twnk-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


			(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the three months ended
			June 30, 2021
			OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001-37540

HOSTESS BRANDS, INC.

(Exact name of registrant as specified in its charter)


Delaware		47-4168492
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
7905 Quivira Road		66215
Lenexa,	KS	(Zip Code)
(Address of principal executive offices)

(816) 701-4600

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each Class	Ticker Symbol	Name of each exchange on which registered
Class A Common Stock, Par Value of $0.0001 per share	TWNK	The Nasdaq Stock Market LLC
Warrants, each exercisable for a half share of Class A Common Stock	TWNKW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.:

Large accelerated filer

☒

Accelerated
filer

☐

Non‑accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒

Shares of Class A common stock outstanding - 130,093,017 shares at August 3, 2021

HOSTESS BRANDS, INC.

FORM 10-Q

For the Three Months Ended June 30, 2021

INDEX


		Page
PART I - Financial Information
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets (Unaudited)	4
	Consolidated Statements of Operations (Unaudited)	5
	Consolidated Statements of Comprehensive Incom e (Loss) (Unaudited)	6
	Consolidated Statements of Stockholders’ Equity (Unaudited)	7
	Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21
PART II - Other Information
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Default Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. All statements contained in this Quarterly Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. Statements that constitute forward-looking statements are generally identified through the inclusion of words such as “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,” “may,” “should,” or similar language. Statements addressing events and developments that we expect or anticipate will occur are also considered forward-looking statements. All forward-looking statements included herein are made only as of the date hereof. It is routine for our internal projections and expectations to change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter or year. Readers of this Quarterly Report are cautioned not to place undue reliance on any such forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Risks and uncertainties are identified under “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as updated by subsequent filings. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

HOSTESS BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except shares and per share data)


	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	218,807	$	173,034
Accounts receivable, net	148,726		125,550
Inventories	52,164		49,348

Prepaids and other current assets	13,150		21,614
Total current assets	432,847		369,546
Property and equipment, net	311,535		303,959
Intangible assets, net	1,956,147		1,967,903
Goodwill	706,615		706,615
Other assets, net	17,976		17,446
Total assets	$	3,425,120	$	3,365,469

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Long-term debt and lease obligations payable within one year	$	14,103	$	13,811
Tax receivable agreement payments payable within one year	10,000		11,800
Accounts payable	67,751		61,428
Customer trade allowances	47,620		46,779
Warrant liabilities	1,316		861
Accrued expenses and other current liabilities	44,514		55,715

Total current liabilities	185,304		190,394
Long-term debt and lease obligations	1,107,021		1,113,037
Tax receivable agreement obligations	137,274		144,744
Deferred tax liability	310,992		295,009
Other long-term liabilities	1,585		1,560
Total liabilities	1,742,176		1,744,744

Commitments and Contingencies (Note 10)

Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 130,459,939 and 130,347,464 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	13		13

Additional paid in capital	1,297,670		1,281,018
Accumulated other comprehensive loss	(4,728)		(10,407)
Retained earnings	412,680		356,101
Treasury stock	(22,691)		(6,000)
Stockholders’ equity	1,682,944		1,620,725

Total liabilities and stockholders’ equity	$	3,425,120	$	3,365,469

See accompanying notes to the unaudited consolidated financial statements.

HOSTESS BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except shares and per share data)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020

Net revenue	$	291,485	$	256,226	$	556,906	$	499,711
Cost of goods sold	186,379		166,852		356,281		331,000
Gross profit	105,106		89,374		200,625		168,711
Operating costs and expenses:
Advertising and marketing	13,144		11,158		24,925		21,221
Selling expense	9,454		12,378		18,084		30,498
General and administrative	23,504		24,153		45,689		49,348
Amortization of customer relationships	5,878		7,110		11,756		13,594
Business combination transaction costs	—		—		—		4,282
Other operating expense	—		—		—		27
Total operating costs and expenses	51,980		54,799		100,454		118,970
Operating income	53,126		34,575		100,171		49,741
Other expense (income):
Interest expense, net	9,954		10,580		19,971		22,305


Change in fair value of warrant liabilities	531		16,382		455		(62,718)
Other expense	1,067		1,132		1,430		1,685
Total other expense (income)	11,552		28,094		21,856		(38,728)
Income before income taxes	41,574		6,481		78,315		88,469
Income tax expense	11,727		5,493		21,736		5,741
Net income	29,847		988		56,579		82,728
Less: Net income attributable to the non-controlling interest	—		1,200		—		1,492
Net income (loss) attributable to Class A stockholders	$	29,847	$	(212)	$	56,579	$	81,236

Earnings per Class A share:
Basic	$	0.23	$	—	$	0.43	$	0.66
Diluted	$	0.21	$	—	$	0.41	$	0.15
Weighted-average shares outstanding:
Basic	131,354,059		123,638,723		131,096,686		123,381,190
Diluted	138,925,489		123,818,404		138,026,854		125,312,658

See accompanying notes to the unaudited consolidated financial statements.

HOSTESS BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, amounts in thousands)


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020

Net income	$	29,847	$	988	$	56,579	$	82,728
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swap designated as a cash flow hedge	(1,810)		(3,006)		5,251		(15,795)
Reclassification into net income	1,152		1,097		2,479		1,178
Income tax benefit (expense)	175		481		(2,051)		3,650
Comprehensive income (loss)	29,364		(440)		62,258		71,761
Less: Comprehensive loss attributed to non-controlling interest	—		1,096		—		659
Comprehensive income (loss) attributed to Class A stockholders	$	29,364	$	(1,536)	$	62,258	$	71,102

See accompanying notes to the unaudited consolidated financial statements.

HOSTESS BRANDS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands)


	Class A Voting Common Stock			Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount									Shares	Amount
Balance–December 31, 2020	130,347	$	13		$	1,281,018	$	(10,407)	$	356,101	444	$	(6,000)	$	1,620,725
Comprehensive income	—	—			—		6,162		26,732		—	—		32,894
Share-based compensation	146	—			2,723		—		—		—	—		2,723


Exercise of employee stock options	20	—			262		—		—		—	—		262
Exercise of public warrants	672	—			7,722		—		—		—	—		7,722
Payment of taxes for employee stock awards	—	—			(843)		—		—		—	—		(843)

SEC Form 10-Q filed by Hostess Brands, Inc.