twnk-20220630

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, 2022
						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

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 - 136,496,962 shares at August 1, 2022

HOSTESS BRANDS, INC.

FORM 10-Q

For the Six Months Ended June 30, 2022

INDEX


		Page
PART I - Financial Information
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited)	4
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed 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	20
Item 4.	Controls and Procedures	20
PART II - Other Information
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Default Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22

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 for the year ended December 31, 2021, 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, except to the extent required by law.

HOSTESS BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	June 30,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	206,831	$	249,159
Short-term investments	20,918		—
Accounts receivable, net	178,769		148,180
Inventories	60,809		52,813

Prepaids and other current assets	10,540		10,564
Total current assets	477,867		460,716
Property and equipment, net	359,444		335,305
Intangible assets, net	1,932,636		1,944,392
Goodwill	706,615		706,615
Other assets, net	52,645		19,283
Total assets	$	3,529,207	$	3,466,311

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Long-term debt and lease obligations payable within one year	$	14,009	$	14,170
Tax receivable agreement payments payable within one year	11,100		11,600
Accounts payable	84,147		68,104
Customer trade allowances	60,668		52,746
Accrued expenses and other current liabilities	42,079		47,009

Total current liabilities	212,003		193,629
Long-term debt and lease obligations	1,092,797		1,099,975
Tax receivable agreement obligations	125,452		134,265
Deferred tax liability	336,587		317,847
Other long-term liabilities	1,635		1,605
Total liabilities	1,768,474		1,747,321

Commitments and Contingencies (Note 9)

Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 142,546,549 shares issued and 136,486,712 shares outstanding as of June 30, 2022 and 142,031,329 shares issued and 138,278,573 shares outstanding as of December 31, 2021	14		14

Additional paid in capital	1,304,970		1,303,254
Accumulated other comprehensive income (loss)	22,993		(506)
Retained earnings	540,434		475,400
Treasury stock	(107,678)		(59,172)
Stockholders’ equity	1,760,733		1,718,990

Total liabilities and stockholders’ equity	$	3,529,207	$	3,466,311

See accompanying notes to the unaudited condensed consolidated financial statements.

HOSTESS BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended				Six Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021

Net revenue	$	340,472	$	291,485	$	672,523	$	556,906
Cost of goods sold	227,772		186,379		444,199		356,281
Gross profit	112,700		105,106		228,324		200,625
Operating costs and expenses:
Advertising and marketing	15,587		13,144		27,537		24,925
Selling	10,137		9,454		19,914		18,084
General and administrative	30,127		23,504		59,799		45,689
Amortization of customer relationships	5,878		5,878		11,756		11,756


Total operating costs and expenses	61,729		51,980		119,006		100,454
Operating income	50,971		53,126		109,318		100,171
Other expense (income):
Interest expense, net	9,741		9,954		19,407		19,971


Change in fair value of warrant liabilities	—		531		—		455
Other expense (income)	(507)		1,067		(71)		1,430
Total other expense	9,234		11,552		19,336		21,856
Income before income taxes	41,737		41,574		89,982		78,315
Income tax expense	11,261		11,727		24,948		21,736
Net income	$	30,476	$	29,847	$	65,034	$	56,579

Earnings per Class A share:
Basic	$	0.22	$	0.23	$	0.47	$	0.43
Diluted	$	0.22	$	0.21	$	0.47	$	0.41
Weighted-average shares outstanding:
Basic	137,909,156		131,354,059		138,255,803		131,096,686
Diluted	138,958,242		138,925,489		139,263,303		138,026,854

See accompanying notes to the unaudited condensed consolidated financial statements.

HOSTESS BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, amounts in thousands)


	Three Months Ended				Six Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021

Net income	$	30,476	$	29,847	$	65,034	$	56,579
Other comprehensive income:
Unrealized gain (loss) on interest rate swap and foreign currency contracts designated as a cash flow hedge	6,327		(1,810)		29,983		5,251
Reclassification into net income	823		1,152		1,885		2,479
Income tax expense	(1,877)		175		(8,369)		(2,051)
Comprehensive income	$	35,749	$	29,364	$	88,533	$	62,258

See accompanying notes to the unaudited condensed consolidated financial statements.

HOSTESS BRANDS, INC.

CONDENSED 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, 2021	138,279	$	14		$	1,303,254	$	(506)	$	475,400	3,753	$	(59,172)	$	1,718,990
Comprehensive income	—	—			—		18,226		34,558		—	—		52,784
Share-based compensation	350	—			2,339		—		—		—	—		2,339


Exercise of employee stock options	105	—			1,662		—		—		—	—		1,662

Payment of taxes for employee stock awards	—	—			(5,216)		—		—		—	—		(5,216)
Repurchase of Common Stock	(459)	—			—		—		—		459	(9,680)		(9,680)

Balance–March 31, 2022	138,275	$	14		$	1,302,039	$	17,720	$	509,958	4,212	$	(68,852)	$	1,760,879
Comprehensive income	—	—			—		5,273		30,476		—	—		35,749
Share-based compensation	23	—			2,648		—		—		—	—		2,648


Exercise of employee stock options	37	—			579		—		—		—	—		579

Payment of taxes for employee stock awards	—	—			(296)		—		—		—	—		(296)
Repurchase of common stock	(1,848)	—			—		—		—		1,848	(38,826)		(38,826)

Balance–June 30, 2022	136,487	$	14		$	1,304,970	$	22,993	$	540,434	6,060	$	(107,678)	$	1,760,733


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

Balance–March 31, 2021	131,185	$	13		$	1,290,882	$	(4,245)	$	382,833	444	$	(6,000)	$	1,663,483
Comprehensive income (loss)	—	—			—		(483)		29,847		—	—		29,364
Share-based compensation	22	—			1,640		—		—

SEC Form 10-Q filed by Hostess Brands Inc.