Hostess Brands (TWNK) 10-Q 9 May 23 2023 Q1 Quarterly report Financial data

Cover

Cover - shares	3 Months Ended
	Mar. 31, 2023	May 05, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
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		132,850,224
Amendment Flag	false
Document Fiscal Year Focus	2023
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, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 101,666	$ 98,584
Short-term investments	0	17,914
Accounts receivable, net	189,952	168,783
Inventories	67,498	65,406
Prepaids and other current assets	11,952	16,375
Total current assets	371,068	367,062
Property and equipment, net	442,963	425,313
Intangible assets, net	1,915,002	1,920,880
Goodwill	706,615	706,615
Other assets, net	63,382	72,329
Total assets	3,499,030	3,492,199
Current liabilities:
Long-term debt and lease obligations payable within one year	4,176	3,917
Tax receivable agreement payments payable within one year	11,200	12,600
Accounts payable	91,771	85,667
Customer trade allowances	66,058	62,194
Accrued expenses and other current liabilities	33,679	59,933
Total current liabilities	206,884	224,311
Long-term debt and lease obligations	998,226	999,089
Tax receivable agreement obligations	123,134	123,092
Deferred tax liability	353,376	347,030
Other long-term liabilities	1,623	1,593
Total liabilities	1,683,243	1,695,115
Commitments and Contingencies (Note 9)
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 143,099,217 shares issued and 133,005,487 shares outstanding as of March 31, 2023 and 142,650,344 shares issued and 133,117,224 shares outstanding as of December 31, 2022	14	14
Additional paid in capital	1,311,291	1,311,629
Accumulated other comprehensive income	29,499	35,078
Retained earnings	677,884	639,595
Treasury stock	(202,901)	(189,232)
Stockholders’ equity	1,815,787	1,797,084
Total liabilities and stockholders’ equity	$ 3,499,030	$ 3,492,199

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
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)	143,099,217	142,650,344
Common stock, outstanding (in shares)	133,005,487	133,117,224

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Net revenue	$ 345,403	$ 332,051
Cost of goods sold	224,686	216,427
Gross profit	120,717	115,624
Operating costs and expenses:
Advertising and marketing	13,899	11,950
Selling	10,649	9,777
General and administrative	28,198	29,672
Amortization of customer relationships	5,878	5,878
Total operating costs and expenses	58,624	57,277
Operating income	62,093	58,347
Other expense
Interest expense, net	10,185	9,666
Other expense	181	436
Total other expense	10,366	10,102
Income before income taxes	51,727	48,245
Income tax expense	13,438	13,687
Net income	$ 38,289	$ 34,558
Earnings per Class A share:
Basic (in usd per share)	$ 0.29	$ 0.25
Diluted (in usd per share)	$ 0.28	$ 0.25
Weighted-average shares outstanding:
Basic (in shares)	133,551,603	138,602,451
Diluted (in shares)	134,553,122	139,565,136

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 38,289	$ 34,558
Other comprehensive income:
Unrealized gain (loss) on interest rate swap and foreign currency contracts designated as a cash flow hedge	(3,013)	23,656
Reclassification into net income	(4,532)	1,062
Income tax benefit (expense)	1,966	(6,492)
Comprehensive income	$ 32,710	$ 52,784

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ 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, 2021		138,279,000
Beginning balance at Dec. 31, 2021	$ 1,718,990	$ 14	$ 1,303,254	$ (506)	$ 475,400	$ (59,172)
Treasury stock, beginning balance (in shares) at Dec. 31, 2021						3,753,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	52,784			18,226	34,558
Share-based compensation (in shares)		350,000
Share-based compensation	2,339		2,339
Exercise of employee stock options (in shares)		105,000
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)		(459,000)				(459,000)
Repurchase of common stock	(9,680)					$ (9,680)
Ending balance (in shares) at Mar. 31, 2022		138,275,000
Ending balance at Mar. 31, 2022	$ 1,760,879	$ 14	1,302,039	17,720	509,958	$ (68,852)
Treasury stock, ending balance (in shares) at Mar. 31, 2022						4,212,000
Beginning balance (in shares) at Dec. 31, 2022	133,117,224	133,117,000
Beginning balance at Dec. 31, 2022	$ 1,797,084	$ 14	1,311,629	35,078	639,595	$ (189,232)
Treasury stock, beginning balance (in shares) at Dec. 31, 2022						9,533,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive income (loss)	32,710			(5,579)	38,289
Share-based compensation (in shares)		324,000
Share-based compensation	3,011		3,011
Exercise of employee stock options (in shares)		125,000
Exercise of employee stock options	2,112		2,112
Payment of taxes for employee stock awards	(5,461)		(5,461)
Repurchase of common stock (in shares)		(561,000)				(561,000)
Repurchase of common stock	$ (13,669)					$ (13,669)
Ending balance (in shares) at Mar. 31, 2023	133,005,487	133,005,000
Ending balance at Mar. 31, 2023	$ 1,815,787	$ 14	$ 1,311,291	$ 29,499	$ 677,884	$ (202,901)
Treasury stock, ending balance (in shares) at Mar. 31, 2023						10,094,000

Condensed Consolidated Statem_4

Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating activities
Net income	$ 38,289,000	$ 34,558,000
Depreciation and amortization	15,327,000	13,297,000
Debt discount amortization	264,000	308,000
Unrealized foreign exchange losses	52,000	317,000
Non-cash lease expense	73,000	125,000
Share-based compensation	3,011,000	2,339,000
Realized and unrealized gains on short-term investments	(86,000)	0
Deferred taxes	8,312,000	7,322,000
Change in operating assets and liabilities:
Accounts receivable	(21,167,000)	(44,848,000)
Inventories	(2,092,000)	(7,054,000)
Prepaids and other current assets	5,092,000	3,735,000
Accounts payable and accrued expenses	(23,016,000)	10,866,000
Customer trade allowances	3,869,000	10,561,000
Net cash provided by operating activities	27,928,000	31,526,000
Investing activities
Purchases of property and equipment	(23,463,000)	(23,034,000)
Proceeds from maturity of short-term investments	18,000,000	0
Acquisition and development of software assets	(964,000)	(1,825,000)
Net cash used in investing activities	(6,427,000)	(24,859,000)
Financing activities
Repayments of long-term debt and lease obligations	0	(2,792,000)
Repurchase of common stock	(13,669,000)	(9,680,000)
Tax payments related to issuance of shares to employees	(5,461,000)	(5,216,000)
Cash received from exercise of options and warrants	2,112,000	1,662,000
Payments on tax receivable agreement	(1,358,000)	(1,443,000)
Net cash used in financing activities	(18,376,000)	(17,469,000)
Effect of exchange rate changes on cash and cash equivalents	(43,000)	74,000
Net increase (decrease) in cash and cash equivalents	3,082,000	(10,728,000)
Cash and cash equivalents at beginning of period	98,584,000	249,159,000
Cash and cash equivalents at end of period	101,666,000	238,431,000
Cash paid during the period for:
Interest, net of amounts capitalized	10,096,000	9,678,000
Net taxes paid (refunded)	6,416,000	(514,000)
Supplemental disclosure of non-cash investing:
Accrued capital expenditures	$ 11,778,000	$ 5,433,000

Summary of Significant Accounti

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2023
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 primarily 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. The Hostess® brand dates back to 1919 when the Hostess® CupCake was introduced to the public, followed by Twinkies® in 1930. 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 Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. In December 2022, the FASB issued ASU No 2022-06, “Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848”, which extends the optional transition relief to ease the potential burden in accounting for reference rate reform on financial reporting. The transition relief is provided through December 31, 2024 based on the expectation that the London Interbank Offered Rate (LIBOR) will cease to be published as of June 30, 2023. The Company is evaluating the impact the new standard will have on the consolidated financial statements and related disclosures but does not anticipate a material impact. 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, 2023 and December 31, 2022, the Company’s accounts receivable were $190.0 million and $168.8 million, respectively, which have been reduced by an allowance for damages occurring during shipment, quality claims and doubtful accounts in the amount of $5.8 million for both periods ended March 31, 2023 and December 31, 2022. 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 $ 33,459 $ 35,410 Finished goods 31,253 26,133 Inventory in transit to customers 2,786 3,863 $ 67,498 $ 65,406 Capitalized Interest The Company capitalizes a portion of the interest on its term loan (see Note 4. Debt and Lease Obligations) related to certain property and equipment during its construction period. The capitalized interest is recorded as part of the asset to which it relates and depreciated over the asset’s estimated useful life. The Company capitalized interest of $1.7 million during the three months ended March 31, 2023. No interest was capitalized during the three months ended March 31, 2022. Capitalized interest is included in property and equipment, net on the condensed consolidated balance sheets. Software Costs Capitalized software is included in other assets on the condensed consolidated balance sheets in the amount of $21.0 million and $21.4 million, net of accumulated amortization of $24.0 million and $22.6 million as of March 31, 2023 and December 31, 2022, 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 expense on the condensed consolidated statements of operations was $1.4 million for the three months ended March 31, 2023, compared to $1.0 million for the three months ended March 31, 2022, respectively. Disaggregation of Revenue Net revenue consists of sales of packaged food products primarily within the Sweet Baked Goods (“SBG”) 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, 2023 ( In thousands ) Sweet Baked Goods Cookies Total United States $ 308,430 $ 32,714 $ 341,144 Canada — 4,259 4,259 $ 308,430 $ 36,973 $ 345,403 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 Concentrations The Company had one customer (together with its affiliates) that accounted for 18.3% and 20.7% of total net revenue for the three months ended March 31, 2023 and 2022, respectively.

Property and Equipment

Property and Equipment	3 Months Ended
	Mar. 31, 2023
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 $ 81,631 $ 81,405 Right of use assets, operating 32,170 32,170 Machinery and equipment 328,110 315,149 Construction in progress 130,607 118,679 572,518 547,403 Less accumulated depreciation and amortization (129,555) (122,090) $ 442,963 $ 425,313 Depreciation expense was $8.0 million and $6.4 million for the three months ended March 31, 2023 and 2022, respectively.

Accrued Expenses and Other Curr

Accrued Expenses and Other Current Liabilities	3 Months Ended
	Mar. 31, 2023
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 $ 8,812 $ 6,195 Accrued interest 7,820 7,850 Incentive compensation 5,232 29,045 Other 11,815 16,843 $ 33,679 $ 59,933

Debt and Lease Obligations

Debt and Lease Obligations	3 Months Ended
	Mar. 31, 2023
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 (7.1% as of March 31, 2023) Principal $ 983,221 $ 983,221 Unamortized debt premium and issuance costs (2,323) (2,563) 980,898 980,658 Lease obligations 21,504 22,348 Total debt and lease obligations 1,002,402 1,003,006 Less: Current portion of long term debt and lease obligations (4,176) (3,917) Long-term portion $ 998,226 $ 999,089 At March 31, 2023, there are no principal payments due under the Company’s aggregate term loans until maturity on August 3, 2025. Including the impact of the interest rate swap contracts, at March 31, 2023, the Company's aggregate term loans had an effective interest rate of 4.8%. Leases The Company has entered into operating leases for certain properties that expire at various times through 2030. The Company determines if an arrangement is a lease at inception. At March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the Company had 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, 2023 March 31, 2022 Operating lease expense $ 1,663 $ 1,603 Short-term lease expense 505 373 Variable lease expense 402 382 $ 2,570 $ 2,358

Derivative Instruments

Derivative Instruments	3 Months Ended
	Mar. 31, 2023
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 counterparties to make a series of payments based on fixed rates ranging from 1.11% to 2.06% 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, 2023 notional amount of $700 million, outstanding through the maturity date of the term loan in 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, 2023, 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%, which includes the term loan margin of 2.25%. To reduce the effect of fluctuations in Canadian dollar (“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 $3.2 million USD for $4.1 million CAD at varying defined settlement dates through June 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 $ 40,087 $ 48,539 Liability derivatives Location Foreign currency contracts (2) Accrued expenses $ 183 $ 423 (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 on the condensed consolidated statements of operations is as follows: Three Months Ended (In thousands) March 31, March 31, (Gain ) Loss on derivative contracts designated as cash flow hedges Location Interest rate swap contracts Interest expense, net $ (4,672) $ 1,062 Foreign currency contracts Cost of goods sold 140 — $ (4,532) $ 1,062

Earnings per Share

Earnings per Share	3 Months Ended
	Mar. 31, 2023
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 restricted stock units (“RSUs”), stock options and Employee Stock Purchase Plan (“ESPP”) awards. Below are basic and diluted net income per share: Three Months Ended March 31, 2023 March 31, 2022 Numerator: Net income (in thousands) $ 38,289 $ 34,558 Denominator: Weighted-average Class A shares outstanding - basic 133,551,603 138,602,451 Dilutive effect of RSUs 499,273 484,295 Dilutive effect of stock options and ESPP awards 502,246 478,390 Weighted-average shares outstanding - diluted 134,553,122 139,565,136 Net income per Class A share - basic $ 0.29 $ 0.25 Net income per Class A share - diluted $ 0.28 $ 0.25

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2023
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% prior to taking into account any discrete items.

Tax Receivable Agreement Obliga

Tax Receivable Agreement Obligations	3 Months Ended
	Mar. 31, 2023
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, 2023: (In thousands) Balance December 31, 2022 $ 135,692 Payments (1,358) Balance March 31, 2023 $ 134,334

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2023
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. In December 2020, the Company asserted claims for indemnification against the sellers under the terms of the Share Purchase Agreement pursuant to which the Company acquired Voortman (the “Agreement”) for damages arising out of alleged breaches by the sellers of certain representations, warranties and covenants contained in such agreement relating to periods prior to the closing of the acquisition. The Company also submitted claims relating to these alleged breaches under the representation and warranty insurance policy (“RWI”) it purchased in connection with the acquisition. In the third quarter of 2022, the RWI insurers paid the Company $42.5 million CAD (the RWI coverage limit) (the “Proceeds”) related to these breaches. Per agreement with the RWI insurers, under no circumstances will the Company be required to return the Proceeds. On November 3, 2022, pursuant to the agreement with the RWI insurer, Voortman brought claims in the Ontario (Canada) Superior Court of Justice (the “Claim”), related to the breaches against certain of the sellers from whom Voortman was acquired. The Claim alleges the seller defendants made certain non-disclosures and misrepresentations to induce the Company to overpay for Voortman. The Company is seeking damages of $109 million CAD representing the amount of the aggregate liability of the sellers for indemnification under the Agreement, $5.0 million CAD in punitive or aggravated damages, interest, proceedings fees and any other relief the presiding court deems appropriate. A portion of any recovery will be shared with the RWI insurers. Although the Company strongly believes that its Claim against the sellers is meritorious, no assurance can be given as to whether the Company will recover all, or any part, of the amounts it is pursuing.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2023
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 Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. In December 2022, the FASB issued ASU No 2022-06, “Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848”, which extends the optional transition relief to ease the potential burden in accounting for reference rate reform on financial reporting. The transition relief is provided through December 31, 2024 based on the expectation that the London Interbank Offered Rate (LIBOR) will cease to be published as of June 30, 2023. The Company is evaluating the impact the new standard will have on the consolidated financial statements and related disclosures but does not anticipate a material impact.
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 ReceivableAccounts receivable represents amounts invoiced to customers for performance obligations which have been satisfied.
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.
Capitalized Interest	Capitalized Interest The Company capitalizes a portion of the interest on its term loan (see Note 4. Debt and Lease Obligations) related to certain property and equipment during its construction period. The capitalized interest is recorded as part of the asset to which it relates and depreciated over the asset’s estimated useful life. The Company capitalized interest of $1.7 million during the three months ended March 31, 2023. No interest was capitalized during the three months ended March 31, 2022. Capitalized interest is included in property and equipment, net on the condensed consolidated balance sheets.
Software Costs	Software Costs Capitalized software is included in other assets on the condensed consolidated balance sheets in the amount of $21.0 million and $21.4 million, net of accumulated amortization of $24.0 million and $22.6 million as of March 31, 2023 and December 31, 2022, 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 expense on the condensed consolidated statements of operations was $1.4 million for the three months ended March 31, 2023, compared to $1.0 million for the three months ended March 31, 2022, respectively.
Disaggregation of Revenue	Disaggregation of RevenueNet revenue consists of sales of packaged food products primarily within the Sweet Baked Goods (“SBG”) category in the United States, as well as in the Cookie category in the United States and Canada.

Summary of Significant Accoun_3

Summary of Significant Accounting Policies (Tables)	3 Months Ended
	Mar. 31, 2023
Accounting Policies [Abstract]
Components of Inventories	The components of inventories are as follows : (In thousands) March 31, December 31, Ingredients and packaging $ 33,459 $ 35,410 Finished goods 31,253 26,133 Inventory in transit to customers 2,786 3,863 $ 67,498 $ 65,406
Disaggregation of Revenue	The following tables disaggregate revenue by geographical market and category. Three Months Ended March 31, 2023 ( In thousands ) Sweet Baked Goods Cookies Total United States $ 308,430 $ 32,714 $ 341,144 Canada — 4,259 4,259 $ 308,430 $ 36,973 $ 345,403 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

Property and Equipment (Tables)

Property and Equipment (Tables)	3 Months Ended
	Mar. 31, 2023
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 $ 81,631 $ 81,405 Right of use assets, operating 32,170 32,170 Machinery and equipment 328,110 315,149 Construction in progress 130,607 118,679 572,518 547,403 Less accumulated depreciation and amortization (129,555) (122,090) $ 442,963 $ 425,313

Accrued Expenses and Other Cu_2

Accrued Expenses and Other Current Liabilities (Tables)	3 Months Ended
	Mar. 31, 2023
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 $ 8,812 $ 6,195 Accrued interest 7,820 7,850 Incentive compensation 5,232 29,045 Other 11,815 16,843 $ 33,679 $ 59,933

Debt and Lease Obligations (Tab

Debt and Lease Obligations (Tables)	3 Months Ended
	Mar. 31, 2023
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 (7.1% as of March 31, 2023) Principal $ 983,221 $ 983,221 Unamortized debt premium and issuance costs (2,323) (2,563) 980,898 980,658 Lease obligations 21,504 22,348 Total debt and lease obligations 1,002,402 1,003,006 Less: Current portion of long term debt and lease obligations (4,176) (3,917) Long-term portion $ 998,226 $ 999,089
Composition of Lease Expenses	The table below shows the composition of lease expense: Three Months Ended (In thousands) March 31, 2023 March 31, 2022 Operating lease expense $ 1,663 $ 1,603 Short-term lease expense 505 373 Variable lease expense 402 382 $ 2,570 $ 2,358

Derivative Instruments (Tables)

Derivative Instruments (Tables)	3 Months Ended
	Mar. 31, 2023
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 $ 40,087 $ 48,539 Liability derivatives Location Foreign currency contracts (2) Accrued expenses $ 183 $ 423 (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 on the condensed consolidated statements of operations is as follows: Three Months Ended (In thousands) March 31, March 31, (Gain ) Loss on derivative contracts designated as cash flow hedges Location Interest rate swap contracts Interest expense, net $ (4,672) $ 1,062 Foreign currency contracts Cost of goods sold 140 — $ (4,532) $ 1,062

Earnings per Share (Tables)

Earnings per Share (Tables)	3 Months Ended
	Mar. 31, 2023
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, 2023 March 31, 2022 Numerator: Net income (in thousands) $ 38,289 $ 34,558 Denominator: Weighted-average Class A shares outstanding - basic 133,551,603 138,602,451 Dilutive effect of RSUs 499,273 484,295 Dilutive effect of stock options and ESPP awards 502,246 478,390 Weighted-average shares outstanding - diluted 134,553,122 139,565,136 Net income per Class A share - basic $ 0.29 $ 0.25 Net income per Class A share - diluted $ 0.28 $ 0.25

Tax Receivable Agreement Obli_2

Tax Receivable Agreement Obligations (Tables)	3 Months Ended
	Mar. 31, 2023
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, 2023: (In thousands) Balance December 31, 2022 $ 135,692 Payments (1,358) Balance March 31, 2023 $ 134,334

Summary of Significant Accoun_4

Summary of Significant Accounting Policies - Basis of Presentation (Details)	3 Months Ended
	Mar. 31, 2023 segment
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, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Accounts receivable	$ 189,952	$ 168,783
Allowance for damages occurring during shipment, quality claims and doubtful accounts	$ 5,800	$ 5,800

Summary of Significant Accoun_6

Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Ingredients and packaging	$ 33,459	$ 35,410
Finished goods	31,253	26,133
Inventory in transit to customers	2,786	3,863
Inventories	$ 67,498	$ 65,406

Summary of Significant Accoun_7

Summary of Significant Accounting Policies - Capitalized Interest (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Accounting Policies [Abstract]
Interest costs capitalized	$ 1,700,000	$ 0

Summary of Significant Accoun_8

Summary of Significant Accounting Policies - Software Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Accounting Policies [Abstract]
Capitalized software	$ 21		$ 21.4
Accumulated amortization	$ 24		$ 22.6
Capitalized software, estimated useful life	5 years
Software amortization expense	$ 1.4	$ 1

Summary of Significant Accoun_9

Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Net revenue	$ 345,403	$ 332,051
United States
Disaggregation of Revenue [Line Items]
Net revenue	341,144	327,288
Canada
Disaggregation of Revenue [Line Items]
Net revenue	4,259	4,763
Sweet Baked Goods
Disaggregation of Revenue [Line Items]
Net revenue	308,430	296,372
Sweet Baked Goods | United States
Disaggregation of Revenue [Line Items]
Net revenue	308,430	296,372
Sweet Baked Goods | Canada
Disaggregation of Revenue [Line Items]
Net revenue	0	0
Cookies
Disaggregation of Revenue [Line Items]
Net revenue	36,973	35,679
Cookies | United States
Disaggregation of Revenue [Line Items]
Net revenue	32,714	30,916
Cookies | Canada
Disaggregation of Revenue [Line Items]
Net revenue	$ 4,259	$ 4,763

Summary of Significant Accou_10

Summary of Significant Accounting Policies - Concentrations (Details)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
One Customer | Customer concentration risk | Consolidated net revenues
Concentration Risk [Line Items]
Percentage of total net revenues for customer	18.30%	20.70%

Property and Equipment (Details

Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 572,518		$ 547,403
Less accumulated depreciation and amortization	(129,555)		(122,090)
Property and equipment, net	442,963		425,313
Depreciation expense	8,000	$ 6,400
Land and buildings
Property, Plant and Equipment [Line Items]
Property and equipment, gross	81,631		81,405
Right of use assets, operating
Property, Plant and Equipment [Line Items]
Property and equipment, gross	32,170		32,170
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	328,110		315,149
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 130,607		$ 118,679

Accrued Expenses and Other Cu_3

Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Payroll, vacation and other compensation	$ 8,812	$ 6,195
Accrued interest	7,820	7,850
Incentive compensation	5,232	29,045
Other	11,815	16,843
Accrued expenses and other current liabilities	$ 33,679	$ 59,933

Debt and Lease Obligations - Su

Debt and Lease Obligations - Summary of Debt and Lease Obligation (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Lease obligations	$ 21,504	$ 22,348
Total debt and lease obligations	$ 1,002,402	$ 1,003,006
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	$ (4,176)	$ (3,917)
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Long-term portion	Long-term portion
Long-term portion	$ 998,226	$ 999,089
Term Loan
Debt Instrument [Line Items]
Effective fixed interest rate on long-term debt (as a percent)	7.10%
Principal	$ 983,221	983,221
Unamortized debt premium and issuance costs	(2,323)	(2,563)
Long-term debt	$ 980,898	$ 980,658

Debt and Lease Obligations - Na

Debt and Lease Obligations - Narrative (Details) - Term Loan	Mar. 31, 2023
Debt Instrument [Line Items]
Effective interest rate	7.10%
Term Loan and Interest Rate Swap Contracts
Debt Instrument [Line Items]
Effective interest rate	4.80%

Debt and Lease Obligations - Co

Debt and Lease Obligations - Composition of Lease Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Debt Disclosure [Abstract]
Operating lease expense	$ 1,663	$ 1,603
Short-term lease expense	505	373
Variable lease expense	402	382
Total lease cost	$ 2,570	$ 2,358

Derivative Instruments - Narrat

Derivative Instruments - Narrative (Details) $ in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2023 CAD ($)
Term Loan
Derivative [Line Items]
Effective fixed interest rate on long-term debt	2.25%
Effective fixed interest rate on long-term debt (as a percent)	7.10%	7.10%
Cash Flow Hedge
Derivative [Line Items]
Maximum contracted sales amount	$ 3.2	$ 4.1
Designated as Hedging Instrument | Interest rate swap contracts | Cash Flow Hedge
Derivative [Line Items]
Notional amount of derivative contracts	$ 700
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]
Effective fixed interest rate on long-term debt (as a percent)	3.36%	3.36%
Fixed interest rate	1.11%	1.11%
Designated as Hedging Instrument | Interest rate swap contracts | Cash Flow Hedge | Maximum
Derivative [Line Items]
Effective fixed interest rate on long-term debt (as a percent)	4.31%	4.31%
Fixed interest rate	2.06%	2.06%

Derivative Instruments - Summar

Derivative Instruments - Summary of the Fair Value of Interest Rate and Foreign Currency Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Other non-current assets | Interest rate swap contracts
Derivative [Line Items]
Asset derivatives	$ 40,087	$ 48,539
Accrued expenses | Foreign currency contracts
Derivative [Line Items]
Liability derivatives	$ 183	$ 423

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, 2023	Mar. 31, 2022
Derivative [Line Items]
(Gain ) Loss on derivative contracts designated as cash flow hedges	$ (4,532)	$ 1,062
Interest rate swap contracts | Interest expense, net
Derivative [Line Items]
(Gain ) Loss on derivative contracts designated as cash flow hedges	(4,672)	1,062
Foreign currency contracts | Cost of goods sold
Derivative [Line Items]
(Gain ) Loss on derivative contracts designated as cash flow hedges	$ 140	$ 0

Earnings per Share (Details)

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net income	$ 38,289	$ 34,558
Denominator:
Weighted-average Class A shares outstanding - basic (in shares)	133,551,603	138,602,451
Weighted-average shares outstanding - diluted (in shares)	134,553,122	139,565,136
Net income per Class A share - basic (in usd per share)	$ 0.29	$ 0.25
Net income per Class A share - dilutive (in usd per share)	$ 0.28	$ 0.25
RSUs
Denominator:
Dilutive effect of share-based payment arrangements (in shares)	499,273	484,295
Stock options and ESPP awards
Denominator:
Dilutive effect of share-based payment arrangements (in shares)	502,246	478,390

Income Taxes (Details)

Income Taxes (Details)	12 Months Ended
	Dec. 31, 2023
Forecast
Income Tax Disclosure [Line Items]
Effective income tax rate (as a percent)	27%

Tax Receivable Agreement Obli_3

Tax Receivable Agreement Obligations - Summary of Activity (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Reconciliation Of Tax Receivable Agreement Liability [Roll Forward]
Beginning balance	$ 135,692
Payments	(1,358)
Ending balance	$ 134,334

Commitments and Contingencies (

Commitments and Contingencies (Details) - CAD ($) $ in Millions		3 Months Ended
	Nov. 03, 2022	Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Proceeds from legal settlements		$ 42.5
Gain contingency, damages sought, value	$ 109
Gain contingency, punitive or aggravated damages, interest, proceedings fees and any other relief sought, value	$ 5