Cover Page
Cover Page - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 07, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 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 | 1 East Armour Boulevard | |
Entity Address, City or Town | Kansas City, | |
Entity Address, State or Province | MO | |
Entity Address, Postal Zip Code | 64111 | |
City Area Code | 816 | |
Local Phone Number | 701‑4600 | |
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 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
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 $0.0001 per share | |
Trading Symbol | TWNK | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 109,323,871 | |
Warrant | ||
Class of Stock [Line Items] | ||
Title of 12(b) Security | Warrants, each exercisable for a half share of Class A Common Stock | |
Trading Symbol | TWNKW | |
Security Exchange Name | NASDAQ | |
Common Class B | ||
Class of Stock [Line Items] | ||
Entity Common Stock, Shares Outstanding | 20,999,784 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 189,284 | $ 146,377 |
Accounts receivable, net | 128,187 | 105,679 |
Inventories | 42,893 | 38,580 |
Prepaids and other current assets | 10,285 | 8,806 |
Total current assets | 370,649 | 299,442 |
Property and equipment, net | 223,751 | 220,349 |
Intangible assets, net | 1,889,221 | 1,901,215 |
Goodwill | 574,645 | 575,645 |
Other assets, net | 10,713 | 14,062 |
Total assets | 3,068,979 | 3,010,713 |
Current liabilities: | ||
Long-term debt and lease obligations payable within one year | 13,206 | 11,268 |
Tax receivable agreement payments payable within one year | 7,700 | 4,400 |
Accounts payable | 72,161 | 65,288 |
Customer trade allowances | 50,765 | 42,010 |
Accrued expenses and other current liabilities | 23,100 | 18,137 |
Total current liabilities | 166,932 | 141,103 |
Long-term debt and lease obligations | 972,118 | 976,736 |
Tax receivable agreement | 85,820 | 64,663 |
Deferred tax liability | 273,575 | 277,954 |
Other long term liabilities | 107 | 0 |
Total liabilities | 1,498,552 | 1,460,456 |
Commitments and Contingencies (Note 11) | ||
Additional paid in capital | 1,022,529 | 925,902 |
Accumulated other comprehensive income (loss) | (190) | 2,523 |
Retained earnings | 303,974 | 271,365 |
Stockholders’ equity | 1,326,326 | 1,199,803 |
Non-controlling interest | 244,101 | 350,454 |
Total liabilities and stockholders’ equity | 3,068,979 | 3,010,713 |
Common Class A | ||
Current liabilities: | ||
Common Stock | 11 | 10 |
Common Class B | ||
Current liabilities: | ||
Common Stock | $ 2 | $ 3 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 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) | 109,323,871 | 100,046,392 |
Common stock, outstanding (shares) | 109,323,871 | 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) | 20,999,784 | 30,255,184 |
Common stock, outstanding (shares) | 20,999,784 | 30,255,184 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Net revenue | $ 241,060 | $ 215,849 | $ 463,798 | $ 424,592 |
Cost of goods sold | 157,610 | 148,992 | 305,160 | 286,494 |
Gross profit | 83,450 | 66,857 | 158,638 | 138,098 |
Operating costs and expenses: | ||||
Advertising and marketing | 10,696 | 8,938 | 19,559 | 17,808 |
Selling expense | 8,310 | 7,751 | 16,830 | 15,139 |
General and administrative | 19,276 | 11,185 | 36,747 | 25,746 |
Amortization of customer relationships | 6,009 | 5,994 | 11,994 | 11,989 |
Other operating expense (income) | 2,278 | (1,660) | 517 | (104) |
Total operating costs and expenses | 46,569 | 32,208 | 85,647 | 70,578 |
Operating income | 36,881 | 34,649 | 72,991 | 67,520 |
Other expense (income): | ||||
Interest expense, net | 10,302 | 9,749 | 20,538 | 19,089 |
Gain on buyout of tax receivable agreement | 0 | 0 | 0 | (12,372) |
Other expense | 846 | 86 | 1,286 | 169 |
Total other expense | 11,148 | 9,835 | 21,824 | 6,886 |
Income before income taxes | 25,733 | 24,814 | 51,167 | 60,634 |
Income tax expense | 9,064 | 194 | 7,886 | 6,712 |
Net income | 16,669 | 24,620 | 43,281 | 53,922 |
Less: Net income attributable to the non-controlling interest | 5,186 | 5,337 | 10,672 | 10,799 |
Net income attributable to Class A stockholders | $ 11,483 | $ 19,283 | $ 32,609 | $ 43,123 |
Earnings per Class A share: | ||||
Basic (usd per share) | $ 0.11 | $ 0.19 | $ 0.32 | $ 0.43 |
Diluted (usd per share) | $ 0.10 | $ 0.18 | $ 0.31 | $ 0.41 |
Weighted-average shares outstanding: | ||||
Basic (shares) | 105,072,322 | 99,939,642 | 102,618,951 | 99,916,161 |
Diluted (shares) | 109,509,195 | 104,773,094 | 105,338,010 | 104,911,474 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 16,669 | $ 24,620 | $ 43,281 | $ 53,922 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on interest rate swap contract designated as a cash flow hedge | (3,006) | 1,383 | (5,171) | 5,121 |
Tax benefit (expense) | 636 | (292) | 1,083 | (1,079) |
Comprehensive income | 14,299 | 25,711 | 39,193 | 57,964 |
Less: Comprehensive income attributed to non-controlling interest | 4,605 | 5,664 | 9,589 | 11,989 |
Comprehensive income attributed to Class A stockholders | $ 9,694 | $ 20,047 | $ 29,604 | $ 45,975 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Total | Class A | Class B | Total Stockholders’ Equity | Common StockClass A | Common StockClass B | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Non-controlling Interest |
Beginning Balance (shares) at Dec. 31, 2017 | 99,791,245 | 30,319,564 | ||||||||
Beginning Balance at Dec. 31, 2017 | $ 1,130,333 | $ 10 | $ 3 | $ 920,723 | $ 1,318 | $ 208,279 | $ 342,240 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income (loss) | 25,923 | 2,082 | 23,841 | 6,331 | ||||||
Share‑based compensation (shares) | 59,989 | 0 | ||||||||
Share-based compensation | 1,721 | 1,721 | 0 | |||||||
Exchanges (shares) | 64,380 | (64,380) | ||||||||
Exchanges | 1,033 | 1,033 | (1,033) | |||||||
Distributions | (4,153) | |||||||||
Payment of taxes for employee stock awards | (407) | (407) | ||||||||
Tax receivable agreement arising from exchanges, net of income taxes of $50 | (350) | (350) | 0 | |||||||
Ending Balance (shares) at Mar. 31, 2018 | 99,915,614 | 30,255,184 | ||||||||
Ending Balance at Mar. 31, 2018 | 1,158,451 | $ 10 | $ 3 | 922,720 | 3,407 | 232,311 | 343,470 | |||
Beginning Balance (shares) at Dec. 31, 2017 | 99,791,245 | 30,319,564 | ||||||||
Beginning Balance at Dec. 31, 2017 | 1,130,333 | $ 10 | $ 3 | 920,723 | 1,318 | 208,279 | 342,240 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income (loss) | $ 57,964 | |||||||||
Ending Balance (shares) at Jun. 30, 2018 | 99,919,503 | 30,255,184 | ||||||||
Ending Balance at Jun. 30, 2018 | 1,179,285 | $ 10 | $ 3 | 923,502 | 4,177 | 251,593 | 343,818 | |||
Beginning Balance (shares) at Mar. 31, 2018 | 99,915,614 | 30,255,184 | ||||||||
Beginning Balance at Mar. 31, 2018 | 1,158,451 | $ 10 | $ 3 | 922,720 | 3,407 | 232,311 | 343,470 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income (loss) | 25,711 | 20,052 | 770 | 19,282 | 5,658 | |||||
Share‑based compensation (shares) | 3,889 | 0 | ||||||||
Share-based compensation | 811 | 811 | 0 | |||||||
Distributions | (5,310) | |||||||||
Payment of taxes for employee stock awards | (29) | (29) | ||||||||
Ending Balance (shares) at Jun. 30, 2018 | 99,919,503 | 30,255,184 | ||||||||
Ending Balance at Jun. 30, 2018 | 1,179,285 | $ 10 | $ 3 | 923,502 | 4,177 | 251,593 | 343,818 | |||
Beginning Balance (shares) at Dec. 31, 2018 | 100,046,392 | 30,255,184 | 100,046,392 | 30,255,184 | ||||||
Beginning Balance at Dec. 31, 2018 | 1,199,803 | $ 10 | $ 3 | 925,902 | 2,523 | 271,365 | 350,454 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income (loss) | 19,910 | (1,216) | 21,126 | 4,984 | ||||||
Share‑based compensation (shares) | 0 | 0 | ||||||||
Share-based compensation | 1,668 | 1,668 | 0 | |||||||
Distributions | (457) | |||||||||
Exercise of public warrants (shares) | 50 | |||||||||
Ending Balance (shares) at Mar. 31, 2019 | 100,046,442 | 30,255,184 | ||||||||
Ending Balance at Mar. 31, 2019 | 1,221,381 | $ 10 | $ 3 | 927,570 | 1,307 | 292,491 | 354,981 | |||
Beginning Balance (shares) at Dec. 31, 2018 | 100,046,392 | 30,255,184 | 100,046,392 | 30,255,184 | ||||||
Beginning Balance at Dec. 31, 2018 | 1,199,803 | $ 10 | $ 3 | 925,902 | 2,523 | 271,365 | 350,454 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income (loss) | 39,193 | |||||||||
Ending Balance (shares) at Jun. 30, 2019 | 109,323,871 | 20,999,784 | 109,323,871 | 20,999,784 | ||||||
Ending Balance at Jun. 30, 2019 | 1,326,326 | $ 11 | $ 2 | 1,022,529 | (190) | 303,974 | 244,101 | |||
Beginning Balance (shares) at Mar. 31, 2019 | 100,046,442 | 30,255,184 | ||||||||
Beginning Balance at Mar. 31, 2019 | 1,221,381 | $ 10 | $ 3 | 927,570 | 1,307 | 292,491 | 354,981 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Comprehensive income (loss) | 14,299 | 9,694 | (1,789) | 11,483 | 4,605 | |||||
Share‑based compensation (shares) | 20,241 | 0 | ||||||||
Share-based compensation | 1,936 | 1,936 | 0 | |||||||
Exchanges (shares) | 9,255,400 | (9,255,400) | ||||||||
Exchanges | 111,026 | $ 1 | $ (1) | 110,734 | 292 | (111,026) | ||||
Distributions | (4,459) | |||||||||
Exercise of employee stock options (shares) | 1,788 | |||||||||
Exercise of employee stock options | $ 23 | |||||||||
Payment of taxes for employee stock awards | (124) | (124) | ||||||||
Tax receivable agreement arising from exchanges, net of income taxes of $50 | (17,610) | (17,610) | 0 | |||||||
Ending Balance (shares) at Jun. 30, 2019 | 109,323,871 | 20,999,784 | 109,323,871 | 20,999,784 | ||||||
Ending Balance at Jun. 30, 2019 | $ 1,326,326 | $ 11 | $ 2 | $ 1,022,529 | $ (190) | $ 303,974 | $ 244,101 |
Consolidated Statements of St_2
Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | |
Statement of Stockholders' Equity [Abstract] | ||||
Tax effect from new accounting principle adoption | $ 83 | |||
Tax effect from share-based compensation | $ 563 | $ 613 | $ 189 | 98 |
Tax effect from tax receivable agreement | $ 10,109 | $ 50 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating activities | ||
Net income | $ 43,281 | $ 53,922 |
Depreciation and amortization | 21,939 | 20,648 |
Impairment of property, goodwill and intangibles | 1,005 | 1,417 |
Debt premium amortization | (536) | (541) |
Tax receivable agreement remeasurement and gain on buyout | (483) | (14,124) |
Share-based compensation | 4,780 | 2,721 |
Deferred taxes | 5,637 | 4,994 |
Change in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | (22,508) | (8,458) |
Inventories | (4,313) | 3,558 |
Prepaids and other current assets | (1,661) | (1,643) |
Accounts payable and accrued expenses | 18,168 | 17,187 |
Customer trade allowances | 8,755 | 1,501 |
Net cash provided by operating activities | 74,064 | 81,182 |
Investing activities | ||
Purchases of property and equipment | (15,398) | (19,836) |
Acquisition of business, net of cash | 0 | (23,910) |
Acquisition and development of software assets | (2,907) | (1,591) |
Net cash used in investing activities | (18,305) | (45,337) |
Financing activities | ||
Repayments of long-term debt and lease obligations | (5,056) | (5,051) |
Distributions to non-controlling interest | (4,916) | (9,463) |
Tax payments related to issuance of shares to employees | (124) | (407) |
Cash received from exercise of options | 23 | 0 |
Payments on tax receivable agreement | (2,779) | (41,353) |
Net cash used in financing activities | (12,852) | (56,274) |
Net increase (decrease) in cash and cash equivalents | 42,907 | (20,429) |
Cash and cash equivalents at beginning of period | 146,377 | 135,701 |
Cash and cash equivalents at end of period | 189,284 | 115,272 |
Cash paid during the period for: | ||
Interest | 22,472 | 20,358 |
Net taxes paid | 1,815 | 3,959 |
Supplemental disclosure of non-cash investing: | ||
Accrued capital expenditures | $ 1,527 | $ 1,388 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 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 Kansas City, Missouri. The consolidated financial statements include the accounts of Hostess Brands, Inc. and its subsidiaries (collectively, the “Company”). The Company is a leading packaged food company focused on developing, manufacturing, marketing, selling and distributing fresh sweet baked goods in the United States. The Company’s operations are conducted through indirect operating subsidiaries that are wholly-owned by Hostess Holdings, L.P. (“Hostess Holdings”), a direct subsidiary of Hostess Brands, Inc. Hostess Brands, Inc. holds 100% of the general partnership interest in Hostess Holdings and a majority of the limited partnership interests therein and consolidates Hostess Holdings in the Company’s consolidated financial statements. The remaining limited partnership interests in Hostess Holdings are held by the holders of the outstanding shares of Class B common stock of Hostess Brands, Inc. These limited partnership interests in Hostess Holdings are reflected in the consolidated financial statements as a non-controlling interest. 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”). In the opinion of management, the unaudited consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented, and all such adjustments were of a normal and recurring nature. The results of operations are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2018 . The Company has two reportable segments: Sweet Baked Goods and In-Store Bakery. 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 the Leases section of this footnote. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries (including those for which the Company is the primary beneficiary of a variable interest entity). All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and for the reported amounts of revenues and expenses during the reporting period. Management utilizes estimates, including, but not limited to, valuation and useful lives of tangible and intangible assets, valuation of expected future payments under the tax receivable agreement, and reserves for trade and promotional allowances. Actual results could differ from these estimates. Accounts Receivable Accounts receivable represents amounts invoiced to customers for performance obligations which have been satisfied. As of June 30, 2019 and December 31, 2018 , the Company’s accounts receivable were $128.2 million and $105.7 million , respectively, which have been reduced by an allowance for damages occurring during shipment, quality claims and doubtful accounts in the amount of $2.8 million and $2.6 million , respectively. In addition, there were customer trade allowances of $50.8 million and $42.0 million as of June 30, 2019 and December 31, 2018 , respectively, in current liabilities in the consolidated balance sheets. Inventories Inventories are stated at the lower of cost or net-realizable value 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) June 30, December 31, Ingredients and packaging $ 19,862 $ 18,865 Finished goods 20,331 16,446 Inventory in transit to customers 2,700 3,269 $ 42,893 $ 38,580 Impairment of Property and Equipment For the six months ended June 30, 2018 , the Company recorded an impairment loss of $1.4 million related to the plann ed disposition of certain production equipment before the end of its useful life. This loss is included in other operating expenses on the consolidated statement of operations. The measurement of this loss was based on Level 3 inputs within the fair value measurement hierarchy. Software Costs Included in “Other assets, net” in the consolidated balance sheets is capitalized software in the amount of $10.2 million and $8.5 million at June 30, 2019 and December 31, 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 was $0.7 million and $1.4 million for the three and six months ended June 30, 2019 , respectively, compared to $0.8 million and $1.4 million for the three and six months ended June 30, 2018 , respectively. Concentrations The Company has one customer (together with its affiliates) that accounted for 10% or more of the Company’s total net revenue. The percentage of total net revenues for this customer is presented below by segment: Three Months Ended Six Months Ended (% of Consolidated Net Revenues) June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Sweet Baked Goods 23.3 % 18.4 % 23.5 % 18.1 % In-Store Bakery 0.4 % 0.6 % 0.4 % 0.6 % Total 23.7 % 19.0 % 23.9 % 18.7 % Leases Subsequent to its adoption of Topic 842, 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 June 30, 2019 , the weighted average effective borrowing rates for outstanding financing and operating leases were 6.8% and 4.7% , respectively. 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 June 30, 2019 , the average remaining terms on both financing leases and operating leases were approximately one year . 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. The table below shows the composition of lease expenses for the period subsequent to the adoption of Topic 842: Three Months Ended Six Months Ended (In thousands) June 30, 2019 June 30, 2019 Amortization of right of use asset, financing lease $ 56 $ 100 Interest, financing lease 5 12 Operating lease expense 616 1,257 Short-term lease expense 282 682 Variable lease expense 189 377 $ 1,148 $ 2,428 At June 30, 2019 , right of use assets related to both operating and financing leases are included in property and equipment, net on the consolidated balance sheet (see Note 2 Property and Equipment). As of June 30, 2019 , lease liabilities for both operating and financing leases are included in the current and non-current portions of long-term debt and lease obligations on the consolidated balance sheet (see Note 6 Debt and Lease Obligations ). |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following: (In thousands) June 30, 2019 December 31, 2018 Land and buildings $ 43,552 $ 47,418 Right of use assets, operating 9,082 — Right of use assets, financing 1,568 — Machinery and equipment 205,859 194,830 Construction in progress 6,426 6,059 266,487 248,307 Less accumulated depreciation and amortization (42,736 ) (27,958 ) $ 223,751 $ 220,349 Depreciation and amortization expense was $4.3 million and $8.6 million for the three and six months ended June 30, 2019, compared to $3.8 million and $7.2 million for the three and six months ended June 30, 2018. |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 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 and private label products sold through the in-store bakery section of grocery and club stores. 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: Three Months Ended Six Months Ended (In thousands) June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Net revenue: Sweet Baked Goods $ 229,273 $ 204,237 $ 442,151 $ 403,529 In-Store Bakery 11,787 11,612 21,647 21,063 Net revenue $ 241,060 $ 215,849 $ 463,798 $ 424,592 Depreciation and amortization: Sweet Baked Goods $ 10,380 $ 9,857 $ 20,562 $ 19,251 In-Store Bakery 680 700 1,377 1,397 Depreciation and amortization $ 11,060 $ 10,557 $ 21,939 $ 20,648 Gross profit: Sweet Baked Goods $ 80,925 $ 64,359 $ 154,069 $ 133,797 In-Store Bakery 2,525 2,498 4,569 4,301 Gross profit $ 83,450 $ 66,857 $ 158,638 $ 138,098 Capital expenditures (1): Sweet Baked Goods $ 7,516 $ 13,432 $ 11,778 $ 22,598 In-Store Bakery 28 164 180 217 Capital expenditures $ 7,544 $ 13,596 $ 11,958 $ 22,815 (1) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable. From December 31, 2018 to June 30, 2019 , capital expenditures in accounts payable decreased by $6.4 million . From December 31, 2017 to June 30, 2018 capital expenditures in accounts payable increased by $1.4 million . Total assets by reportable segment are as follows: (In thousands) June 30, December 31, Total segment assets: Sweet Baked Goods $ 2,981,878 $ 2,924,333 In-Store Bakery 87,101 86,380 Total segment assets $ 3,068,979 $ 3,010,713 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets During the three months ended June 30, 2019, the Company recognized an impairment charge of $1.0 million in other operating expense on the consolidated statement of operations related to the In-Store Bakery reporting unit. This charge reflects a change in certain market assumptions since the last time the reporting unit was valued in the fourth quarter of 2018 (Level 1 input). Goodwill activity is presented below by reportable segment: (In thousands) Sweet Baked Goods In Store Bakery Total Balance as of December 31, 2018 $ 535,853 $ 39,792 $ 575,645 Impairment — (1,000 ) (1,000 ) Balance as of June 30, 2019 $ 535,853 $ 38,792 $ 574,645 Intangible assets consist of the following: (In thousands) June 30, 2019 December 31, Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,410,497 $ 1,410,497 Intangible assets with definite lives (Customer Relationships) 543,148 543,120 Less accumulated amortization (Customer Relationships) (63,824 ) (51,802 ) Less accumulated impairment charges (Trademarks and Trade Names) (600 ) (600 ) Intangible assets, net $ 1,889,221 $ 1,901,215 Amortization expense was $6.0 million and $12.0 million for the three and six months ended June 30, 2019 , respectively and $6.0 million and $12.0 million for the three and six months ended June 30, 2018 , respectively. The unamortized portion of customer relationships will be expensed over their remaining useful lives, from 18 to 23 years . The weighted-average amortization period as of June 30, 2019 for customer relationships was 20.0 |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities Included in accrued expenses and other current liabilities are the following: (In thousands) June 30, 2019 December 31, Payroll, vacation and other compensation $ 6,969 $ 6,104 Incentive compensation 6,539 3,261 Accrued interest 4,974 4,849 Workers compensation reserve 2,743 1,866 Self-insurance reserves 1,772 1,646 Current income taxes payable 103 411 $ 23,100 $ 18,137 |
Debt and Lease Obligations
Debt and Lease Obligations | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt and Lease Obligations | Debt and Lease Obligations A summary of the carrying value of the debt and lease obligations is as follows: (In thousands) June 30, December 31, Third Term Loan (4.8% as of June 30, 2019) Principal $ 978,856 $ 983,825 Unamortized debt premium and issuance costs 3,242 3,778 Total Third Term Loan 982,098 987,603 Financing lease obligations 314 401 Operating lease obligations 2,912 — Total debt and lease obligations 985,324 988,004 Less: Current portion of long term debt and lease obligations (13,206 ) (11,268 ) Long-term portion $ 972,118 $ 976,736 |
Interest Rate Swap
Interest Rate Swap | 6 Months Ended |
Jun. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Interest Rate Swap | Interest Rate Swap 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 will be reduced by $100 million each year of the five-year contract. As of June 30, 2019 and June 30, 2018 , the notional amount is $300 million and $400 million , respectively. The Company entered into this transaction to reduce its exposure to changes in cash flows associated with its variable rate debt and has designated this derivative as a cash flow hedge. At June 30, 2019 , the effective interest rate on the long-term debt hedged by this contract was 4.03% . As of June 30, 2019 the fair value of the interest rate swap contract of $0.1 million is reported within other long Term liabilities on the consolidated balance sheet. As of December 31, 2018 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 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 observable market interest rate curves (Level 2). |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jun. 30, 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 shares of Class A common stock outstanding for the period excluding non-vested restricted stock awards. In computing diluted 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, restricted stock units and stock options. Below are basic and diluted net income per share: Three Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Numerator: Net income attributable to Class A stockholders (in thousands) $ 11,483 $ 19,283 $ 32,609 $ 43,123 Denominator: Weighted-average Class A shares outstanding - basic 105,072,322 99,939,642 102,618,951 99,916,161 Dilutive effect of warrants 4,002,135 4,668,452 2,363,537 4,856,923 Dilutive effect of restricted stock units 434,738 165,000 355,522 138,390 Weighted-average shares outstanding - diluted 109,509,195 104,773,094 105,338,010 104,911,474 Net income per Class A share - basic $ 0.11 $ 0.19 $ 0.32 $ 0.43 Net income per Class A share - diluted $ 0.10 $ 0.18 $ 0.31 $ 0.41 For the three and six months ended June 30, 2019 and 2018, stock options were excluded from the computation of diluted net income per share because the assumed proceeds from the awards’ exercise was greater than the average market price of the common shares. Weighted average Class A shares outstanding reflect the exchange of 9.3 million Class B shares for Class A shares during the three months ended June 30, 2019. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is subject to U.S. federal, state and local taxes on its allocable portion of the income of Hostess Holdings, a partnership for U.S. federal and most applicable state and local taxes. As a partnership, Hostess Holdings is itself not subject to U.S. federal and certain state and local income taxes. The operations of Hostess Holdings include those of its C Corporation subsidiaries. The Company’s estimated annual effective tax rate is 21.8% prior to taking into account any discrete items. The effective tax rate was 35.2% and 0.8% in the second quarters of 2019 and 2018, respectively. The Company recognized a discrete tax expense of $2.8 million as compared to a discrete tax benefit of $5.0 million |
Tax Receivable Agreement
Tax Receivable Agreement | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Tax Receivable Agreement | Tax Receivable Agreement The following table summarizes activity related to the Tax Receivable Agreement for the six months ended June 30, 2019: (In thousands) Balance December 31, 2018 $ 69,063 Exchange of Class B units for Class A shares 27,719 Remeasurement due to change in estimated tax rate (483 ) Payments (2,779 ) Balance June 30, 2019 $ 93,520 As of June 30, 2019 the future expected payments under the tax receivable agreement are as follows: 2019 $ 1,400 2020 7,500 2021 5,100 2022 5,100 2023 5,200 Thereafter 69,220 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies During the three months ended June 30, 2019, the Company entered into a 6.5 year lease, with the option to renew for two additional five-year periods, for a distribution facility in Kansas. The lease term will commence upon completion of construction of the facility, which is expected to occur by the first quarter of 2020. During the initial lease term, average annual minimum lease payments are expected to be $2.3 million . During the three months ended June 30, 2019, the Company entered into an agreement to purchase an office building in Kansas that will house the Company’s corporate offices for $6.4 million . The sale closed in the third quarter of 2019. During the three months ended June 30, 2019, the Company entered into a 9 year lease for space to house its new hub for marketing and category management in Chicago, IL. The lease term is expected to commence in the fourth quarter of 2019. Average annual minimum lease payments are expected to be $0.3 million . Liabilities related to legal proceedings are recorded when it is probable that a liability has been incurred and the associated amount can be reasonably estimated. Where the estimated amount of loss is within a range of amounts and no amount within the range is a better estimate than any other amount, the minimum amount is accrued. As additional information becomes available, potential liabilities are reassessed and the estimates revised, if necessary. Any 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. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In July 2019, the Company entered into an agreement to sell its In-Store Bakery operations to a third party for a cash payment of approximately $65.0 million , subject to certain post-closing adjustments, which approximates the Company’s carrying value of the business being sold. The Company purchased the In-Store Bakery operations in 2016 for approximately $51.0 million . The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2019. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 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”). In the opinion of management, the unaudited consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented, and all such adjustments were of a normal and recurring nature. The results of operations are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2018 . The Company has two reportable segments: Sweet Baked Goods and In-Store Bakery. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries (including those for which the Company is the primary beneficiary of a variable interest entity). 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 the Leases section of this footnote. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and for the reported amounts of revenues and expenses during the reporting period. Management utilizes estimates, including, but not limited to, valuation and useful lives of tangible and intangible assets, valuation of expected future payments under the tax receivable agreement, and reserves for trade and promotional allowances. Actual results could differ from these estimates. |
Accounts Receivable | Accounts Receivable |
Inventories | Inventories Inventories are stated at the lower of cost or net-realizable value on a first-in first-out basis. |
Software Costs | Software Costs Included in “Other assets, net” in the consolidated balance sheets is capitalized software in the amount of $10.2 million and $8.5 million at June 30, 2019 and December 31, 2018 , respectively. Capitalized software costs are amortized over their estimated useful life of five years |
Leases | Leases Subsequent to its adoption of Topic 842, 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 June 30, 2019 , the weighted average effective borrowing rates for outstanding financing and operating leases were 6.8% and 4.7% , respectively. 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 June 30, 2019 , the average remaining terms on both financing leases and operating leases were approximately one year . 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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Components of Inventories | The components of inventories are as follows : (In thousands) June 30, December 31, Ingredients and packaging $ 19,862 $ 18,865 Finished goods 20,331 16,446 Inventory in transit to customers 2,700 3,269 $ 42,893 $ 38,580 |
Customer Concentration Risk | The Company has one customer (together with its affiliates) that accounted for 10% or more of the Company’s total net revenue. The percentage of total net revenues for this customer is presented below by segment: Three Months Ended Six Months Ended (% of Consolidated Net Revenues) June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Sweet Baked Goods 23.3 % 18.4 % 23.5 % 18.1 % In-Store Bakery 0.4 % 0.6 % 0.4 % 0.6 % Total 23.7 % 19.0 % 23.9 % 18.7 % |
Lease Cost | The table below shows the composition of lease expenses for the period subsequent to the adoption of Topic 842: Three Months Ended Six Months Ended (In thousands) June 30, 2019 June 30, 2019 Amortization of right of use asset, financing lease $ 56 $ 100 Interest, financing lease 5 12 Operating lease expense 616 1,257 Short-term lease expense 282 682 Variable lease expense 189 377 $ 1,148 $ 2,428 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: (In thousands) June 30, 2019 December 31, 2018 Land and buildings $ 43,552 $ 47,418 Right of use assets, operating 9,082 — Right of use assets, financing 1,568 — Machinery and equipment 205,859 194,830 Construction in progress 6,426 6,059 266,487 248,307 Less accumulated depreciation and amortization (42,736 ) (27,958 ) $ 223,751 $ 220,349 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Operations and Total Assets | Information regarding the operations of these reportable segments is as follows: Three Months Ended Six Months Ended (In thousands) June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Net revenue: Sweet Baked Goods $ 229,273 $ 204,237 $ 442,151 $ 403,529 In-Store Bakery 11,787 11,612 21,647 21,063 Net revenue $ 241,060 $ 215,849 $ 463,798 $ 424,592 Depreciation and amortization: Sweet Baked Goods $ 10,380 $ 9,857 $ 20,562 $ 19,251 In-Store Bakery 680 700 1,377 1,397 Depreciation and amortization $ 11,060 $ 10,557 $ 21,939 $ 20,648 Gross profit: Sweet Baked Goods $ 80,925 $ 64,359 $ 154,069 $ 133,797 In-Store Bakery 2,525 2,498 4,569 4,301 Gross profit $ 83,450 $ 66,857 $ 158,638 $ 138,098 Capital expenditures (1): Sweet Baked Goods $ 7,516 $ 13,432 $ 11,778 $ 22,598 In-Store Bakery 28 164 180 217 Capital expenditures $ 7,544 $ 13,596 $ 11,958 $ 22,815 (1) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in cash or acquired through accounts payable. From December 31, 2018 to June 30, 2019 , capital expenditures in accounts payable decreased by $6.4 million . From December 31, 2017 to June 30, 2018 capital expenditures in accounts payable increased by $1.4 million . Total assets by reportable segment are as follows: (In thousands) June 30, December 31, Total segment assets: Sweet Baked Goods $ 2,981,878 $ 2,924,333 In-Store Bakery 87,101 86,380 Total segment assets $ 3,068,979 $ 3,010,713 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill Activity | Goodwill activity is presented below by reportable segment: (In thousands) Sweet Baked Goods In Store Bakery Total Balance as of December 31, 2018 $ 535,853 $ 39,792 $ 575,645 Impairment — (1,000 ) (1,000 ) Balance as of June 30, 2019 $ 535,853 $ 38,792 $ 574,645 |
Schedule of Indefinite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) June 30, 2019 December 31, Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,410,497 $ 1,410,497 Intangible assets with definite lives (Customer Relationships) 543,148 543,120 Less accumulated amortization (Customer Relationships) (63,824 ) (51,802 ) Less accumulated impairment charges (Trademarks and Trade Names) (600 ) (600 ) Intangible assets, net $ 1,889,221 $ 1,901,215 |
Schedule of Finite-Lived Intangible Assets | Intangible assets consist of the following: (In thousands) June 30, 2019 December 31, Intangible assets with indefinite lives (Trademarks and Trade Names) $ 1,410,497 $ 1,410,497 Intangible assets with definite lives (Customer Relationships) 543,148 543,120 Less accumulated amortization (Customer Relationships) (63,824 ) (51,802 ) Less accumulated impairment charges (Trademarks and Trade Names) (600 ) (600 ) Intangible assets, net $ 1,889,221 $ 1,901,215 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses and Other Current Liabilities | Included in accrued expenses and other current liabilities are the following: (In thousands) June 30, 2019 December 31, Payroll, vacation and other compensation $ 6,969 $ 6,104 Incentive compensation 6,539 3,261 Accrued interest 4,974 4,849 Workers compensation reserve 2,743 1,866 Self-insurance reserves 1,772 1,646 Current income taxes payable 103 411 $ 23,100 $ 18,137 |
Debt and Lease Obligations (Tab
Debt and Lease Obligations (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Summary of Debt and Capital Lease Obligation | A summary of the carrying value of the debt and lease obligations is as follows: (In thousands) June 30, December 31, Third Term Loan (4.8% as of June 30, 2019) Principal $ 978,856 $ 983,825 Unamortized debt premium and issuance costs 3,242 3,778 Total Third Term Loan 982,098 987,603 Financing lease obligations 314 401 Operating lease obligations 2,912 — Total debt and lease obligations 985,324 988,004 Less: Current portion of long term debt and lease obligations (13,206 ) (11,268 ) Long-term portion $ 972,118 $ 976,736 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income Per Share | Below are basic and diluted net income per share: Three Months Ended Six Months Ended June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Numerator: Net income attributable to Class A stockholders (in thousands) $ 11,483 $ 19,283 $ 32,609 $ 43,123 Denominator: Weighted-average Class A shares outstanding - basic 105,072,322 99,939,642 102,618,951 99,916,161 Dilutive effect of warrants 4,002,135 4,668,452 2,363,537 4,856,923 Dilutive effect of restricted stock units 434,738 165,000 355,522 138,390 Weighted-average shares outstanding - diluted 109,509,195 104,773,094 105,338,010 104,911,474 Net income per Class A share - basic $ 0.11 $ 0.19 $ 0.32 $ 0.43 Net income per Class A share - diluted $ 0.10 $ 0.18 $ 0.31 $ 0.41 |
Tax Receivable Agreement (Table
Tax Receivable Agreement (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Summary of Tax Receivable Agreement | The following table summarizes activity related to the Tax Receivable Agreement for the six months ended June 30, 2019: (In thousands) Balance December 31, 2018 $ 69,063 Exchange of Class B units for Class A shares 27,719 Remeasurement due to change in estimated tax rate (483 ) Payments (2,779 ) Balance June 30, 2019 $ 93,520 |
Future Expected Payments Under Tax Receivable Arrangement | As of June 30, 2019 the future expected payments under the tax receivable agreement are as follows: 2019 $ 1,400 2020 7,500 2021 5,100 2022 5,100 2023 5,200 Thereafter 69,220 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Description of Business (Details) | 6 Months Ended |
Jun. 30, 2019segment | |
Accounting Policies [Abstract] | |
Ownership percentage in Hostess Holdings | 100.00% |
Number of reportable segments | 2 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Adoption of New Accounting Standards (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 |
Accounting Policies [Abstract] | ||
Right of use asset | $ 8,200 | |
Right of use asset, accumulated amortization | 5,200 | |
Lease liability | $ 2,912 | $ 3,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||
Accounts receivable | $ 128,187 | $ 105,679 |
Reserve to cover allowances for damages occurring during shipment, quality claims and doubtful accounts | 2,800 | 2,600 |
Customer trade allowances | $ 50,765 | $ 42,010 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
Ingredients and packaging | $ 19,862 | $ 18,865 | |
Finished goods | 20,331 | 16,446 | |
Inventory in transit to customers | 2,700 | 3,269 | |
Inventories | $ 42,893 | $ 38,580 | |
Impairment related to disposition of production equipment | $ 1,400 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Software Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||||
Capitalized software | $ 10.2 | $ 10.2 | $ 8.5 | ||
Capitalized software, estimated useful life | 5 years | ||||
Software amortization expense | $ 0.7 | $ 0.8 | $ 1.4 | $ 1.4 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Concentrations (Details) - Customer concentration risk - Consolidated net revenues | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Concentration Risk [Line Items] | ||||
Percentage of total net revenues for customer | 23.70% | 19.00% | 23.90% | 18.70% |
Sweet Baked Goods | ||||
Concentration Risk [Line Items] | ||||
Percentage of total net revenues for customer | 23.30% | 18.40% | 23.50% | 18.10% |
In-Store Bakery | ||||
Concentration Risk [Line Items] | ||||
Percentage of total net revenues for customer | 0.40% | 0.60% | 0.40% | 0.60% |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Leases (Details) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
Accounting Policies [Abstract] | ||
Weighted average effective borrowing rate, finance lease | 6.80% | 6.80% |
Weighted average effective borrowing rate, operating lease | 4.70% | 4.70% |
Average remaining term, finance lease (in years) | 1 year | 1 year |
Average remaining term, operating lease (in years) | 1 year | 1 year |
Lease, Cost [Abstract] | ||
Amortization of right of use asset, financing lease | $ 56 | $ 100 |
Interest, financing lease | 5 | 12 |
Operating lease expense | 616 | 1,257 |
Short-term lease expense | 282 | 682 |
Variable lease expense | 189 | 377 |
Total lease cost | $ 1,148 | $ 2,428 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 266,487 | $ 266,487 | $ 248,307 | ||
Less accumulated depreciation and amortization | (42,736) | (42,736) | (27,958) | ||
Property and equipment, net | 223,751 | 223,751 | 220,349 | ||
Depreciation expense | 4,300 | $ 3,800 | 8,600 | $ 7,200 | |
Land and buildings | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 43,552 | 43,552 | 47,418 | ||
Right of use assets, operating | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 9,082 | 9,082 | |||
Right of use assets, financing | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 1,568 | 1,568 | |||
Machinery and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 205,859 | 205,859 | 194,830 | ||
Construction in progress | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 6,426 | $ 6,426 | $ 6,059 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)segment | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($) | |
Segment Reporting [Abstract] | |||||
Number of reportable segments | segment | 2 | ||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 241,060 | $ 215,849 | $ 463,798 | $ 424,592 | |
Depreciation and amortization | 11,060 | 10,557 | 21,939 | 20,648 | |
Gross profit | 83,450 | 66,857 | 158,638 | 138,098 | |
Capital expenditures | 7,544 | 13,596 | 11,958 | 22,815 | |
Increase (decrease) of capital expenditures in accounts payable | (6,400) | 1,400 | |||
Total segment assets | 3,068,979 | 3,068,979 | $ 3,010,713 | ||
Sweet Baked Goods | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 229,273 | 204,237 | 442,151 | 403,529 | |
Depreciation and amortization | 10,380 | 9,857 | 20,562 | 19,251 | |
Gross profit | 80,925 | 64,359 | 154,069 | 133,797 | |
Capital expenditures | 7,516 | 13,432 | 11,778 | 22,598 | |
Total segment assets | 2,981,878 | 2,981,878 | 2,924,333 | ||
In-Store Bakery | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 11,787 | 11,612 | 21,647 | 21,063 | |
Depreciation and amortization | 680 | 700 | 1,377 | 1,397 | |
Gross profit | 2,525 | 2,498 | 4,569 | 4,301 | |
Capital expenditures | 28 | $ 164 | 180 | $ 217 | |
Total segment assets | $ 87,101 | $ 87,101 | $ 86,380 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Impairment charge | $ 1,000 | |||
Amortization expense | $ 6,009 | $ 5,994 | $ 11,994 | $ 11,989 |
Customer Relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Weighted-average amortization period | 20 years | |||
Customer Relationships | Minimum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Remaining amortization period | 18 years | |||
Customer Relationships | Maximum | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Remaining amortization period | 23 years | |||
In-Store Bakery | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Impairment charge | $ 1,000 | $ 1,000 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Goodwill Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Goodwill [Roll Forward] | ||
Balance as of December 31, 2018 | $ 575,645 | |
Impairment | (1,000) | |
Balance as of June 30, 2019 | $ 574,645 | 574,645 |
Sweet Baked Goods | ||
Goodwill [Roll Forward] | ||
Balance as of December 31, 2018 | 535,853 | |
Impairment | 0 | |
Balance as of June 30, 2019 | 535,853 | 535,853 |
In-Store Bakery | ||
Goodwill [Roll Forward] | ||
Balance as of December 31, 2018 | 39,792 | |
Impairment | (1,000) | (1,000) |
Balance as of June 30, 2019 | $ 38,792 | $ 38,792 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Summary of Intangible Assets (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Indefinite-lived Intangible Assets [Line Items] | ||
Less accumulated impairment charges (Trademarks and Trade Names) | $ (600) | $ (600) |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | 1,889,221 | 1,901,215 |
Trademarks and Trade Names | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Intangible assets with indefinite lives (Trademarks and Trade Names) | 1,410,497 | 1,410,497 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets with definite lives (Customer Relationships) | 543,148 | 543,120 |
Less accumulated amortization (Customer Relationships) | $ (63,824) | $ (51,802) |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Payroll, vacation and other compensation | $ 6,969 | $ 6,104 |
Incentive compensation | 6,539 | 3,261 |
Accrued interest | 4,974 | 4,849 |
Workers compensation reserve | 2,743 | 1,866 |
Self-insurance reserves | 1,772 | 1,646 |
Current income taxes payable | 103 | 411 |
Accrued expenses and other current liabilities | $ 23,100 | $ 18,137 |
Debt and Lease Obligations - Sc
Debt and Lease Obligations - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||
Financing lease obligations | $ 314 | ||
Financing lease obligations | $ 401 | ||
Operating lease obligations | 2,912 | $ 3,000 | |
Total debt and lease obligations | 985,324 | 988,004 | |
Less: Current portion of long term debt and lease obligations | (13,206) | (11,268) | |
Long-term portion | 972,118 | 976,736 | |
Term Loan | Third Term Loan (4.8% as of June 30, 2019) | |||
Debt Instrument [Line Items] | |||
Principal | 978,856 | 983,825 | |
Unamortized debt premium and issuance costs | 3,242 | 3,778 | |
Long-term debt | $ 982,098 | $ 987,603 | |
Effective rate | 4.80% |
Interest Rate Swap (Details)
Interest Rate Swap (Details) - Designated as Hedging Instrument - Interest Rate Swap - Cash Flow Hedge - USD ($) | 6 Months Ended | |||
Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Apr. 30, 2017 | |
Derivative [Line Items] | ||||
Fixed interest rate | 1.78% | |||
Notional amount of interest rate swap | $ 300,000,000 | $ 400,000,000 | $ 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% | |||
Other Noncurrent Liabilities | ||||
Derivative [Line Items] | ||||
Fair value of derivative | $ 100,000 | |||
Other Assets | ||||
Derivative [Line Items] | ||||
Fair value of derivative | $ (5,100,000) | |||
LIBOR | ||||
Derivative [Line Items] | ||||
Basis spread on variable rate | 0.75% |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator: | |||||
Net income attributable to Class A stockholders (in thousands) | $ 11,483 | $ 19,283 | $ 32,609 | $ 43,123 | |
Denominator: | |||||
Weighted-average Class A shares outstanding - basic (shares) | 105,072,322 | 99,939,642 | 102,618,951 | 99,916,161 | |
Dilutive effect of warrants (shares) | 4,002,135 | 4,668,452 | 2,363,537 | 4,856,923 | |
Dilutive effect of restricted stock units (shares) | 434,738 | 165,000 | 355,522 | 138,390 | |
Weighted-average shares outstanding - diluted (shares) | 109,509,195 | 104,773,094 | 105,338,010 | 104,911,474 | |
Net income per Class A share - basic (usd per share) | $ 0.11 | $ 0.19 | $ 0.32 | $ 0.43 | |
Net income per Class A share - dilutive (usd per share) | $ 0.10 | $ 0.18 | $ 0.31 | $ 0.41 | |
Common Stock | Common Class A | |||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||
Exchanges (shares) | 9,255,400 | 64,380 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 35.20% | 0.80% | 21.80% | |
Income tax benefit related to change in estimated state tax rate | $ (2.8) | $ (5) |
Tax Receivable Agreement - Summ
Tax Receivable Agreement - Summary of Activity (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Reconciliation Of Tax Receivable Agreement Liability [Roll Forward] | |
Balance December 31, 2018 | $ 69,063 |
Exchange of Class B units for Class A shares | 27,719 |
Remeasurement due to change in estimated tax rate | (483) |
Payments | (2,779) |
Balance June 30, 2019 | $ 93,520 |
Tax Receivable Agreement - Futu
Tax Receivable Agreement - Future Expected Payments (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Income Tax Disclosure [Abstract] | |
2019 | $ 1,400 |
2020 | 7,500 |
2021 | 5,100 |
2022 | 5,100 |
2023 | 5,200 |
Thereafter | $ 69,220 |
Commitments and Contingencies -
Commitments and Contingencies - (Details) $ in Millions | 3 Months Ended | |
Jun. 30, 2019USD ($)renewal_period | Apr. 30, 2019 | |
Lessee, Lease, Description [Line Items] | ||
Payment to purchase office building | $ 6.4 | |
Distribution Facility | ||
Lessee, Lease, Description [Line Items] | ||
Term of contract (in years) | 6 years 6 months | |
Number of lease renewal periods | renewal_period | 2 | |
Renewal term of contract (in years) | 5 years | |
Average annual minimum lease payments | $ 2.3 | |
Marketing And Category Management Hub | ||
Lessee, Lease, Description [Line Items] | ||
Term of contract (in years) | 9 years | |
Average annual minimum lease payments | $ 0.3 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2016 | Jul. 31, 2019 | |
In-Store Bakery | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Subsequent Event | ||
Subsequent Event [Line Items] | ||
Cash payment for sale of operations | $ 65 | |
In-Store Bakery | ||
Subsequent Event [Line Items] | ||
Consideration transferred during acquisition | $ 51 |
Uncategorized Items - twnk-10q2
Label | Element | Value |
Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 198,000 |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 191,000 |
Noncontrolling Interest [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 85,000 |
AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 7,000 |