Reiterates Full Year 2017 Financial
Outlook
Hostess Brands, Inc. (NASDAQ: TWNK, TWNKW) (“Hostess” or the
“Company”) today announced it is completing the acquisition of
certain US breakfast assets of ARYZTA LLC (“ARYZTA”), including one
of its Chicago Cloverhill bakery facilities and the Big Texas® and
Cloverhill® brands. In addition to the brands, the acquisition
includes supply partnerships with several key retailers of Hostess.
Until June 2017, the bakery was a significant co-manufacturer to
the Company.
“This is an excellent enabling acquisition for the Hostess
breakfast strategy and fills a key strategic gap in our product
portfolio,” said Dean Metropoulos, Executive Chairman of Hostess.
“The Big Texas and Cloverhill brands and private label partnerships
will add significant strength to our growing breakfast
business.”
Highlights of the transaction include the following:
- The Big Texas® and Cloverhill® brands
distribution strength provides Hostess greater access to the club,
vending, cash and carry and independent convenience stores sales
channels; and provides for a strong breakfast partnership with
several existing key retailers
- Significantly expands the Hostess range
of offerings in the Breakfast category of Sweet Baked Goods
(“SBG”), including HoneyBuns, Danish Pastries and Cinnamon Rolls,
among other offerings. With this acquisition, the Company expects
to reduce its reliance on co-manufacturing;
- The 137,000 square-foot bakery facility
represents the largest individually-wrapped Danish pastry facility
in North America;
“This strategic acquisition allows us to bring important product
manufacturing in-house as we expand and drive growth in our
breakfast product portfolio,” commented Bill Toler, President
and Chief Executive Officer of Hostess. “In addition, this purchase
will enable Hostess to forgo in-house capital investments and
create significant value over the next few years.”
“We have had a long supply relationship with ARYZTA for our
breakfast items and are eager to expand our growing breakfast
offerings with these capabilities. In addition, the positioning and
consumer loyalty to the Big Texas and Cloverhill brands will
broaden our participation in a number of distribution outlets,”
said Andy Jacobs, Chief Operating Officer of Hostess. “This
acquisition will enhance our competitive position as we have the
opportunity to further build our branded distribution and market
share in the breakfast category within sweet baked goods1, as well
as enhance new and existing retailer relationships, particularly in
the complementary club and vending sales channels.”
The acquired assets include inventory, property, plant,
equipment and customer relationships serviced by the Chicago
Cloverhill bakery facility. The Company expects short-term EBITDA
losses of approximately $15 million to $20 million and
corresponding earnings per diluted share dilution of approximately
$0.10 to $0.12 as a result of anticipated operating losses from the
acquired business through the second half of 2018 as the Company
improves the sales and operating performance of the facility. The
Company expects the acquired business to be EBITDA positive in the
first half of 2019. By 2020, the Company expects this business to
contribute approximately $20 million to $25 million in EBITDA. The
Company will provide a formal outlook for full year 2018 when it
reports financial results for the fourth quarter and full year
ended December 31, 2017 in late February.
The Company believes this acquisition is an efficient use of
cash and continues to have the financial flexibility to consider
potential future uses of cash including funding acquisitions,
optional debt repayments or opportunistically simplifying its
equity structure. Additionally, Hostess expects to immediately
depreciate a substantial portion of the purchase price for tax
purposes.
Full Year 2017 Outlook
Today, the Company also confirmed its full year 2017 financial
outlook, prior to giving effect to the favorable impact of recently
enacted federal tax reform, previously provided on November 8,
2017.
The Company believes that it is well positioned to grow and
enhance shareholder value through the execution of its strategic
initiatives. These key strategic initiatives are focused on further
core distribution expansion, continued new product initiatives and
line extensions, the pursuit of white space opportunities and
serving as a platform for future acquisitions.
About Hostess Brands, Inc.
The Company is one of the leading packaged food companies
focused on developing, manufacturing, marketing, selling and
distributing fresh sweet baked goods in the United States. The
brand's history dates back to 1919, when the Hostess® CupCake was
introduced to the public, followed by Twinkies® in 1930. Today, the
Company produces a variety of new and classic treats including Ding
Dongs®, Ho Hos®, Donettes®, Hostess Bake Shop and Fruit Pies, in
addition to Twinkies® and CupCakes.
For more information about Hostess products and Hostess Brands,
please visit hostesscakes.com. Follow Hostess on Twitter:
@Hostess_Snacks; on Facebook: facebook.com/Hostess; on Instagram:
Hostess_Snacks; and on Pinterest: pinterest.com/hostesscakes.
Forward-Looking Statements
This press release contains statements reflecting the Company's
views about its future performance that constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended, that involve substantial risks and
uncertainties. 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 the
Company's future operating performance and statements addressing
events and developments that the Company expects or anticipate will
occur are also considered as forward-looking statements. All
forward-looking statements included herein are made only as of the
date hereof. The Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information,
future events, or otherwise.
These statements inherently involve risks and uncertainties that
could cause actual results to differ materially from those
anticipated in such forward-looking statements. These risks and
uncertainties include, but are not limited to, maintaining,
extending and expanding the Company's reputation and brand image;
protecting intellectual property rights; leveraging the Company's
brand value to compete against lower-priced alternative brands;
correctly predicting, identifying and interpreting changes in
consumer preferences and demand and offering new products to meet
those changes; operating in a highly competitive industry; the
continued ability to produce and successfully market products with
extended shelf life; the ability to drive revenue growth in key
products or add products that are faster-growing and more
profitable; volatility in commodity, energy, and other input
prices; dependence on major customers; geographic focus could make
the Company particularly vulnerable to economic and other events
and trends in North America; increased costs in order to comply
with governmental regulation; general political, social and
economic conditions; a portion of the workforce belongs to unions
and strikes or work stoppages could cause the business to suffer;
product liability claims, product recalls, or regulatory
enforcement actions; unanticipated business disruptions; dependence
on third parties for significant services; insurance may not
provide adequate levels of coverage against claims; failures,
unavailability, or disruptions of the Company's information
technology systems; the Company's ability to achieve expected
synergies and benefits and performance from the Company's strategic
acquisitions; dependence on key personnel or a highly skilled and
diverse workforce; and the Company's ability to finance
indebtedness on terms favorable to the Company; and other risks as
set forth from time to time in the Company's Securities and
Exchange Commission filings.
As a result of a number of known and unknown risks and
uncertainties, the Company's actual results or performance may be
materially different from those expressed or implied by these
forward-looking statements. Risks and uncertainties are identified
and discussed in Item 1A-Risk Factors in the Company's Annual
Report on Form 10-K and its subsequent Securities and Exchange
Commission filings. All subsequent written or oral forward-looking
statements attributable to us or persons acting on the Company's
behalf are expressly qualified in their entirety by these risk
factors. The Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information,
future events, or otherwise.
1 For the 52-week period ended December 30, 2017, Breakfast
represented 51% of the SBG category and Hostess has a 15% share
compared to All Day Snacking, which represents 49% of the SBG
category, where Hostess has a 20% share per Nielsen’s U.S. SBG
category data.
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