discounts and other allowances is estimated based on the Company’s historical performance or specific terms with the customer. The Company generally does not accept product returns and provides these allowances for anticipated expired or damaged products. Trade promotions, consisting primarily of customer pricing allowances, merchandising funds and consumer coupons, are offered through various programs to customers and consumers. A provision for estimated trade promotions is recorded as a reduction of revenue in the same period when the sale is recognized. The Company also offers rebates based on purchase levels, product placement locations in retail stores and advertising placed by customers. The ultimate cost of these programs is dependent on certain factors such as actual purchase volumes or customer activities and is the subject of significant management estimates. The Company accounts for these programs as variable consideration and recognizes a reduction in revenue in the same period as the underlying program. For product produced by third parties, management evaluates whether the Company is the principal (i.e., report revenue on a gross basis) or agent (i.e., report revenue on a net basis). Management has determined that it is the principal in all cases, since it establishes its own pricing for such product, generally assumes the credit risk for amounts billed to its customers, and often takes physical control of the product before it is shipped to customers. |
Equity Compensation | Equity Compensation The grant date fair values of stock options are valued using the Black-Scholes option-pricing model, including a simplified method to estimate the number of periods to exercise date (i.e., the expected option term). Management has determined that the equity plan has not been in place for a sufficient amount of time to estimate the post vesting exercise behavior. Therefore, it will continue to use this simplified method until such time as it has sufficient history to provide a reasonable basis to estimate the expected term. Forfeitures are recognized as a reduction of expense as incurred. For awards which have performance and market conditions, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance or market criteria will be met. The equity-based compensation expense, net of forfeitures, is recognized using a straight-line basis over the requisite service period of the awards, which corresponds to the vesting periods of the awards. For performance-based awards, compensation expense is remeasured throughout the vesting period as probability is reassessed. For market-based awards, probability is not reassessed and compensation expense is not remeasured subsequent to the initial assessment on the grant date. |
Income Taxes | Income Taxes Hostess Brands, Inc. owns a controlling interest in Hostess Holdings, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hostess Holdings is not directly subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Hostess Holdings is passed through to and included in the taxable income or loss of its partners, including the Company. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income of Hostess Holdings. |
Derivatives | Derivatives The Company has 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 income 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 as a component of interest expense in the consolidated statements of operations. Payments made under this contract are included in the supplemental disclosure of interest paid in the consolidated statements of cash flows. During the year ended December 31, 2019, the Company used foreign currency forward contracts to manage the impact of fluctuations in foreign currency exchange rates relative to future commitments denominated in currencies other than the US dollar. The foreign currency contract outstanding as of December 31, 2019 did not qualify as a cash flow hedge. |
Fair Value Measurement | Fair Value Measurements The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the best extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: • Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. • Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. • Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. |
New Accounting Pronouncements | Adoption of New Accounting Standards On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, along with the related ASUs 2018-01, 2018-10 and 2018-11 (collectively, “Topic 842”). Topic 842 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. To adopt this standard, the Company utilized a modified retrospective transition method. Under this approach, the results for reporting periods beginning January 1, 2019 are presented under Topic 842. Prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting standards. There was no cumulative effect of applying Topic 842 to the opening balance of retained earnings. The Company has elected to apply the practical expedients under Topic 842 which allow entities to not reassess the lease classification for expired or existing leases and to not reassess if expired or existing contracts contain leases under the Topic 842 definition. The Company has also elected to use hindsight when determining the lease term of existing leases. As a result of the adoption, on January 1, 2019, the Company recognized right of use assets of $8.2 million, offset by associated accumulated amortization of $5.2 million and corresponding lease liabilities of $3.0 million. The recognition of leases subsequent to the adoption of Topic 842 is further described in Note 15. Commitments and Contingencies. On January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective transition method. Under this method, results for reporting periods beginning January 1, 2018 are presented under Topic 606. Prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605, with the cumulative effect of applying Topic 606 to prior period amounts recognized as an adjustment to opening retained earnings. The Company has elected to apply the new standard to contracts that were not complete as of January 1, 2018. Under this transition method, the Company deemed contracts to be not complete if, as of the date of transition, the Company had not fulfilled its performance obligations. On January 1, 2018, the Company adopted ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The adoption of this standard did not have a material impact on the consolidated financial statements. In March 2018, the Company adopted ASU 2018-05, Income Taxes: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“Topic 740”), which updates the income tax accounting in U.S. GAAP to reflect the SEC’s interpretive guidance released on December 22, 2017, when the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform”) was signed into law. Additional information regarding the adoption of this standard is contained in Note 13. Income Taxes. In September 2018, the Company adopted ASU 2018-15, Intangibles-Goodwill and Other Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“Subtopic 350-40”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard did not have a material impact on the consolidated financial statements. New Accounting Pronouncements In June 2016, ASU 2016-13 Financial Instruments-Credit Losses : Measurement of Credit Losses on Financial Instruments ( “Topic 326” ) was issued. This ASU requires entities to measure the impairment of certain financial instruments, including trade receivables, based on expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. The Company adopted this ASU on January 1, 2020. Based on its assessment, the Company does not expect the adoption will have a material impact on its consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Components of Inventories | The components of inventories are as follows : (In thousands) December 31, December 31, Ingredients and packaging $ 21,439 $ 18,865 Finished goods 22,513 16,446 Inventory in transit to customers 3,656 3,269 $ 47,608 $ 38,580 |
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: Year Ended Year Ended Year Ended Sweet Baked Goods 23.3 % 20.4 % 19.7 % In-Store Bakery 0.3 % 0.6 % 0.7 % Total 23.6 % 21.0 % 20.4 % |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Consideration Paid | The following is a summary of the allocation of the purchase price: (In thousands) Inventory $ 8,335 Other current assets 500 Property and equipment 13,272 Trade name and trademarks 1,648 Customer relationships 1,136 Other current liabilities (1,731) Net assets acquired $ 23,160 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Summary of the Activity of Unvested RSUs | The following table summarizes the activity of the Company’s unvested RSUs: Restricted Stock Weighted Average Unvested as of December 31, 2017 915,894 $ 15.73 Total Granted 440,883 12.92 Forfeited (172,257) 15.46 Vested(1) (288,736) 15.61 Unvested as of December 31, 2018 895,784 $ 14.46 Total Granted 721,985 12.76 Forfeited (298,601) 14.96 Vested(2) (415,033) 14.26 Unvested as of December 31, 2019 904,135 $ 12.99 (1) Includes 81,960 shares withheld to satisfy $1.0 million of employee tax obligations upon vesting. (2) Includes 108,012 shares withheld to satisfy $1.4 million of employee tax obligations upon vesting. |
Schedule of Assumptions | The following table includes the significant inputs used to determine the fair value of options issued under the 2016 plan. Year Ended Year Ended Expected volatility (1) 26.66% 27.13% Expected dividend yield (2) —% —% Expected option term (3) 6.00 years 6.25 years Risk-free rate (4) 1.8% 3.0% (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) From its inception through December 31, 2019, the Company has not paid any dividends on its common stock. As of the stock option grant date, the Company does not anticipate paying any dividends on common stock over the term of the stock options. Option holders have no right to dividends prior to the exercise of the options. (3) The Company utilized the simplified method to determine the expected term of the stock options since the Company does 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. Number Weighted Average Weighted Weighted Outstanding as of December 31, 2017 827,620 5.54 $ 15.74 $ 4.97 Granted 382,070 0 15.78 5.04 Forfeited (265,751) 0 14.7 5.24 Outstanding as of December 31, 2018 943,939 5.54 $ 13.54 $ 4.97 Exercisable as of December 31, 2018 273,759 4.53 $ 15.47 $ 5.00 Granted 905,421 — 11.59 3.76 Exercised (7,463) — 13.11 4.17 Forfeited (124,226) — 12.42 4.13 Outstanding as of December 31, 2019 1,717.671 8.35 $ 13.35 $ 4.15 Exercisable as of December 31, 2019 486,663 7.35 $ 15.43 $ 4.80 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: (In thousands) December 31, December 31, Land and buildings $ 53,683 $ 47,418 Right of use assets - operating 23,771 — Machinery and equipment 209,382 194,830 Construction in progress 5,878 6,059 292,714 248,307 Less accumulated depreciation (50,330) (27,958) $ 242,384 $ 220,349 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Operations and Total Assets | Information regarding the operations of these reportable segments is as follows: (In thousands) Year Ended Year Ended Year Ended Net revenue: Sweet Baked Goods $ 878,973 $ 808,355 $ 733,827 In-Store Bakery 28,702 42,034 42,361 Net revenue $ 907,675 $ 850,389 $ 776,188 Depreciation and amortization (1): Sweet Baked Goods $ 41,732 $ 38,607 $ 35,441 In-Store Bakery 1,602 2,804 2,729 Depreciation and amortization $ 43,334 $ 41,411 $ 38,170 Gross profit: Sweet Baked Goods $ 293,648 $ 258,995 $ 316,916 In-Store Bakery 6,186 8,282 9,982 Gross profit $ 299,834 $ 267,277 $ 326,898 Capital expenditures (2): Sweet Baked Goods $ 35,354 $ 53,394 $ 35,609 In-Store Bakery 182 354 774 Capital expenditures $ 35,536 $ 53,748 $ 36,383 (1) Depreciation and amortization include charges to net income classified as costs of goods sold and general and administrative expenses on the consolidated statements of operations. (2) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable. Total assets by reportable segment are as follows: (In thousands) December 31, December 31, Total segment assets: Sweet Baked Goods $ 3,097,701 $ 2,924,333 In-Store Bakery — 86,380 Total segment assets $ 3,097,701 $ 3,010,713 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Activity of Goodwill | Goodwill activity is presented below by reportable segment: (In thousands) Sweet Baked Goods In-Store Bakery Total Balance as of December 31, 2017 $ 529,423 $ 50,023 $ 579,446 Impairment — (2,700) (2,700) Other reclassifications and tax adjustments 6,430 (7,531) (1,101) Balance as of December 31, 2018 $ 535,853 $ 39,792 $ 575,645 Impairment — (1,000) (1,000) Divestiture — (38,792) (38,792) Balance as of December 31, 2019 $ 535,853 $ — $ 535,853 |
Schedule of Indefinite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) December 31, December 31, Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,630 $ 1,410,497 Intangible assets with definite lives (Customer Relationships) 515,713 543,120 Less accumulated amortization (Customer Relationships) (71,028) (51,802) Less accumulated impairment charges (Trademarks and Trade Names) — (600) Intangible assets, net $ 1,853,315 $ 1,901,215 |
Schedule of Finite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) December 31, December 31, Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,408,630 $ 1,410,497 Intangible assets with definite lives (Customer Relationships) 515,713 543,120 Less accumulated amortization (Customer Relationships) (71,028) (51,802) Less accumulated impairment charges (Trademarks and Trade Names) — (600) Intangible assets, net $ 1,853,315 $ 1,901,215 |
Future Amortization Expense | Future expected amortization expense is as follows: (In thousands) 2020 $ 22,513 2021 22,513 2022 22,513 2023 22,513 2024 22,513 2025 and thereafter 332,120 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Included in accrued expenses are the following: (In thousands) December 31, December 31, Incentive compensation $ 6,840 $ 3,261 Accrued interest 4,870 4,849 Payroll, vacation and other compensation 3,389 6,104 Workers compensation reserve 2,665 1,866 Self-insurance reserves 1,938 1,646 Taxes 1,255 411 Interest rate swap contract 704 — $ 21,661 $ 18,137 |
Tax Receivable Agreement (Table
Tax Receivable Agreement (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Summary of Tax Receivable Agreement | The following table summarizes activity related to the Tax Receivable Agreement obligations: (In thousands) Balance December 31, 2017 $ 124,360 Exchange of Class B units for Class A shares 294 Reduction of future payments due to Buyout (46,372) Remeasurement due to change in estimated state tax rate (1,866) Payments (7,353) Balance December 31, 2018 $ 69,063 Exchange of Class B units for Class A shares 71,679 Remeasurement due to disposal of In-Store Bakery operations 1,779 Remeasurement due to change in estimated state tax rate (1,593) Payments (2,732) Balance December 31, 2019 $ 138,196 |
Future Expected Payments Under Tax Receivable Arrangement | As of December 31, 2019 the future expected payments under the Tax Receivable Agreement are as follows: (In thousands) 2020 $ 12,100 2021 7,400 2022 7,400 2023 7,800 2024 8,100 Thereafter 95,396 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Summary of Debt and Capital Lease Obligation | A summary of the carrying value of the debt and the lease obligations is as follows: (In thousands) December 31, December 31, Term Loan (4.14% as of December 31, 2019) Principal $ 973,930 $ 983,825 Unamortized debt premium and issuance costs (3,094) 3,778 970,836 987,603 Lease obligations 16,452 401 Total debt and lease obligations 987,288 988,004 Less: Amounts due within one year (11,883) (11,268) Long-term portion $ 975,405 $ 976,736 |
Schedule of Maturities of Long-term Debt | At December 31, 2019, minimum debt repayments under the Fourth Term Loan are due as follows: (In thousands) 2020 $ 9,764 2021 9,764 2022 9,764 2023 9,764 2024 9,764 2025 and thereafter 925,110 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income Per Share | Below are basic and diluted earnings per share: Year Ended Year Ended Year Ended Numerator: Net income attributable to Class A stockholders (in thousands) $ 63,115 $ 62,895 $ 223,897 Denominator: Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards) 110,540,264 99,957,049 99,109,629 Dilutive effect of warrants 3,693,758 3,021,239 6,113,053 Dilutive effect of RSAs and RSUs 465,425 120,106 84,611 Weighted-average shares outstanding - diluted 114,699,447 103,098,394 105,307,293 Earnings per Class A share - basic $ 0.57 $ 0.63 $ 2.26 Earnings per Class A share - dilutive $ 0.55 $ 0.61 $ 2.13 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | The income tax expense (benefit) consisted of the following: (In thousands) Year Ended Year Ended Year Ended Current tax expense (benefit) Federal $ 1,724 $ 622 $ 11,163 State and local 1,047 2,077 2,903 Total Current 2,771 2,699 14,066 Deferred tax expense (benefit) Federal 14,859 14,476 (93,457) State and local (738) (4,221) 12,187 Total Deferred 14,121 10,255 (81,270) Income tax expense (benefit), net $ 16,892 $ 12,954 $ (67,204) |
Schedule of Effective Income Tax Rate Reconciliation | For the years ended December 31, 2019, 2018, and 2017, the effective income tax rate differs from the federal statutory income tax rate as explained below: Year Ended Year Ended Year Ended U. S. federal statutory income tax rate 21.0 % 21.0 % 35.0 % State and local income taxes, net of federal benefit 4.6 4.3 3.8 Income attributable to non-controlling interest (3.2) (4.1) (6.3) Tax Cuts and Jobs Act — — (66.2) Change in state tax rate (4.8) (6.0) 1.2 Gain on TRA buyout — (1.4) — Other 0.3 (0.1) (2.7) Effective income tax rate 17.9 % 13.7 % (35.2) % |
Schedule of Deferred Tax Assets and Liabilities | Details of the Company’s deferred tax assets and liabilities are summarized as follows: (In thousands) As of As of Deferred tax assets Imputed interest $ 6,198 $ 3,064 Tax credits 2,599 2,696 Disallowed interest carryforward — 2,374 Net operating loss carryforwards 249 1,000 Other 1,343 1,252 Total deferred tax assets 10,389 10,386 Deferred tax liabilities Investment in partnership (266,440) (279,015) Goodwill and intangible assets — (7,023) Property and equipment — (1,261) Other — (1,041) Total deferred tax liabilities (266,440) (288,340) Total deferred tax assets and liabilities $ (256,051) $ (277,954) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Minimum Operating Lease Payments | The future minimum lease payments under these agreements as of December 31, 2019 are shown below. (In thousands) 2020 $ 3,541 2021 $ 2,222 2022 $ 2,494 2023 $ 2,735 2024 $ 3,848 Thereafter $ 4,081 |
Components of Lease Expense | The table below shows the composition of lease expenses for the period subsequent to the adoption of Topic 842: (In thousands) Year Ended Reduction of right of use asset, financing lease $ 133 Interest, financing lease $ 16 Operating lease expense $ 3,070 Short-term lease expense $ 968 Variable lease expense $ 1,076 $ 5,263 |
Contractual Commitments | Contractual commitments were as follows: (In thousands) Total Committed Commitments within 1 year Commitments beyond 1 year Ingredients $ 76,441 $ 75,280 $ 1,161 Packaging $ 49,260 $ 49,260 $ — |
Unaudited Quarterly Financial_2
Unaudited Quarterly Financial Data (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of Quarterly Financial Data | Summarized quarterly financial data: Three Months Ended (In thousands, expect per share data) December 31, September 30, June 30, March 31, Net revenue $ 216,666 $ 227,211 $ 241,060 $ 222,738 Operating income 39,534 23,571 36,881 36,110 Net income 23,555 10,729 16,669 26,612 Net income attributable to Class A stockholders 21,721 8,785 11,483 21,126 Earnings per Class A share: Basic 0.18 0.08 0.11 0.21 Diluted 0.17 0.07 0.10 0.21 Three Months Ended (In thousands, except per share data) December 31, September 30, June 30, March 31, Net revenue $ 214,815 $ 210,982 $ 215,849 $ 208,743 Operating income 30,344 23,693 34,649 32,872 Net income 16,352 11,152 24,620 29,302 Net Income attributable to Class A stockholders 11,830 7,941 19,283 23,841 Earnings per Class A share: Basic 0.12 0.08 0.19 0.24 Diluted 0.12 0.08 0.18 0.23 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Description of Business (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
Accounting Policies [Abstract] | |
Number of reportable segments | 2 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||
Accounts receivable | $ 104,892 | $ 105,679 |
Reserve to cover allowances for damages occurring during shipment, quality claims and doubtful accounts | $ 2,700 | $ 2,600 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||
Ingredients and packaging | $ 21,439 | $ 18,865 |
Finished goods | 22,513 | 16,446 |
Inventory in transit to customers | 3,656 | 3,269 |
Inventories | $ 47,608 | $ 38,580 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Land and buildings | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Property, and equipment, useful life (years) | 15 years | ||
Land and buildings | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Property, and equipment, useful life (years) | 50 years | ||
Machinery and equipment | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Property, and equipment, useful life (years) | 3 years | ||
Machinery and equipment | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Property, and equipment, useful life (years) | 20 years | ||
Sweet Baked Goods | |||
Property, Plant and Equipment [Line Items] | |||
Impairment loss of production line | $ 0.5 | $ 1.4 | $ 1 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Software Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||
Capitalized computer software | $ 11.9 | $ 8.5 | |
Capitalized software costs, useful life | 5 years | ||
Capitalized software costs, amortization expense | $ 2.7 | $ 2.7 | $ 2.5 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Goodwill and Intangible Assets (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill [Line Items] | |||
Goodwill | $ 535,853,000 | $ 575,645,000 | $ 579,446,000 |
Trade name and trademarks | |||
Goodwill [Line Items] | |||
Intangible assets with indefinite lives (Trademarks and Trade Names) | 1,408,600,000 | 1,409,900,000 | |
Customer Relationships | |||
Goodwill [Line Items] | |||
Intangible assets with definite lives (customer relationships) | 444,700,000 | 491,300,000 | |
In-Store Bakery | |||
Goodwill [Line Items] | |||
Goodwill | 0 | 39,792,000 | $ 50,023,000 |
Goodwill and intangible asset impairment | $ (1,000,000) | $ (3,300,000) |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Reserves for Self-Insurance Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Stop-loss amount | $ 300 | |
Self-insurance reserves | 2,000 | $ 1,600 |
Workers compensation reserve | $ 2,665 | $ 1,866 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Leases (Details) | Dec. 31, 2019 |
Accounting Policies [Abstract] | |
Weighted average effective borrowing rate, operating leases | 4.40% |
Average remaining terms, operating leases | 6 years |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Revenue Recognition (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Invoice payment period (in years) | 30 days |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Concentrations (Details) - Customer concentration risk - Consolidated net revenues | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 23.60% | 21.00% | 20.40% |
Sweet Baked Goods | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 23.30% | 20.40% | 19.70% |
In-Store Bakery | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 0.30% | 0.60% | 0.70% |
Summary of Significant Accou_14
Summary of Significant Accounting Policies - Collective Bargaining Agreements (Details) | Dec. 31, 2019 |
Accounting Policies [Abstract] | |
Percentage of employees covered by collective bargaining agreements | 44.00% |
Summary of Significant Accou_15
Summary of Significant Accounting Policies - Employee Benefit Plans (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||
Health care contributions, by the Company | $ 1,800,000 | $ 1,900,000 | $ 1,100,000 |
Accrued incentive | $ 6,800,000 | $ 0 |
Summary of Significant Accou_16
Summary of Significant Accounting Policies - Adoption of New Accounting Standards (Details) - Accounting Standards Update 2016-02 $ in Millions | Jan. 01, 2019USD ($) |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Right of use asset | $ 8.2 |
Right of use asset, accumulated amortization | 5.2 |
Lease liability | $ 3 |
Divestiture of In-Store Baker_2
Divestiture of In-Store Bakery Operations (Details) - USD ($) $ in Thousands | Aug. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Non-cash fees on sale of business | $ 1,414 | $ 0 | $ 0 | |
In-Store Bakery | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Proceeds from divestiture | $ 65,000 | |||
Non-cash fees on sale of business | 2,100 | |||
In-Store Bakery | Other operating expenses | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Loss on disposal | $ 300 |
Business Combinations - Purchas
Business Combinations - Purchase Price Allocation (Details) - US Breakfast Assets of ARYZTA, LLC $ in Thousands | Feb. 01, 2018USD ($) |
Business Acquisition [Line Items] | |
Inventory | $ 8,335 |
Other current assets | 500 |
Property and equipment | 13,272 |
Other current liabilities | (1,731) |
Net assets acquired | 23,160 |
Customer Relationships | |
Business Acquisition [Line Items] | |
Customer relationships | 1,136 |
Trade name and trademarks | |
Business Acquisition [Line Items] | |
Trade name and trademarks | $ 1,648 |
Business Combinations - Additio
Business Combinations - Additional Information (Details) - USD ($) | Feb. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 535,853,000 | $ 575,645,000 | $ 579,446,000 | |
Business combination transaction costs | $ 1,914,000 | 297,000 | $ 0 | |
US Breakfast Assets of ARYZTA, LLC | ||||
Business Acquisition [Line Items] | ||||
Total consideration | $ 23,200,000 | |||
Goodwill | $ 0 | |||
Business combination transaction costs | $ 300,000 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 9.2 | $ 5.6 | $ 7.4 |
Common Class A | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Common stock reserved for issuance (in shares) | 7,150,000 | ||
Shares available for issuance, 2016 Plan (in shares) | 3,490,775 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Units, Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Weighted average remaining period | 1 year 9 months 18 days | 1 year 6 months | |
Allocated share-based compensation expense | $ 9.2 | $ 5.6 | $ 7.4 |
RSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage of granted units, eligible to be received | 225.00% | ||
Stock units outstanding with performance obligations Related to EBITDA | 0 | 300,000 | |
Stock units outstanding with performance obligations Related to TSR | 300,000 | 100,000 | |
Total unrecognized compensation cost | $ 7.6 | $ 6.4 | |
Total unrecognized compensation cost, grant date fair value | 4.1 | ||
RSUs | General and Administrative Expense | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Allocated share-based compensation expense | $ 7.2 | $ 4.3 | |
Total Sharebased Return Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage of granted units, eligible to be received | 200.00% | ||
Minimum | RSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Requisite service period of awards | 1 year | ||
Maximum | RSUs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Requisite service period of awards | 3 years | ||
Year two | Total Sharebased Return Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 2 years | ||
Year three | Total Sharebased Return Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 3 years |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of the Activity of Unvested RSUs (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Weighted Average Grant Date Fair Value | |||
Withheld to satisfy employee tax obligations (in shares) | 108,012 | 81,960 | |
RSUs | |||
Restricted Stock Units | |||
Unvested at beginning of period (shares) | 895,784,000 | 915,894,000 | |
Total Granted (shares) | 721,985,000 | 440,883,000 | |
Forfeited (shares) | (298,601,000) | (172,257,000) | |
Vested (shares) | (415,033,000) | (288,736,000) | |
Unvested at end of period (shares) | 904,135,000 | 895,784,000 | 915,894,000 |
Weighted Average Grant Date Fair Value | |||
Unvested at beginning of period (usd per share) | $ 14.46 | $ 15.73 | |
Total Granted (usd per share) | 12.76 | 12.92 | |
Forfeited (usd per share) | 14.96 | 15.46 | |
Vested (usd per share) | 14.26 | 15.61 | |
Unvested at end of period (usd per share) | $ 12.99 | $ 14.46 | $ 15.73 |
Additional Paid-in Capital | |||
Weighted Average Grant Date Fair Value | |||
Employee tax obligation upon vesting | $ 1,431 | $ 1,025 | $ 436 |
Stock-Based Compensation - Re_2
Stock-Based Compensation - Restricted Stock Awards, Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 9.2 | $ 5.6 | $ 7.4 |
Restricted stock awards, issued (in shares) | 0 | 0 | |
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
RSA's outstanding (in shares) | 0 | 0 | |
Restricted Stock | General and Administrative Expense | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 1 | ||
Restricted Stock | Executive | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares granted | 400,000 | ||
Restricted stock granted, post modification (in shares) | 100,000 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Assumptions (Details) - Option | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility (as a percent) | 26.66% | 27.13% |
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Expected option term | 6 years | 6 years 3 months |
Risk-free rate (as a percent) | 1.80% | 3.00% |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options, Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Maximum term under grant agreement | 10 years | ||
Total unrecognized compensation cost related to non-vested stock options | $ 3.7 | ||
Compensation expense | 9.2 | $ 5.6 | $ 7.4 |
Option | General and Administrative Expense | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 2 | $ 1.3 |
Stock-Based Compensation - Su_2
Stock-Based Compensation - Summary of the Activity of Unvested Stock Options (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Options | |||
Outstanding at beginning of period (shares) | 943,939 | 827,620 | |
Granted (shares) | 905,421 | 382,070 | |
Exercised (shares) | (7,463) | ||
Forfeited (shares) | (124,226) | (265,751) | |
Outstanding at end of period (shares) | 1,717,671 | 943,939 | 827,620 |
Number of Options, Exercisable (shares) | 486,663,000 | 273,759 | |
Weighted Average Remaining Contractual Life (years) | 8 years 4 months 6 days | 5 years 6 months 14 days | 5 years 6 months 14 days |
Weighted average remaining contractual life, exercisable (years) | 7 years 4 months 6 days | 4 years 6 months 10 days | |
Weighted Average Exercise Price | |||
Outstanding at beginning of period (usd per share) | $ 13.54 | $ 15.74 | |
Granted (usd per share) | 11.59 | 15.78 | |
Exercised (usd per share) | 13.11 | ||
Forfeited (usd per share) | 12.42 | 14.7 | |
Outstanding at end of period (usd per share) | 13.35 | 13.54 | $ 15.74 |
Weighted average exercise price, exercisable (usd per share) | 15.43 | 15.47 | |
Weighted Average Grant Date Fair Value | |||
Outstanding at beginning of period (usd per share) | 4.97 | 4.97 | |
Granted (usd per share) | 3.76 | 5.04 | |
Exercised (usd per share) | 4.17 | ||
Forfeited (usd per share) | 4.13 | 5.24 | |
Outstanding at end of period (usd per share) | 4.15 | 4.97 | $ 4.97 |
Weighted average grant date fair value, exercisable (usd per share) | $ 4.80 | $ 5 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 292,714 | $ 248,307 | |
Less accumulated depreciation | (50,330) | (27,958) | |
Property and equipment, net | 242,384 | 220,349 | |
Depreciation expense | 17,200 | 14,600 | $ 11,800 |
Land and buildings | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 53,683 | 47,418 | |
Right of use assets - operating | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 23,771 | 0 | |
Machinery and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 209,382 | 194,830 | |
Construction in progress | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 5,878 | $ 6,059 |
Segment Reporting (Details)
Segment Reporting (Details) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($)segment | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Segment Reporting [Abstract] | |||||||||||
Number of reportable segments | segment | 2 | ||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net revenue | $ 216,666,000 | $ 227,211,000 | $ 241,060,000 | $ 222,738,000 | $ 214,815,000 | $ 210,982,000 | $ 215,849,000 | $ 208,743,000 | $ 907,675,000 | $ 850,389,000 | $ 776,188,000 |
Depreciation and amortization | 43,334,000 | 41,411,000 | 38,170,000 | ||||||||
Gross profit | 299,834,000 | 267,277,000 | 326,898,000 | ||||||||
Capital expenditures | 35,536,000 | 53,748,000 | 36,383,000 | ||||||||
Total segment assets | 3,097,701,000 | 3,010,713,000 | 3,097,701,000 | 3,010,713,000 | |||||||
Sweet Baked Goods | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net revenue | 878,973,000 | 808,355,000 | 733,827,000 | ||||||||
Depreciation and amortization | 41,732,000 | 38,607,000 | 35,441,000 | ||||||||
Gross profit | 293,648,000 | 258,995,000 | 316,916,000 | ||||||||
Capital expenditures | 35,354,000 | 53,394,000 | 35,609,000 | ||||||||
Total segment assets | 3,097,701,000 | 2,924,333,000 | 3,097,701,000 | 2,924,333,000 | |||||||
In-Store Bakery | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Net revenue | 28,702,000 | 42,034,000 | 42,361,000 | ||||||||
Depreciation and amortization | 1,602,000 | 2,804,000 | 2,729,000 | ||||||||
Gross profit | 6,186,000 | 8,282,000 | 9,982,000 | ||||||||
Capital expenditures | 182,000 | 354,000 | $ 774,000 | ||||||||
Total segment assets | $ 0 | $ 86,380,000 | $ 0 | $ 86,380,000 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Finite-Lived Intangible Assets [Line Items] | |||
Impairment Charges | $ 1,000 | $ 2,700 | |
Amortization expense | $ 23,377 | 24,057 | $ 23,855 |
Customer Relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Weighted-average amortization period | 19 years 9 months 18 days | ||
Customer Relationships | Minimum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Remaining amortization period | 19 years | ||
Customer Relationships | Maximum | |||
Finite-Lived Intangible Assets [Line Items] | |||
Remaining amortization period | 23 years | ||
In-Store Bakery | |||
Finite-Lived Intangible Assets [Line Items] | |||
Impairment Charges | $ 1,000 | $ 2,700 | |
Reduction of intangible assets, net due to divestiture of segment | $ 24,500 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Goodwill Activity (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill [Roll Forward] | ||
Beginning balance | $ 575,645 | $ 579,446 |
Impairment | (1,000) | (2,700) |
Other reclassifications and tax adjustments | (1,101) | |
Divestiture | (38,792) | |
Ending balance | 535,853 | 575,645 |
Sweet Baked Goods | ||
Goodwill [Roll Forward] | ||
Beginning balance | 535,853 | 529,423 |
Impairment | 0 | 0 |
Other reclassifications and tax adjustments | 6,430 | |
Divestiture | 0 | |
Ending balance | 535,853 | 535,853 |
In-Store Bakery | ||
Goodwill [Roll Forward] | ||
Beginning balance | 39,792 | 50,023 |
Impairment | (1,000) | (2,700) |
Other reclassifications and tax adjustments | (7,531) | |
Divestiture | (38,792) | |
Ending balance | $ 0 | $ 39,792 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | $ 1,853,315 | $ 1,901,215 |
Trade name and trademarks | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Intangible assets with indefinite lives (Trademarks and Trade Names) | 1,408,630 | 1,410,497 |
Less accumulated impairment charges (Trademarks and Trade Names) | 0 | (600) |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets with definite lives (Customer Relationships) | 515,713 | 543,120 |
Less accumulated amortization (Customer Relationships) | $ (71,028) | $ (51,802) |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Future Amortization (Details) - Customer Relationships $ in Thousands | Dec. 31, 2019USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
2020 | $ 22,513 |
2021 | 22,513 |
2022 | 22,513 |
2023 | 22,513 |
2024 | 22,513 |
2025 and thereafter | $ 332,120 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Incentive compensation | $ 6,840 | $ 3,261 |
Accrued interest | 4,870 | 4,849 |
Payroll, vacation and other compensation | 3,389 | 6,104 |
Workers compensation reserve | 2,665 | 1,866 |
Self-insurance reserves | 1,938 | 1,646 |
Taxes | 1,255 | 411 |
Interest rate swap contract | 704 | 0 |
Accrued expenses and other current liabilities | $ 21,661 | $ 18,137 |
Tax Receivable Agreement - Narr
Tax Receivable Agreement - Narrative (Details) - USD ($) $ in Thousands | Jan. 26, 2018 | Dec. 31, 2019 | Dec. 31, 2018 |
Business Acquisition [Line Items] | |||
Fair value inputs, tax savings rate | 26.90% | ||
Tax receivable arrangement, remeasurement due to exchange of class B units | $ 71,679 | $ 294 | |
Tax receivable agreement, remeasurement due to change in state tax rate | $ 1,593 | $ 1,866 | |
Tax receivable agreement, cash tax savings rate | 26.40% | 26.90% | |
Remeasurement due to disposal of In-Store Bakery operations | $ 1,779 | ||
Tax receivable agreement, payment made to terminate future payments | $ 34,000 | ||
Fair value inputs, tax savings rate, prior to tax reform | 27.50% | ||
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% | ||
Fair value inputs, tax savings rate | 26.40% |
Tax Receivable Agreement - Summ
Tax Receivable Agreement - Summary of Activity (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Reconciliation of Tax Receivable Agreement Liability [Roll Forward] | ||
Beginning balance | $ 69,063 | $ 124,360 |
Exchange of units | 71,679 | 294 |
Reduction of future payments due to Buyout | (46,372) | |
Remeasurement due to disposal of In-Store Bakery operations | 1,779 | |
Remeasurement due to change in estimated state tax rate | (1,593) | (1,866) |
Payments | (2,732) | (7,353) |
Ending balance | $ 138,196 | $ 69,063 |
Tax Receivable Agreement - Futu
Tax Receivable Agreement - Future Expected Payments (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Income Tax Disclosure [Abstract] | |
2020 | $ 12,100 |
2021 | 7,400 |
2022 | 7,400 |
2023 | 7,800 |
2024 | 8,100 |
Thereafter | $ 95,396 |
Debt - Narrative (Details)
Debt - Narrative (Details) - Term Loan - USD ($) $ in Millions | Oct. 01, 2019 | Nov. 20, 2017 | Dec. 31, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||||
Fair value of long term debt | $ 977.6 | $ 927.3 | ||
Fourth Term Loan | ||||
Debt Instrument [Line Items] | ||||
Interest rate on aggregate principal balance | 0.25% | |||
Fourth Term Loan | New LIBOR Floor | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 0.75% | |||
Fourth Term Loan | LIBOR Floor | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 2.25% | |||
Third Term Loan | ||||
Debt Instrument [Line Items] | ||||
Interest rate on aggregate principal balance | 0.25% | |||
Long-term debt, principal balance | $ 976.4 | |||
Third Term Loan | LIBOR Floor | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 2.50% |
Debt - Schedule of Long-Term De
Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Lease obligations | $ 16,452 | |
Lease obligations | $ 401 | |
Total debt and lease obligations | 987,288 | 988,004 |
Less: Amounts due within one year | (11,883) | (11,268) |
Long-term portion | 975,405 | 976,736 |
Term Loan | First Term Loan | ||
Debt Instrument [Line Items] | ||
Term Loan (4.14% as of December 31, 2019) | 973,930 | 983,825 |
Unamortized debt premium and issuance costs | (3,094) | 3,778 |
Long-term debt | $ 970,836 | $ 987,603 |
Effective fixed interest rate on long-term debt | 4.14% |
Debt - Schedule of Maturities o
Debt - Schedule of Maturities of Long-term Debt (Details) - Fourth Term Loan - Term Loan $ in Thousands | Dec. 31, 2019USD ($) |
Debt Instrument [Line Items] | |
2020 | $ 9,764 |
2021 | 9,764 |
2022 | 9,764 |
2023 | 9,764 |
2024 | 9,764 |
2025 and thereafter | $ 925,110 |
Debt - Revolving Credit Facilit
Debt - Revolving Credit Facility (Details) - Revolving Credit Facility - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Oct. 01, 2019 | Dec. 31, 2018 | |
Line of Credit Facility [Line Items] | |||
Long-term line of credit | $ 0 | $ 0 | |
Minimum | |||
Line of Credit Facility [Line Items] | |||
Unused capacity, commitment fee percentage | 0.375% | ||
Maximum | |||
Line of Credit Facility [Line Items] | |||
Unused capacity, commitment fee percentage | 0.50% | ||
Hostess Brands, LLC | |||
Line of Credit Facility [Line Items] | |||
Line of credit, amount to be issued | $ 100,000,000 | ||
Base Rate | |||
Line of Credit Facility [Line Items] | |||
Unused capacity, commitment fee percentage | 1.25% | ||
Base Rate | Minimum | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.00% | ||
Base Rate | Maximum | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as a percent) | 2.50% | ||
LIBOR | |||
Line of Credit Facility [Line Items] | |||
Unused capacity, commitment fee percentage | 2.25% | ||
LIBOR | Minimum | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as a percent) | 3.00% | ||
LIBOR | Maximum | |||
Line of Credit Facility [Line Items] | |||
Basis spread on variable rate (as a percent) | 3.50% |
Derivative Contracts (Details)
Derivative Contracts (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Derivative [Line Items] | |||
Gain on foreign currency contract | $ 7,128,000 | $ 0 | $ 0 |
Designated as Hedging Instrument | Interest Rate Swap | |||
Derivative [Line Items] | |||
Unrealized losses expected to be reclassified | (400,000) | ||
Designated as Hedging Instrument | Interest Rate Swap | Cash Flow Hedge | |||
Derivative [Line Items] | |||
Fixed interest rate | 1.78% | ||
Notional amount | 300,000,000 | $ 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 | 4.03% | ||
Designated as Hedging Instrument | Interest Rate Swap | Cash Flow Hedge | Accrued Expenses and Other Liabilities | |||
Derivative [Line Items] | |||
Fair value of derivative | $ (700,000) | ||
Designated as Hedging Instrument | Interest Rate Swap | Cash Flow Hedge | Other Assets | |||
Derivative [Line Items] | |||
Fair value of derivative | $ 5,100,000 | ||
Designated as Hedging Instrument | Interest Rate Swap | Cash Flow Hedge | LIBOR | |||
Derivative [Line Items] | |||
Basis spread on variable rate (as a percent) | 0.75% | ||
Designated as Hedging Instrument | Foreign currency contract | |||
Derivative [Line Items] | |||
Notional amount | 440,000,000 | ||
Designated as Hedging Instrument | Foreign currency contract | Other Current Assets | |||
Derivative [Line Items] | |||
Fair value of derivative | $ 7,100,000 |
Equity (Details)
Equity (Details) | 12 Months Ended | |
Dec. 31, 2019class$ / sharesshares | Dec. 31, 2018shares | |
Class of Stock [Line Items] | ||
Common stock, number of classes | class | 3 | |
Warrants redemption price (usd per share) | $ / shares | $ 0.01 | |
Share price (usd per share) | $ / shares | $ 24 | |
Warrants trading days threshold | 20 days | |
Warrants trading day period before redemption | 30 days | |
Public warrants | ||
Class of Stock [Line Items] | ||
Warrants outstanding (shares) | 48,453,154 | 48,274,307 |
Private placement warrants | ||
Class of Stock [Line Items] | ||
Warrants outstanding (shares) | 8,046,636 | 8,225,583 |
Common Class A | ||
Class of Stock [Line Items] | ||
Common stock, authorized (shares) | 200,000,000 | 200,000,000 |
Common stock, issued (shares) | 122,108,086 | 100,046,392 |
Common stock, outstanding (shares) | 122,108,086 | 100,046,392 |
Class of warrant, number of securities called | 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 | 50,000,000 |
Common stock, issued (shares) | 8,409,834 | 30,255,184 |
Common stock, outstanding (shares) | 8,409,834 | 30,255,184 |
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) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | |||||||||||
Net income attributable to Class A stockholders (in thousands) | $ 21,721 | $ 8,785 | $ 11,483 | $ 21,126 | $ 11,830 | $ 7,941 | $ 19,283 | $ 23,841 | $ 63,115 | $ 62,895 | $ 223,897 |
Denominator: | |||||||||||
Weighted-average Class A shares outstanding - basic (excluding non-vested restricted stock awards) (in shares) | 110,540,264 | 99,957,049 | 99,109,629 | ||||||||
Dilutive effect of warrants (in shares) | 3,693,758 | 3,021,239 | 6,113,053 | ||||||||
Dilutive effect of RSAs and RSUs (in shares) | 465,425 | 120,106 | 84,611 | ||||||||
Weighted-average shares outstanding - diluted (in shares) | 114,699,447 | 103,098,394 | 105,307,293 | ||||||||
Earnings per Class A share - basic (usd per share) | $ 0.18 | $ 0.08 | $ 0.11 | $ 0.21 | $ 0.12 | $ 0.08 | $ 0.19 | $ 0.24 | $ 0.57 | $ 0.63 | $ 2.26 |
Earnings per Class A share - dilutive (usd per share) | $ 0.17 | $ 0.07 | $ 0.10 | $ 0.21 | $ 0.12 | $ 0.08 | $ 0.18 | $ 0.23 | $ 0.55 | $ 0.61 | $ 2.13 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||
Federal | $ 1,724 | $ 622 | $ 11,163 |
State and local | 1,047 | 2,077 | 2,903 |
Total Current | 2,771 | 2,699 | 14,066 |
Federal | 14,859 | 14,476 | (93,457) |
State and local | (738) | (4,221) | 12,187 |
Total Deferred | 14,121 | 10,255 | (81,270) |
Income tax expense (benefit), net | $ 16,892 | $ 12,954 | $ (67,204) |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||
U. S. federal statutory income tax rate | 21.00% | 21.00% | 35.00% |
State and local income taxes, net of federal benefit | 4.60% | 4.30% | 3.80% |
Income attributable to non-controlling interest | (3.20%) | (4.10%) | (6.30%) |
Tax Cuts and Jobs Act | 0 | 0 | (0.662) |
Change in state tax rate | (4.80%) | (6.00%) | 1.20% |
Gain on TRA buyout | 0.00% | (1.40%) | 0.00% |
Other | 0.30% | (0.10%) | (2.70%) |
Effective income tax rate | 17.90% | 13.70% | (35.20%) |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Imputed interest | $ 6,198 | $ 3,064 |
Tax credits | 2,599 | 2,696 |
Disallowed interest carryforward | 0 | 2,374 |
Net operating loss carryforwards | 249 | 1,000 |
Other | 1,343 | 1,252 |
Total deferred tax assets | 10,389 | 10,386 |
Investment in partnership | (266,440) | (279,015) |
Goodwill and intangible assets | 0 | (7,023) |
Property and equipment | 0 | (1,261) |
Other | 0 | (1,041) |
Total deferred tax liabilities | (266,440) | (288,340) |
Total deferred tax assets and liabilities | $ (256,051) | $ (277,954) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | |
Operating Loss Carryforwards [Line Items] | |||
Unrecognized tax benefits that would affect tax rate | $ 0 | $ 0 | |
Tax Cuts And Jobs Act Of 2017, provisional non-cash tax benefit | $ 111,300,000 | ||
State Tax Authority | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforwards | 4,000,000 | ||
State income tax credit carryforward | $ 3,300,000 |
Commitments and Contingencies -
Commitments and Contingencies - Share Purchase Agreement (Details) - Jan. 03, 2020 - Parent Company of Voortman - Subsequent Event - Subsidiary of the Company $ in Millions | USD ($) | CAD ($) |
Business Acquisition [Line Items] | ||
Purchase price, subject to customary adjustments for net indebtedness of the acquired business and working capital | $ 320,000,000 | $ 425 |
Portion of purchase price deposited into escrow account | 10,800,000 | |
Term Loan | ||
Business Acquisition [Line Items] | ||
Amount of incremental term loans entered into in order to finance transaction | $ 140,000,000 |
Commitment and Contingencies -
Commitment and Contingencies - Operating Leases (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 3,541 |
2021 | 2,222 |
2022 | 2,494 |
2023 | 2,735 |
2024 | 3,848 |
Thereafter | $ 4,081 |
Commitments and Contingencies_2
Commitments and Contingencies - Financing Leases (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2019USD ($)renewal_period | |
Capital Leased Assets [Line Items] | |||
Finance lease, base term (in years) | 6 years 6 months | ||
Finance lease, number of extension periods | renewal_period | 2 | ||
Finance lease, extension period (in years) | 5 years | ||
Operating lease, rent expense | $ 1.9 | $ 2 | |
Development Authority of Columbus, GA | Maximum | |||
Capital Leased Assets [Line Items] | |||
Tax-exempt bond | $ 18 |
Commitment and Contingencies _2
Commitment and Contingencies - Composition of Lease Expenses (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Reduction of right of use asset, financing lease | $ 133 |
Interest, financing lease | 16 |
Operating lease expense | 3,070 |
Short-term lease expense | 968 |
Variable lease expense | 1,076 |
Total lease expenses | $ 5,263 |
Commitments and Contingencies_3
Commitments and Contingencies - Contractual Commitments (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Ingredients | |
Long-term Purchase Commitment [Line Items] | |
Total Committed | $ 76,441 |
Commitments within 1 year | 75,280 |
Commitments beyond 1 year | 1,161 |
Packaging | |
Long-term Purchase Commitment [Line Items] | |
Total Committed | 49,260 |
Commitments within 1 year | 49,260 |
Commitments beyond 1 year | $ 0 |
Commitments and Contingencies_4
Commitments and Contingencies - Letters of Credit (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Line of Credit Facility [Line Items] | ||
Line of credit secured, percent | 100.00% | |
$2.2 Million Standby Letters of Credit | ||
Line of Credit Facility [Line Items] | ||
Line of credit, amount to be issued | $ 4.2 | $ 3 |
Unaudited Quarterly Financial_3
Unaudited Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Net revenue | $ 216,666 | $ 227,211 | $ 241,060 | $ 222,738 | $ 214,815 | $ 210,982 | $ 215,849 | $ 208,743 | $ 907,675 | $ 850,389 | $ 776,188 |
Operating income | 39,534 | 23,571 | 36,881 | 36,110 | 30,344 | 23,693 | 34,649 | 32,872 | 136,096 | 121,558 | 233,992 |
Net income | 23,555 | 10,729 | 16,669 | 26,612 | 16,352 | 11,152 | 24,620 | 29,302 | 77,565 | 81,426 | 258,108 |
Net income attributable to Class A stockholders | $ 21,721 | $ 8,785 | $ 11,483 | $ 21,126 | $ 11,830 | $ 7,941 | $ 19,283 | $ 23,841 | $ 63,115 | $ 62,895 | $ 223,897 |
Earnings (loss) per Class A share: | |||||||||||
Basic (usd per share) | $ 0.18 | $ 0.08 | $ 0.11 | $ 0.21 | $ 0.12 | $ 0.08 | $ 0.19 | $ 0.24 | $ 0.57 | $ 0.63 | $ 2.26 |
Diluted (usd per share) | $ 0.17 | $ 0.07 | $ 0.10 | $ 0.21 | $ 0.12 | $ 0.08 | $ 0.18 | $ 0.23 | $ 0.55 | $ 0.61 | $ 2.13 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - Interest Rate Swap | 1 Months Ended |
Feb. 26, 2020USD ($) | |
Subsequent Event [Line Items] | |
Term of contract | 5 years |
Notional amount | $ 250,000,000 |
Minimum | |
Subsequent Event [Line Items] | |
Fixed interest rate | 1.53% |
Maximum | |
Subsequent Event [Line Items] | |
Fixed interest rate | 1.64% |
LIBOR | |
Subsequent Event [Line Items] | |
Basis spread on variable rate (as a percent) | 0.75% |
Uncategorized Items - twnk-2019
Label | Element | Value |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 191,000 |
AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 7,000 |
Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 198,000 |
Noncontrolling Interest [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 85,000 |