Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2022 | May 02, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2022 | |
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 | |
Title of 12(b) Security | Class A Common Stock, Par Value of $0.0001 per share | |
Trading Symbol | TWNK | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 138,286,747 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001644406 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 238,431 | $ 249,159 |
Accounts receivable, net | 193,085 | 148,180 |
Inventories | 59,867 | 52,813 |
Prepaids and other current assets | 6,972 | 10,564 |
Total current assets | 498,355 | 460,716 |
Property and equipment, net | 354,055 | 335,305 |
Intangible assets, net | 1,938,514 | 1,944,392 |
Goodwill | 706,615 | 706,615 |
Other assets, net | 42,821 | 19,283 |
Total assets | 3,540,360 | 3,466,311 |
Current liabilities: | ||
Long-term debt and lease obligations payable within one year | 14,126 | 14,170 |
Tax receivable agreement payments payable within one year | 10,200 | 11,600 |
Accounts payable | 90,591 | 68,104 |
Customer trade allowances | 63,329 | 52,746 |
Accrued expenses and other current liabilities | 36,873 | 47,009 |
Total current liabilities | 215,119 | 193,629 |
Long-term debt and lease obligations | 1,096,867 | 1,099,975 |
Tax receivable agreement obligations | 134,222 | 134,265 |
Deferred tax liability | 331,658 | 317,847 |
Other long-term liabilities | 1,615 | 1,605 |
Total liabilities | 1,779,481 | 1,747,321 |
Commitments and Contingencies (Note 9) | ||
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 142,487,326 shares issued and 138,275,493 shares outstanding as of March 31, 2022 and 142,031,329 shares issued and 138,278,573 shares outstanding as of December 31, 2021 | 14 | 14 |
Additional paid in capital | 1,302,039 | 1,303,254 |
Accumulated other comprehensive income (loss) | 17,720 | (506) |
Retained earnings | 509,958 | 475,400 |
Treasury stock | (68,852) | (59,172) |
Stockholders’ equity | 1,760,879 | 1,718,990 |
Total liabilities and stockholders’ equity | $ 3,540,360 | $ 3,466,311 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, issued (in shares) | 142,487,326 | 142,031,329 |
Common stock, outstanding (in shares) | 138,275,493 | 138,278,573 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income Statement [Abstract] | ||
Net revenue | $ 332,051 | $ 265,421 |
Cost of goods sold | 216,427 | 169,902 |
Gross profit | 115,624 | 95,519 |
Operating costs and expenses: | ||
Advertising and marketing | 11,950 | 11,781 |
Selling expense | 9,777 | 8,630 |
General and administrative | 29,672 | 22,185 |
Amortization of customer relationships | 5,878 | 5,878 |
Total operating costs and expenses | 57,277 | 48,474 |
Operating income | 58,347 | 47,045 |
Other expense (income): | ||
Interest expense, net | 9,666 | 10,017 |
Change in fair value of warrant liabilities | 0 | (76) |
Other expense | 436 | 363 |
Total other expense | 10,102 | 10,304 |
Income before income taxes | 48,245 | 36,741 |
Income tax expense | 13,687 | 10,009 |
Net income | $ 34,558 | $ 26,732 |
Earnings per Class A share: | ||
Basic (in usd per share) | $ 0.25 | $ 0.20 |
Diluted (in usd per share) | $ 0.25 | $ 0.19 |
Weighted-average shares outstanding: | ||
Basic (in shares) | 138,602,451 | 130,839,313 |
Diluted (in shares) | 139,565,136 | 137,186,889 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 34,558 | $ 26,732 |
Other comprehensive income: | ||
Unrealized gain on interest rate swap and foreign currency contracts designated as a cash flow hedge | 23,656 | 7,060 |
Reclassification into net income | 1,062 | 1,327 |
Income tax expense | (6,492) | (2,225) |
Comprehensive income | $ 52,784 | $ 32,894 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock |
Beginning balance (in shares) at Dec. 31, 2020 | 130,347 | 444 | ||||
Beginning balance at Dec. 31, 2020 | $ 1,620,725 | $ 13 | $ 1,281,018 | $ (10,407) | $ 356,101 | $ (6,000) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Comprehensive income | 32,894 | 6,162 | 26,732 | |||
Share-based compensation (in shares) | 146 | |||||
Share-based compensation | 2,723 | 2,723 | ||||
Exercise of employee stock options (in shares) | 20 | |||||
Exercise of employee stock options | 262 | 262 | ||||
Payment of taxes for employee stock awards | (843) | (843) | ||||
Exercise of public warrants (in shares) | 672 | |||||
Exercise of public warrants | 7,722 | 7,722 | ||||
Ending balance (in shares) at Mar. 31, 2021 | 131,185 | 444 | ||||
Ending balance at Mar. 31, 2021 | 1,663,483 | $ 13 | 1,290,882 | (4,245) | 382,833 | $ (6,000) |
Beginning balance (in shares) at Dec. 31, 2021 | 138,279 | 3,753 | ||||
Beginning balance at Dec. 31, 2021 | 1,718,990 | $ 14 | 1,303,254 | (506) | 475,400 | $ (59,172) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Comprehensive income | 52,784 | 18,226 | 34,558 | |||
Share-based compensation (in shares) | 350 | |||||
Share-based compensation | 2,339 | 2,339 | ||||
Exercise of employee stock options (in shares) | 105 | |||||
Exercise of employee stock options | 1,662 | 1,662 | ||||
Payment of taxes for employee stock awards | (5,216) | (5,216) | ||||
Repurchase of Common Stock (in shares) | (459) | (459) | ||||
Repurchase of Common Stock | (9,680) | $ (9,680) | ||||
Ending balance (in shares) at Mar. 31, 2022 | 138,275 | 4,212 | ||||
Ending balance at Mar. 31, 2022 | $ 1,760,879 | $ 14 | $ 1,302,039 | $ 17,720 | $ 509,958 | $ (68,852) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Operating activities | ||
Net income | $ 34,558 | $ 26,732 |
Depreciation and amortization | 13,297 | 12,691 |
Debt discount amortization | 308 | 311 |
Change in fair value of warrant liabilities | 0 | (76) |
Unrealized foreign exchange losses | 317 | 123 |
Non-cash lease expense | 125 | 329 |
Share-based compensation | 2,339 | 2,723 |
Deferred taxes | 7,322 | 6,646 |
Change in operating assets and liabilities: | ||
Accounts receivable | (44,848) | (34,204) |
Inventories | (7,054) | (2,796) |
Prepaids and other current assets | 3,735 | 13,112 |
Accounts payable and accrued expenses | 10,866 | 6,582 |
Customer trade allowances | 10,561 | 680 |
Net cash provided by operating activities | 31,526 | 32,853 |
Investing activities | ||
Purchases of property and equipment | (23,034) | (10,251) |
Acquisition and development of software assets | (1,825) | (634) |
Net cash used in investing activities | (24,859) | (10,885) |
Financing activities | ||
Repayments of long-term debt and lease obligations | (2,792) | (2,792) |
Repurchase of common stock | (9,680) | 0 |
Tax payments related to issuance of shares to employees | (5,216) | (843) |
Cash received from exercise of options and warrants | 1,662 | 7,984 |
Payments on tax receivable agreement | (1,443) | (1,600) |
Net cash provided by (used in) financing activities | (17,469) | 2,749 |
Effect of exchange rate changes on cash and cash equivalents | 74 | 95 |
Net increase (decrease) in cash and cash equivalents | (10,728) | 24,812 |
Cash and cash equivalents at beginning of period | 249,159 | 173,034 |
Cash and cash equivalents at end of period | 238,431 | 197,846 |
Cash paid during the period for: | ||
Interest | 9,678 | 9,807 |
Net taxes paid (refunded) | (514) | (8,191) |
Supplemental disclosure of non-cash investing: | ||
Accrued capital expenditures | $ 5,433 | $ 4,026 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2022 | |
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 condensed consolidated financial statements include the accounts of Hostess Brands, Inc. and its subsidiaries (collectively, the “Company”). The Company is a leading sweet snacks company focused on developing, manufacturing, marketing, selling and distributing snacks in North America under the Hostess® and Voortman® brands. The Company produces a variety of new and classic treats including iconic Hostess® Donettes®, Twinkies®, CupCakes, Ding Dongs® and Zingers®, as well as a variety of Voortman® branded cookies and wafers. Basis of Presentation The Company’s operations are conducted through wholly-owned operating subsidiaries. The condensed 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 results of operations for any quarter or a partial fiscal year period are not necessarily indicative of the results to be expected for other periods or the full fiscal year. For the periods presented, the Company has one reportable segment. Adoption of New Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. ASU No. 2020-04 is elective and effective as of March 12, 2020 through December 31, 2022. Once elected, this ASU must be applied prospectively for all eligible contract modifications. The Company will adopt Topic 848 when its relevant contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 to have a material impact on its condensed consolidated financial statements. Principles of Consolidation All intercompany balances and transactions related to activity between the Company and its wholly-owned subsidiaries have been eliminated in consolidation. Use of Estimates The preparation of condensed 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. Accounts Receivable Accounts receivable represents amounts invoiced to customers for performance obligations which have been satisfied. As of March 31, 2022 and December 31, 2021, the Company’s accounts receivable were $193.1 million and $148.2 million, respectively, which have been reduced by an allowance for damages occurring during shipment, quality claims and doubtful accounts in the amount of $4.4 million and $3.0 million for the periods ending March 31, 2022 and December 31, 2021, respectively. The allowance for doubtful accounts represents the Company’s estimate of expected credit losses related to trade receivables. To estimate the allowance for doubtful accounts, the Company leverages information on historical losses, current conditions, and reasonable and supportable forecasts of future conditions. Account balances are written off against the allowance when the Company deems the amount is uncollectible. 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) March 31, December 31, Ingredients and packaging $ 27,369 $ 22,607 Finished goods 28,825 26,988 Inventory in transit to customers 3,673 3,218 $ 59,867 $ 52,813 Software Costs Capitalized software is included in other assets in the condensed consolidated balance sheets in the amount of $15.6 million and $14.7 million as of March 31, 2022 and December 31, 2021, respectively. Capitalized software costs are amortized over their estimated useful life of up to five years commencing when such assets are ready for their intended use. Software amortization expense included in general and administrative operating expense was $1.0 million for the three months ended March 31, 2022, compared to $0.9 million for the three months ended March 31, 2021. Disaggregation of Revenue Net revenue consists of sales of packaged food products primarily within the Sweet Baked Goods category in the United States, as well as in the Cookie category in the United States and Canada. The following tables disaggregate revenue by geographical market and category. Three Months Ended March 31, 2022 ( In thousands ) Sweet Baked Goods Cookies Total United States $ 296,372 $ 30,916 $ 327,288 Canada — 4,763 4,763 $ 296,372 $ 35,679 $ 332,051 Three Months Ended March 31, 2021 ( In thousands ) Sweet Baked Goods Cookies Total United States $ 237,700 $ 23,803 $ 261,503 Canada — 3,918 3,918 $ 237,700 $ 27,721 $ 265,421 Concentrations For the three months ended March 31, 2022 and 2021, the Company had one customer (together with its affiliates) that accounted for 20.7% and 20.5% of total net revenue, respectively. Foreign Currency Remeasurement Certain Voortman Cookies Limited (“Voortman”) sales and costs are denominated in the Canadian dollar (“CAD”). CAD transactions have been remeasured into U.S. dollars (“USD”) on the condensed consolidated statements of operations using the average exchange rate for the reporting period. Balances expected to be settled in CAD have been remeasured into USD on the condensed consolidated balance sheets using the exchange rate at the end of the |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following: (In thousands) March 31, December 31, Land and buildings $ 72,110 $ 70,692 Right of use assets, operating 32,192 32,192 Machinery and equipment 300,658 299,071 Construction in progress 49,024 26,027 453,984 427,982 Less accumulated depreciation and amortization (99,929) (92,677) $ 354,055 $ 335,305 Depreciation expense was $6.4 million for the three months ended March 31, 2022, compared to $5.8 million for the three months ended March 31, 2021. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 3 Months Ended |
Mar. 31, 2022 | |
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) March 31, December 31, Payroll, vacation and other compensation $ 10,575 $ 7,791 Incentive compensation 7,041 21,172 Accrued interest 4,528 4,828 Interest rate swap and foreign currency contracts 185 2,042 Other 14,544 11,176 $ 36,873 $ 47,009 |
Debt and Lease Obligations
Debt and Lease Obligations | 3 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
Debt and Lease Obligations | Debt and Lease Obligations A summary of the carrying value of the debt and lease obligations are as follows: (In thousands) March 31, December 31, Term loan (3.0% as of March 31, 2022) Principal $ 1,088,804 $ 1,091,596 Unamortized debt premium and issuance costs (3,371) (3,679) 1,085,433 1,087,917 Lease obligations 25,560 26,228 Total debt and lease obligations 1,110,993 1,114,145 Less: Current portion of long term debt and lease obligations (14,126) (14,170) Long-term portion $ 1,096,867 $ 1,099,975 At March 31, 2022, minimum debt repayments under the term loan are due as follows: ( In thousands ) 2022 $ 8,375 2023 11,167 2024 11,167 2025 1,058,095 Leases The Company has entered into operating leases for certain properties which expire at various times through 2026. The Company determines if an arrangement is a lease at inception. At March 31, 2022 and December 31, 2021, right of use assets related to operating leases are included in property and equipment, net on the condensed consolidated balance sheets (see Note 2. Property and Equipment). As of March 31, 2022 and December 31 2021, the Company has no outstanding financing leases. Lease liabilities for operating leases are included in the current and non-current portions of long-term debt and lease obligations on the condensed consolidated balance sheets. The table below shows the composition of lease expense: Three Months Ended (In thousands) March 31, 2022 March 31, 2021 Operating lease expense $ 1,603 $ 1,653 Short-term lease expense 373 203 Variable lease expense 382 357 $ 2,358 $ 2,213 |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Derivative Instruments Interest Rate Swap and Foreign Currency Contracts The Company entered into interest rate swap contracts with counter parties to make a series of payments based on fixed rates ranging from 1.11% to 2.06% in addition to the term loan margin of 2.25% 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 the March 31, 2022 notional amount of $800 million which will reduce by $100 million in May 2022, with the remaining $700 million outstanding through August 2025. The Company entered into these transactions to reduce its exposure to changes in cash flows associated with its variable rate debt and has designated these derivatives as cash flow hedges. At March 31, 2022, the interest on the Company’s variable rate debt hedged by these contracts is effectively fixed at rates ranging from 3.36% to 4.31%. To reduce the effect of fluctuations in CAD denominated expenses relative to their U.S. dollar equivalents originating from its Canadian operations, the Company entered into CAD purchase contracts. The contracts provide for the Company to sell a total of $13.4 million USD for $16.8 million CAD at varying defined settlement dates through March 2023. The Company has designated these contracts as cash flow hedges. A summary of the fair value of interest rate and foreign currency instruments is as follows: (In thousands) March 31, December 31, Asset derivatives Location Interest rate swap contracts (1) Other non-current assets $ 24,516 $ 1,803 Foreign currency contracts (2) Other current assets 194 — $ 24,710 $ 1,803 Liability derivatives Location Interest rate swap contracts (1) Accrued expenses $ 80 $ 1,798 Foreign currency contracts (2) Accrued expenses 105 244 $ 185 $ 2,042 (1) The fair values of interest rate swap contracts are 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). (2) The fair values of foreign currency contracts are measured at each reporting period by comparison to available market information on similar contracts (Level 2). A summary of the gains and losses related to interest rate and foreign currency instruments in the condensed consolidated statements of operations is as follows: Three Months Ended (In thousands) March 31, March 31, Loss on derivative contracts designated as cash flow hedges Location Interest rate swap contracts Interest expense, net $ 1,062 $ 1,327 |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share Basic earnings per share is calculated by dividing net income for the period by the weighted average number of shares of Class A common stock outstanding for the period excluding non-vested share-based 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 RSUs and stock options as well as public and private placement warrants. Below are basic and diluted net income per share: Three Months Ended March 31, 2022 March 31, 2021 Numerator: Net income (in thousands) - basic $ 34,558 $ 26,732 Less: Change in fair value of warrant liabilities — (76) Numerator - diluted 34,558 26,656 Denominator: Weighted-average Class A shares outstanding - basic 138,602,451 130,839,313 Dilutive effect of warrants — 5,830,238 Dilutive effect of RSUs 484,295 414,314 Dilutive effect of stock options 478,390 103,024 Weighted-average shares outstanding - diluted 139,565,136 137,186,889 Net income per Class A share - basic $ 0.25 $ 0.20 Net income per Class A share - diluted $ 0.25 $ 0.19 For warrants that are liability-classified, during periods when the impact would be dilutive, the Company assumes share settlement of the instruments as of the beginning of the reporting period and adjusts the numerator to remove the change in fair value of the warrant liability and adjusts the denominator to include the dilutive shares calculated using the treasury stock method. There were no stock options that were excluded from the computation of diluted weighted average shares for the three months ended March 31, 2022 compared to 123,998 excluded for the three months ended March 31, 2021, because their effect was anti-dilutive. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is subject to U.S. federal, state and local income taxes as well as Canadian income tax on its controlled foreign subsidiary. The income tax provision is determined based on the estimated full year effective tax rate, adjusted for infrequent or unusual items, which are recognized on a discrete basis in the period they occur. The Company’s estimated annual effective tax rate is 27.1% prior to taking into account any discrete items. As of March 31, 2022 income taxes payable were $3.5 million as compared to income taxes receivable as of December 31, 2021 were $3.1 million. |
Tax Receivable Agreement Obliga
Tax Receivable Agreement Obligations | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Tax Receivable Agreement Obligations | Tax Receivable Agreement Obligations The following table summarizes activity related to the tax receivable agreement for the three months ended March 31, 2022: (In thousands) Balance December 31, 2021 $ 145,865 Payments (1,443) Balance March 31, 2022 $ 144,422 As of March 31, 2022 the future expected payments under the tax receivable agreement are as follows: (In thousands) 2022 $ 10,200 2023 9,600 2024 10,100 2025 9,400 2026 9,600 Thereafter 95,522 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The Company’s operations are conducted through wholly-owned operating subsidiaries. The condensed 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 results of operations for any quarter or a partial fiscal year period are not necessarily indicative of the results to be expected for other periods or the full fiscal year. For the periods presented, the Company has one reportable segment. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. ASU No. 2020-04 is elective and effective as of March 12, 2020 through December 31, 2022. Once elected, this ASU must be applied prospectively for all eligible contract modifications. The Company will adopt Topic 848 when its relevant contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 to have a material impact on its condensed consolidated financial statements. |
Principles of Consolidation | Principles of ConsolidationAll intercompany balances and transactions related to activity between the Company and its wholly-owned subsidiaries have been eliminated in consolidation. |
Use of Estimates | Use of EstimatesThe preparation of condensed 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. |
Accounts Receivable | Accounts Receivable Accounts receivable represents amounts invoiced to customers for performance obligations which have been satisfied. As of March 31, 2022 and December 31, 2021, the Company’s accounts receivable were $193.1 million and $148.2 million, respectively, which have been reduced by an allowance for damages occurring during shipment, quality claims and doubtful accounts in the amount of $4.4 million and $3.0 million for the periods ending March 31, 2022 and December 31, 2021, respectively. The allowance for doubtful accounts represents the Company’s estimate of expected credit losses related to trade receivables. To estimate the allowance for doubtful accounts, the Company leverages information on historical losses, current conditions, and reasonable and supportable forecasts of future conditions. Account balances are written off against the allowance when the Company deems the amount is uncollectible. |
Inventories | 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. |
Software Costs | Software CostsCapitalized software is included in other assets in the condensed consolidated balance sheets in the amount of $15.6 million and $14.7 million as of March 31, 2022 and December 31, 2021, respectively. Capitalized software costs are amortized over their estimated useful life of up to five years commencing when such assets are ready for their intended use. |
Disaggregation of Revenue | Disaggregation of RevenueNet revenue consists of sales of packaged food products primarily within the Sweet Baked Goods category in the United States, as well as in the Cookie category in the United States and Canada. |
Foreign Currency Remeasurement | Foreign Currency Remeasurement Certain Voortman Cookies Limited (“Voortman”) sales and costs are denominated in the Canadian dollar (“CAD”). CAD transactions have been remeasured into U.S. dollars (“USD”) on the condensed consolidated statements of operations using the average exchange rate for the reporting period. Balances expected to be settled in CAD have been remeasured into USD on the condensed consolidated balance sheets using the exchange rate at the end of the |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Components of Inventories | The components of inventories are as follows : (In thousands) March 31, December 31, Ingredients and packaging $ 27,369 $ 22,607 Finished goods 28,825 26,988 Inventory in transit to customers 3,673 3,218 $ 59,867 $ 52,813 |
Disaggregation of Revenue | The following tables disaggregate revenue by geographical market and category. Three Months Ended March 31, 2022 ( In thousands ) Sweet Baked Goods Cookies Total United States $ 296,372 $ 30,916 $ 327,288 Canada — 4,763 4,763 $ 296,372 $ 35,679 $ 332,051 Three Months Ended March 31, 2021 ( In thousands ) Sweet Baked Goods Cookies Total United States $ 237,700 $ 23,803 $ 261,503 Canada — 3,918 3,918 $ 237,700 $ 27,721 $ 265,421 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: (In thousands) March 31, December 31, Land and buildings $ 72,110 $ 70,692 Right of use assets, operating 32,192 32,192 Machinery and equipment 300,658 299,071 Construction in progress 49,024 26,027 453,984 427,982 Less accumulated depreciation and amortization (99,929) (92,677) $ 354,055 $ 335,305 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
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) March 31, December 31, Payroll, vacation and other compensation $ 10,575 $ 7,791 Incentive compensation 7,041 21,172 Accrued interest 4,528 4,828 Interest rate swap and foreign currency contracts 185 2,042 Other 14,544 11,176 $ 36,873 $ 47,009 |
Debt and Lease Obligations (Tab
Debt and Lease Obligations (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
Summary of Debt and Lease Obligation | A summary of the carrying value of the debt and lease obligations are as follows: (In thousands) March 31, December 31, Term loan (3.0% as of March 31, 2022) Principal $ 1,088,804 $ 1,091,596 Unamortized debt premium and issuance costs (3,371) (3,679) 1,085,433 1,087,917 Lease obligations 25,560 26,228 Total debt and lease obligations 1,110,993 1,114,145 Less: Current portion of long term debt and lease obligations (14,126) (14,170) Long-term portion $ 1,096,867 $ 1,099,975 |
Schedule of Maturities of Long-term Debt | At March 31, 2022, minimum debt repayments under the term loan are due as follows: ( In thousands ) 2022 $ 8,375 2023 11,167 2024 11,167 2025 1,058,095 |
Composition of Lease Expenses | The table below shows the composition of lease expense: Three Months Ended (In thousands) March 31, 2022 March 31, 2021 Operating lease expense $ 1,603 $ 1,653 Short-term lease expense 373 203 Variable lease expense 382 357 $ 2,358 $ 2,213 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of the Fair Value of Interest Rate and Foreign Currency Instruments | A summary of the fair value of interest rate and foreign currency instruments is as follows: (In thousands) March 31, December 31, Asset derivatives Location Interest rate swap contracts (1) Other non-current assets $ 24,516 $ 1,803 Foreign currency contracts (2) Other current assets 194 — $ 24,710 $ 1,803 Liability derivatives Location Interest rate swap contracts (1) Accrued expenses $ 80 $ 1,798 Foreign currency contracts (2) Accrued expenses 105 244 $ 185 $ 2,042 (1) The fair values of interest rate swap contracts are 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). (2) The fair values of foreign currency contracts are measured at each reporting period by comparison to available market information on similar contracts (Level 2). |
Summary of the Gains and Losses Related to Interest Rate and Foreign Currency Instruments in the Consolidated Statement of Operations | A summary of the gains and losses related to interest rate and foreign currency instruments in the condensed consolidated statements of operations is as follows: Three Months Ended (In thousands) March 31, March 31, Loss on derivative contracts designated as cash flow hedges Location Interest rate swap contracts Interest expense, net $ 1,062 $ 1,327 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income Per Share | Below are basic and diluted net income per share: Three Months Ended March 31, 2022 March 31, 2021 Numerator: Net income (in thousands) - basic $ 34,558 $ 26,732 Less: Change in fair value of warrant liabilities — (76) Numerator - diluted 34,558 26,656 Denominator: Weighted-average Class A shares outstanding - basic 138,602,451 130,839,313 Dilutive effect of warrants — 5,830,238 Dilutive effect of RSUs 484,295 414,314 Dilutive effect of stock options 478,390 103,024 Weighted-average shares outstanding - diluted 139,565,136 137,186,889 Net income per Class A share - basic $ 0.25 $ 0.20 Net income per Class A share - diluted $ 0.25 $ 0.19 |
Tax Receivable Agreement Obli_2
Tax Receivable Agreement Obligations (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Summary of Tax Receivable Agreement | The following table summarizes activity related to the tax receivable agreement for the three months ended March 31, 2022: (In thousands) Balance December 31, 2021 $ 145,865 Payments (1,443) Balance March 31, 2022 $ 144,422 |
Future Expected Payments Under Tax Receivable Arrangement | As of March 31, 2022 the future expected payments under the tax receivable agreement are as follows: (In thousands) 2022 $ 10,200 2023 9,600 2024 10,100 2025 9,400 2026 9,600 Thereafter 95,522 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2022segment | |
Accounting Policies [Abstract] | |
Number of reportable segments | 1 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||
Accounts receivable | $ 193,085 | $ 148,180 |
Reserve to cover allowances for damages occurring during shipment, quality claims and doubtful accounts | $ 4,400 | $ 3,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Accounting Policies [Abstract] | ||
Ingredients and packaging | $ 27,369 | $ 22,607 |
Finished goods | 28,825 | 26,988 |
Inventory in transit to customers | 3,673 | 3,218 |
Inventories | $ 59,867 | $ 52,813 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Software Costs (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Accounting Policies [Abstract] | |||
Capitalized software | $ 15.6 | $ 14.7 | |
Capitalized software, estimated useful life | 5 years | ||
Software amortization expense | $ 1 | $ 0.9 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Disaggregation of Revenue [Line Items] | ||
Net revenue | $ 332,051 | $ 265,421 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 327,288 | 261,503 |
Canada | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 4,763 | 3,918 |
Sweet Baked Goods | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 296,372 | 237,700 |
Sweet Baked Goods | United States | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 296,372 | 237,700 |
Sweet Baked Goods | Canada | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 0 | 0 |
Cookies | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 35,679 | 27,721 |
Cookies | United States | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 30,916 | 23,803 |
Cookies | Canada | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | $ 4,763 | $ 3,918 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Concentrations (Details) | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
One Customer | Customer concentration risk | Consolidated net revenues | ||
Concentration Risk [Line Items] | ||
Percentage of total net revenues for customer | 20.70% | 20.50% |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Foreign Currency Remeasurement (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Accounting Policies [Abstract] | ||
Foreign currency transaction gain (loss) on remeasurement | $ (0.3) | $ (0.1) |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 453,984 | $ 427,982 | |
Less accumulated depreciation and amortization | (99,929) | (92,677) | |
Property and equipment, net | 354,055 | 335,305 | |
Depreciation expense | 6,400 | $ 5,800 | |
Land and buildings | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 72,110 | 70,692 | |
Right of use assets, operating | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 32,192 | 32,192 | |
Machinery and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 300,658 | 299,071 | |
Construction in progress | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 49,024 | $ 26,027 |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Payables and Accruals [Abstract] | ||
Payroll, vacation and other compensation | $ 10,575 | $ 7,791 |
Incentive compensation | 7,041 | 21,172 |
Accrued interest | 4,528 | 4,828 |
Interest rate swap and foreign currency contracts | 185 | 2,042 |
Other | 14,544 | 11,176 |
Accrued expenses and other current liabilities | $ 36,873 | $ 47,009 |
Debt and Lease Obligations - Su
Debt and Lease Obligations - Summary of Debt and Lease Obligation (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Debt Instrument [Line Items] | ||
Lease obligations | $ 25,560 | $ 26,228 |
Total debt and lease obligations | $ 1,110,993 | $ 1,114,145 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] | Less: Current portion of long term debt and lease obligations | Less: Current portion of long term debt and lease obligations |
Less: Current portion of long term debt and lease obligations | $ (14,126) | $ (14,170) |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration] | Long-term portion | Long-term portion |
Long-term portion | $ 1,096,867 | $ 1,099,975 |
Term Loan | ||
Debt Instrument [Line Items] | ||
Effective fixed interest rate on long-term debt (as a percent) | 3.00% | |
Principal | $ 1,088,804 | 1,091,596 |
Unamortized debt premium and issuance costs | (3,371) | (3,679) |
Long-term debt | $ 1,085,433 | $ 1,087,917 |
Debt and Lease Obligations - Sc
Debt and Lease Obligations - Schedule of Maturities of Long-term Debt (Details) - Term Loan $ in Thousands | Mar. 31, 2022USD ($) |
Debt Instrument [Line Items] | |
2022 | $ 8,375 |
2023 | 11,167 |
2024 | 11,167 |
2025 | $ 1,058,095 |
Debt and Lease Obligations - Co
Debt and Lease Obligations - Composition of Lease Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Debt Disclosure [Abstract] | ||
Operating lease expense | $ 1,603 | $ 1,653 |
Short-term lease expense | 373 | 203 |
Variable lease expense | 382 | 357 |
Total lease cost | $ 2,358 | $ 2,213 |
Derivative Instruments - Narrat
Derivative Instruments - Narrative (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2022USD ($) | Mar. 31, 2022CAD ($) | |
Term Loan | ||
Derivative [Line Items] | ||
Effective fixed interest rate on long-term debt (as a percent) | 3.00% | 3.00% |
LIBOR Floor | Term Loan | ||
Derivative [Line Items] | ||
Effective fixed interest rate on long-term debt | 2.25% | |
Cash Flow Hedge | ||
Derivative [Line Items] | ||
Maximum contracted sales amount | $ 13,400,000 | $ 16.8 |
Designated as Hedging Instrument | Interest rate swap contracts | Cash Flow Hedge | ||
Derivative [Line Items] | ||
Notional amount of derivative contracts | 800,000,000 | |
Reduction in notional amount per year | $ 100,000,000 | |
Designated as Hedging Instrument | Interest rate swap contracts | Cash Flow Hedge | LIBOR | ||
Derivative [Line Items] | ||
Basis spread on variable rate (as a percent) | 0.75% | 0.75% |
Designated as Hedging Instrument | Interest rate swap contracts | Cash Flow Hedge | Minimum | ||
Derivative [Line Items] | ||
Fixed interest rate | 1.11% | 1.11% |
Notional amount of derivative contracts | $ 700,000,000 | |
Effective fixed interest rate on long-term debt (as a percent) | 3.36% | 3.36% |
Designated as Hedging Instrument | Interest rate swap contracts | Cash Flow Hedge | Maximum | ||
Derivative [Line Items] | ||
Fixed interest rate | 2.06% | 2.06% |
Effective fixed interest rate on long-term debt (as a percent) | 4.31% | 4.31% |
Derivative Instruments - Summar
Derivative Instruments - Summary of the Fair Value of Interest Rate and Foreign Currency Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Derivative [Line Items] | ||
Asset derivatives | $ 24,710 | $ 1,803 |
Liability derivatives | 185 | 2,042 |
Other non-current assets | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Asset derivatives | 24,516 | 1,803 |
Other current assets | Foreign currency contracts | ||
Derivative [Line Items] | ||
Asset derivatives | 194 | 0 |
Accrued expenses | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Liability derivatives | 80 | 1,798 |
Accrued expenses | Foreign currency contracts | ||
Derivative [Line Items] | ||
Liability derivatives | $ 105 | $ 244 |
Derivative Instruments - Summ_2
Derivative Instruments - Summary of the Gains and Losses Related to Interest Rate and Foreign Currency Instruments in the Consolidated Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Derivative [Line Items] | ||
Loss on derivative contracts designated as cash flow hedges | $ 1,062 | $ 1,327 |
Interest rate swap contracts | Interest expense, net | ||
Derivative [Line Items] | ||
Loss on derivative contracts designated as cash flow hedges | $ 1,062 | $ 1,327 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Numerator: | ||
Net income (in thousands) - basic | $ 34,558 | $ 26,732 |
Change in fair value of warrant liabilities | 0 | (76) |
Numerator - diluted | $ 34,558 | $ 26,656 |
Denominator: | ||
Weighted-average Class A shares outstanding - basic (in shares) | 138,602,451 | 130,839,313 |
Dilutive effect of warrants (in shares) | 0 | 5,830,238 |
Weighted-average shares outstanding - diluted (in shares) | 139,565,136 | 137,186,889 |
Net income per Class A share - basic (in usd per share) | $ 0.25 | $ 0.20 |
Net income per Class A share - dilutive (in usd per share) | $ 0.25 | $ 0.19 |
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 123,998 |
RSUs | ||
Denominator: | ||
Dilutive effect of share-based payment arrangements (in shares) | 484,295 | 414,314 |
Option | ||
Denominator: | ||
Dilutive effect of share-based payment arrangements (in shares) | 478,390 | 103,024 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | |
Income Tax Disclosure [Line Items] | |||
Income taxes payable | $ 3.5 | ||
Income taxes receivable | $ 3.1 | ||
Forecast | |||
Income Tax Disclosure [Line Items] | |||
Effective income tax rate (as a percent) | 27.10% |
Tax Receivable Agreement Obli_3
Tax Receivable Agreement Obligations - Summary of Activity (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2022USD ($) | |
Reconciliation Of Tax Receivable Agreement Liability [Roll Forward] | |
Balance December 31, 2021 | $ 145,865 |
Payments | (1,443) |
Balance March 31, 2022 | $ 144,422 |
Tax Receivable Agreement Obli_4
Tax Receivable Agreement Obligations - Future Expected Payments (Details) $ in Thousands | Mar. 31, 2022USD ($) |
Income Tax Disclosure [Abstract] | |
2022 | $ 10,200 |
2023 | 9,600 |
2024 | 10,100 |
2025 | 9,400 |
2026 | 9,600 |
Thereafter | $ 95,522 |