Hostess Brands, Inc. (NASDAQ: TWNK, TWNKW) (“Hostess” or the
“Company”), today reported its financial results for the second
quarter ended June 30, 20181.
Business Highlights:
- Second quarter net revenue increased
$12.7 million, or 6.2%, resulting from the $20.8 million of net
revenue provided by the operations of the Chicago bakery, which the
Company acquired in February 2018.
- Hostess® branded point of sale
increased 2.4% for the 13-week period ended June 30, 2018. Point of
sale for the top seven sub-brands increased 4.4%. These sub-brands
represent 66.1% of the Company's net revenue.
- The Hostess® brand's market share for
the 13-week period ended June 30, 2018 was 17.5%, up 42 basis
points.
- Net income was $24.6 million compared
to $28.2 million. Diluted EPS was $0.18 per share consistent with
prior year.
- Adjusted EPS was $0.14 per share
compared to $0.17 per share.
- Adjusted EBITDA was $47.6 million, or
22.1% of net revenue, compared to $63.2 million or 31.1% of net
revenue.
- Cash and cash equivalents were $115.3
million as of June 30, 2018 with a leverage ratio of 4.22x, both
driven by year to date operating cash flows of $81.2 million
compared to $66.2 million for the first half of 2017.
- The Company expects continued growth
above the Sweet Baked Goods ("SBG") category average in 2018. The
updated full year adjusted EBITDA outlook has been reduced to $190
million to $200 million.
“During the second quarter I was pleased to continue to see
overall point of sale and market share growth ahead of the SBG
category giving us confidence in our growth potential moving
forward. The overall growth was reduced by meaningful and larger
than anticipated reductions in both promotional support and
associated retail inventory from one of our largest retail
partners. Additionally, the escalating inflationary pressures,
including transportation and other supply chain costs, were more
pronounced than we anticipated. The recently acquired Chicago
bakery added significant revenue at negative margins as we continue
to transform the bakery, further reducing our overall margins in
the second quarter,” commented Andy Callahan, President and Chief
Executive Officer of Hostess.
“We expect sequential improvement to our margins in the
second half of 2018 and as we progress into 2019, anchoring our
overall growth thesis. This includes a disciplined
approach to strategically align our pricing and merchandising
structure, recapture display volume and ensure the efficient
alignment of our distribution and manufacturing network to support
our growth. Additionally, as we complete the transformation of our
Chicago bakery, we believe it will be a platform to profitably
expand our presence in the Breakfast sub-category. We are confident
that the fundamental strength of the Hostess® brand along with the
results of these efforts will continue to create value for
stockholders,” commented Andy Callahan.
Second Quarter 2018
Net revenue was $215.8 million, an increase of 6.2%, or $12.7
million, compared to $203.2 million. The Chicago bakery, which the
Company acquired in the first quarter of 2018 to expand its
breakfast product portfolio and manufacturing capabilities,
contributed $20.8 million of net revenue, which was partially
offset by reduced Hostess® branded display volume and corresponding
retail inventory reduction at one of the Company's largest retail
partners. The Company continued to gain market share in the SBG
category with strong growth in sub-brands including Donettes® and
Hostess Bakery Petites®. The company gained 42 basis points of
market share through strong performance in the convenience, food
and club channels which contributed to overall point of sale growth
of 2.4% for the Hostess® brand ahead of the total SBG category.
1 This press release contains certain non-GAAP financial
measures, including adjusted earnings per share (“EPS”) and
adjusted EBITDA. Please refer to the schedules in the press release
for reconciliations of non-GAAP financial measures to the
comparable GAAP measure. Unless otherwise stated, all comparisons
are to the second quarter of 2017. All measures of market
performance contained in this press release, including point of
sale and market share, are specific to Hostess® branded products
within the SBG category and do not include other brands or products
sold outside of the SBG category.
Gross profit was $66.9 million, or 31.0% of net revenue,
compared to $88.4 million, or 43.5% of net revenue. The decline was
primarily attributed to a combination of the shift in mix of
revenue to include Chicago non-Hostess branded products, which are
currently unprofitable, and the continued efforts to transform the
recently acquired Chicago bakery which collectively resulted in 709
basis points lower margin. Over the short term, the Company
continues to invest in converting the operations and processes to
be more streamlined and efficient. The Company believes this
investment will provide the infrastructure necessary to deliver
profitable growth in the breakfast subcategory. Also contributing
to the lower gross profit this quarter were higher transportation
costs and other inflationary pressures, which resulted in a 447
basis point decrease in gross margin and lower overhead absorption
due to decreased production volume.
Advertising, selling, general and administrative (“SG&A”)
expenses were $27.9 million, or 12.9% of net revenue, compared to
$32.6 million, or 16.0% of net revenue. The decrease was attributed
primarily to lower expenses related to corporate incentives.
The decrease in the Company's effective tax rate from 28.6% to
0.8% was primarily attributed to a discrete tax benefit of $5.0
million resulting from a change in the Company's estimated state
tax rate based upon adjustments to the Company's state
apportionment factors. The lower federal statutory rate enacted by
the legislation commonly referred to as the Tax Cuts and Jobs Act
(“Tax Reform”) also impacted the effective tax rate for the
quarter.
Net income was $24.6 million, compared to net income of $28.2
million. Net income attributed to Class A stockholders was $19.3
million, or $0.18 per diluted share, compared to $18.8 million, or
$0.18 per diluted share.
Adjusted EPS was $0.14, compared to $0.17 per share. Adjusted
EBITDA was $47.6 million, or 22.1% of net revenue, compared to
adjusted EBITDA of $63.2 million, or 31.1% of net revenue. The
decreases in adjusted EPS and adjusted EBITDA were primarily
attributable to higher costs as a result of the integration of the
Chicago bakery and higher transportation costs and other
inflationary pressures. Reduced Hostess® branded display volume
also negatively impacted adjusted EBITDA. See "Reconciliation of
Non-GAAP Financial Measures" in the schedules to this press
release.
Cash from operations for the first half of the year was $81.2
million compared to $67.8 million for the first half of 2017. The
increase was primarily attributed to the timing of vendor payments
and customer receipts as well as lower income tax payments.
Sweet Baked Goods Segment: Net revenue was $204.2
million, an increase of $12.5 million, or 6.5%, compared to $191.7
million. The revenue increase driven by the addition of the Chicago
bakery was partially offset by reduced Hostess® branded display
volume and corresponding retail inventory reduction at one of the
Company's largest retail partners.
Gross profit was $64.4 million, or 31.5% of net revenue,
compared to $85.5 million, or 44.6% of net revenue. The decline was
primarily attributed to the addition of currently unprofitable
products and higher costs as a result of the integration of the
Chicago bakery and higher transportation costs and other
inflationary pressures.
In-Store Bakery Segment: Net revenue was $11.6 million,
an increase of $0.1 million, or 1.1%, compared to net revenue of
$11.5 million. Gross profit was $2.5 million, or 21.5% of net
revenue, compared to gross profit of $3.0 million, or 25.8% of net
revenue. The decrease in gross margin was primarily attributable to
a shift in product and channel mix and higher transportation
costs.
Outlook
Due to expected headwinds in the second half of 2018 from
reduced promotional support from one of its largest retail partners
and inflationary pressures, the Company has reduced its full year
guidance for 2018 adjusted EPS to $0.52 to $0.58 from the prior
guidance of $0.65 to $0.70 and now expects adjusted EBITDA of $190
million to $200 million compared to prior guidance of $220 million
to $230 million. See the schedules in this press release for
additional guidance and a reconciliation of anticipated 2018
adjusted EBITDA to anticipated net income of $73 million to $81
million for 2018.
Conference Call and Webcast
The Company will host a conference call and webcast today,
August 7, 2018 at 4:30 p.m. EDT to discuss the results for the
second quarter. Investors interested in participating in the live
call can dial 877-451-6152 from the U.S. and 201-389-0879
internationally. A telephone replay will be available approximately
two hours after the call concludes through Tuesday, August 21,
2018, by dialing 844-512-2921 from the U.S., or 412-317-6671 from
international locations, and entering confirmation code 13681719.
There will also be a simultaneous, live webcast available on the
Investor Relations section of the Company’s website at www.hostessbrands.com. The webcast will be
archived for 30 days.
About Hostess Brands, Inc.
Hostess® is the second leading brand by market share within the
SBG category. For the 13-week period ended June 30, 2018, the
Company's market share was 17.5% per Nielsen’s U.S. SBG category
data. The Company has a #1 leading market position within the two
largest SBG Segments: Donut Segment and Snack Cake Segment,
according to Nielsen U.S. Total Universe for the 13-week period
ended June 30, 2018. The Donut and Snack Cake Segments together
account for 47.1% of the SBG category's total dollar sales.
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 Bakery
Petites® and Fruit Pies, in addition to Twinkies® and CupCakes.
The Company has two reportable segments: SBG and In-Store
Bakery. The SBG segment consists of sweet baked goods that are sold
under the Hostess® and Dolly Madison® brands, Hostess® branded
bread and buns and frozen retail products. The operations
attributed to the Chicago Bakery including the Cloverhill® and Big
Texas® brands are also included in the SBG segment. The In-Store
Bakery segment consists of Superior® and Hostess® branded products
sold through the in-store bakery section of grocery and club
stores. Prior to the fourth quarter of 2017, the Company had two
operating segments: SBG and Other. The analysis above reflects the
new segment presentation for both the current and comparative
periods.
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 for 2017 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.
HOSTESS BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands,
except shares and per share data)
June 30, December 31,
ASSETS 2018 2017 Current assets: Cash
and cash equivalents $ 115,272 $ 135,701 Accounts receivable, net
110,470 101,012 Inventories 38,191 34,345 Prepaids and other
current assets 11,276 7,970 Total current assets 275,209
279,028 Property and equipment, net 199,839 174,121 Intangible
assets, net 1,911,099 1,923,088 Goodwill 578,345 579,446 Other
assets, net 18,137 10,592 Total assets $ 2,982,629 $
2,966,275
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Long-term debt and capital lease obligation
payable within one year $ 11,268 $ 11,268 Tax receivable agreement
payments payable within one year 700 14,200 Accounts payable 70,858
49,992 Customer trade allowances 42,012 40,511 Accrued expenses and
other current liabilities 10,810 11,880 Total current
liabilities 135,648 127,851 Long-term debt and capital lease
obligation 982,328 987,920 Tax receivable agreement 68,584 110,160
Deferred tax liability 272,966 267,771 Total liabilities
1,459,526 1,493,702 Class A common stock, $0.0001 par value,
200,000,000 shares authorized, 99,919,503 and 99,791,245 shares
issued and outstanding at June 30, 2018 and December 31, 2017,
respectively 10 10 Class B common stock, $0.0001 par value,
50,000,000 shares authorized, 30,255,184 and 30,319,564 shares
issued and outstanding at June 30, 2018 and December 31, 2017,
respectively 3 3 Additional paid in capital 923,502 920,723
Accumulated other comprehensive income 4,177 1,318 Retained
earnings 251,593 208,279 Stockholders’ equity 1,179,285
1,130,333 Non-controlling interest 343,818 342,240 Total
liabilities and stockholders’ equity $ 2,982,629 $ 2,966,275
HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited, amounts in thousands,
except shares and per share data)
Three Months Ended Six Months Ended
June 30,2018 June 30,2017
June 30,2018 June 30,2017
Net revenue $ 215,849 $ 203,178 $ 424,592 $ 387,716 Cost of
goods sold 148,992 114,734 286,494
219,976 Gross profit 66,857 88,444 138,098
167,740 Operating costs and expenses: Advertising and
marketing 8,938 8,111 17,808 15,433 Selling expense 7,751 8,700
15,139 16,812 General and administrative 11,185 15,739 25,746
28,921 Amortization of customer relationships 5,994 5,994 11,989
11,867 Tax receivable agreement liability remeasurement (1,752 ) —
(1,752 ) — Impairment of property and equipment — — 1,417 — Related
party expenses 92 108 184 192 Business combination transaction
costs — — 47 — Total operating costs
and expenses 32,208 38,652 70,578
73,225 Operating income 34,649 49,792 67,520 94,515 Other expense
(income): Interest expense, net 9,749 10,035 19,089 19,865 Gain on
buyout of tax receivable agreement — — (12,372 ) — Other expense 86
239 169 953 Total other expense 9,835
10,274 6,886 20,818 Income before
income taxes 24,814 39,518 60,634 73,697 Income tax expense 194
11,311 6,712 21,291 Net income 24,620
28,207 53,922 52,406 Less: Net income attributable to the
non-controlling interest 5,337 9,377 10,799
17,744 Net income attributable to Class A stockholders $
19,283 $ 18,830 $ 43,123 $ 34,662
Earnings per Class A share: Basic $ 0.19 $ 0.19 $ 0.43 $ 0.35
Diluted $ 0.18 $ 0.18 $ 0.41 $ 0.33 Weighted-average Class A shares
outstanding: Basic 99,939,642 98,943,690 99,916,161 98,600,075
Diluted 104,773,094 107,184,341 104,911,474 106,004,898
Results of
Operations by Segment
Three Months Ended Six Months
Ended
(In
thousands)
June 30,
2018
June 30,
2017
June 30,
2018
June 30,
2017
Net Revenue Sweet baked goods $ 204,237 $ 191,695 $ 403,529 $
366,488 In-Store Bakery 11,612 11,483 21,063
21,228 $ 215,849 $ 203,178 $ 424,592 $ 387,716
Gross Profit Sweet baked goods $ 64,359 $ 85,486 $ 133,797 $
162,268 In-Store Bakery 2,498 2,958 4,301
5,472 $ 66,857 $ 88,444 $ 138,098 $ 167,740
HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited, amounts in
thousands)
Six Months Ended June
30,2018 June 30,2017
Operating activities Net income $ 53,922 $ 52,406
Depreciation and amortization 20,648 18,854 Impairment of property
and equipment 1,417 — Debt premium amortization (541 ) (470 ) Tax
receivable agreement remeasurement and gain on buyout (14,124 ) —
Stock-based compensation 2,721 4,360 Non-cash gain on debt
modification — (394 ) Gain on sale/abandonment of property and
equipment — (15 ) Deferred taxes 4,994 12,505 Change in operating
assets and liabilities: Accounts receivable (8,458 ) (10,883 )
Inventories 3,558 (3,353 ) Prepaids and other current assets (1,643
) (140 ) Accounts payable and accrued expenses 17,187 (6,418 )
Customer trade allowances 1,501 1,327 Net cash
provided by operating activities 81,182 67,779
Investing activities Purchases of property and equipment
(19,836 ) (15,101 ) Acquisition of business (23,910 ) — Proceeds
from sale of assets — 54 Acquisition and development of software
assets (1,591 ) (859 ) Net cash used in investing activities
(45,337 ) (15,906 )
Financing activities Repayments of
long-term debt and capital lease obligation (5,051 ) (2,570 ) Debt
fees — (1,017 ) Distributions to non-controlling interest (9,463 )
(8,918 ) Tax payments related to issuance of shares to employees
(407 ) — Payments on tax receivable agreement (41,353 ) — Proceeds
from the exercise of warrants — 1 Net cash used in
financing activities (56,274 ) (12,504 )
Net increase in cash
and cash equivalents (20,429 ) 39,369 Cash and cash equivalents
at beginning of period 135,701 26,855
Cash and
cash equivalents at end of period $ 115,272 $ 66,224
Supplemental Disclosures of Cash Flow
Information: Cash paid during the period for: Interest $ 20,358
$ 24,958 Taxes paid $ 3,959 $ 9,930 Supplemental disclosure of
non-cash investing: Change in accrued capital expenditures $ 1,388
$ 123
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDA and adjusted EPS are non-GAAP financial measures
commonly used in the Company's industry and should not be construed
as an alternative to net income or earnings per share as
indicators of operating performance or as an alternative to cash
flow provided by operating activities as a measure of liquidity
(each as determined in accordance with GAAP). These measures may
not be comparable to similarly titled measures reported by other
companies. The Company has included adjusted EBITDA and adjusted
EPS because it believes the measures provide management and
investors with additional information to measure the Company's
performance and liquidity, estimate the Company's value and
evaluate the Company's ability to service debt.
Adjusted EBITDA
The Company defines adjusted EBITDA as net income adjusted to
exclude (i) interest expense, net, (ii) depreciation and
amortization, (iii) income taxes and (iv) as further adjusted to
eliminate the impact of certain items that the Company does not
consider indicative of its ongoing operating performance. These
further adjustments are itemized below. You are encouraged to
evaluate these adjustments and the reasons the Company considers
them appropriate for supplemental analysis. In evaluating adjusted
EBITDA, you should be aware that in the future the Company may
incur expenses that are the same as or similar to some of the
adjustments set forth below. The Company's presentation of adjusted
EBITDA should not be construed as an inference that its future
results will be unaffected by unusual or non-recurring items.
Adjusted EBITDA has limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for
analysis of the Company's results as reported under GAAP. For
example, adjusted EBITDA:
- does not reflect the Company's capital
expenditures, future requirements for capital expenditures or
contractual commitments;
- does not reflect changes in, or cash
requirements for, the Company's working capital needs;
- does not reflect the significant
interest expense, or the cash requirements necessary to service
interest or principal payments, on the Company's debt; and
- does not reflect payments related to
income taxes, the tax receivable agreement or distributions to the
non-controlling interest to reimburse its tax liability.
Adjusted EPS
Net income attributed to Class A stockholders is adjusted to
exclude certain items that affect comparability, then divided by
weighted average diluted Class A shares outstanding to determine
adjusted EPS. The adjustments are itemized below. You are
encouraged to evaluate these adjustments and the reasons the
Company considers them appropriate for supplemental analysis. In
evaluating adjusted EPS, you should be aware that in the future the
Company may incur expenses that are the same as or similar to some
of the adjustments set forth below. The presentation of adjusted
EPS should not be construed as an inference that future results
will be unaffected by unusual or recurring items.
Reconciliation of Adjusted EBITDA(Unaudited)
Three Months Ended Six Months Ended (In
thousands) June 30,
2018
June 30,
2017
June 30,
2018
June 30,
2017
Net income $ 24,620 $ 28,207 $ 53,922 $ 52,406
Non-GAAP adjustments: Income tax provision 194 11,311 6,712 21,291
Interest expense, net 9,749 10,035 19,089 19,865 Depreciation and
amortization 10,557 9,588 20,648 18,854 Share-based compensation
1,098 3,839 2,721 4,360 Tax Receivable Agreement remeasurement and
gain on buyout (1,752 ) — (14,124 ) — — Impairment of property and
equipment — — 1,417 — Tax Reform bonuses 602 — 1,585 — Chicago
bakery acquisition and integration costs 1,817 — 1,864 — Other i.
712 239 796 953
Adjusted EBITDA $
47,597 $ 63,219 $ 94,630 $ 117,729
i. For the three and six months ended June 30, 2018, other
expenses included transaction and other non-operating professional
fees. For the three and six months ended June 30, 2017, other
expense primarily included professional fees incurred related to
the secondary public offering of common stock and the registration
of certain privately held warrants offset by a gain recognized
related to the modification of long-term debt.
Reconciliation of Adjusted EPS
(unaudited)
Three Months Ended Six Months
Ended (In thousands except share and per share data)
June 30,
2018
June 30,
2017
June 30,
2018
June 30,
2017
Net income attributed to Class A stockholders $ 19,283 $
18,830 $ 43,123 $ 34,662 Non-GAAP adjustments: Tax Receivable
Agreement remeasurement and gain on buyout (1,752 ) — (14,124 ) —
Remeasurement of deferred taxes (4,995 ) — (4,995 ) — Impairment of
property and equipment — — 1,417 — Tax Reform bonuses 602 — 1,585 —
Chicago bakery acquisition and integration costs 1,817 — 1,864 —
Gain on debt modification — (174 ) — (174 ) Tax impact of
adjustments (57 ) 51 1,064 51 Non-controlling interest allocation
of adjustments (562 ) 41 (1,131 ) 41 Numerator $
14,336 $ 18,748 $ 28,803 $ 34,580
Weighted average Class A shares outstanding-diluted 104,773,094
107,184,341 104,911,474 106,004,898
Adjusted EPS $ 0.14 $ 0.17 $ 0.27 $
0.33
Reconciliation of Adjusted EBITDA-Guidance for the year ended
December 31, 2018
Reconciliation of 2018 adjusted EBITDA guidance to net income
presents inherent difficulty in forecasting certain amounts that
are necessary for a full reconciliation to net income. The
Company's outlook for 2018 adjusted EBITDA is based on the same
methodology used to present adjusted EBITDA for completed periods.
However, the amounts, if any, of the non-recurring items that
are excluded from adjusted EBITDA are highly uncertain and
incapable of estimation, and have not been included in the table
below. Such non-recurring items may include non-cash expenses
for earn out liabilities, the impact to net income resulting from
Tax Receivable Agreement transactions, and/or other items. As such
items are excluded from adjusted EBITDA, the occurrence and
magnitude thereof, while impacting net income and the
reconciliation of adjusted EBITDA to net income, would have no
impact on adjusted EBITDA for 2018. In addition, the below
reconciliation assumes that the overall capital structure of the
Company and effective income tax rates are consistent with the
structure at June 30, 2018. Changes to these assumptions could
significantly impact net income for 2018, and accordingly, the
reconciliation of adjusted EBITDA to net income, but not adjusted
EBITDA itself. For additional information regarding adjusted
EBITDA, refer to the related explanations presented above under
“Reconciliation of Adjusted EBITDA”.
2018 Guidance Adjusted EBITDA Reconciliation (Unaudited)
EstimatedYear Ended December 31,
2018 Amounts in millions, except shares and per share
data Net income attributed to common stockholders $ 52 -
$57 Net income attributed to the non-controlling interest 21
- 24 Net income 73 - 81 Non-GAAP adjustments: Income tax
provision 19 - 21 Interest expense, net 40 - 40 Depreciation and
amortization 42 - 42 Share-based compensation 8 - 8 Other expenses
8 - 8 Adjusted EBITDA $ 190 - $200
Other 2018
Guidance EstimatedYear Ended
December 31, 2018 Earnings per Class A share: Basic $ 0.52 -
$0.57 Diluted $ 0.49 - $0.55 Adjusted $ 0.52 - $0.58
Weighted-average shares outstanding: Basic 99,922,979 Diluted
105,073,977 Cash provided by operations $ 145 - $150
Net increase in cash and cash equivalents $ 5 - $10 Capital
expenditures $ 50 - $60 Leverage ratio
4.20x - 4.45x
Expected effective tax rate giving effect to the non-controlling
interest 20% - 21% Expected statutory corporate federal and state
income tax rate applied to income attributed to Class A
stockholders 27% - 28% Payments related to the Company's current
federal and state income tax liabilities $ 4 - $5 Distributions to
holders of the non-controlling interest to cover income tax
payments $ 11 - $12 2018 payments to the selling equity holders of
Hostess Holdings related to 2017 activity under the terms of the
tax receivable agreement $ 8 - $9
Reconciliation of Adjusted
EBITDA
For the Trailing Twelve Months Ended
June 30, 2018
(Unaudited)
Year EndedDecember 31, 2017
Less: SixMonths EndedJune
30, 2017
Plus: SixMonths EndedJune
30, 2018
Twelve Months EndedJune 30, 2018 Net
income $ 258,108 $ (52,406 ) $ 53,922 $ 259,624 Plus
non-GAAP adjustments: Income tax provision (benefit) (67,204 )
(21,291 ) 6,712 (81,783 ) Interest expense, net 39,174 (19,865 )
19,089 38,398 Depreciation and amortization 38,170 (18,854 ) 20,648
39,964 Share-based compensation 7,413 (4,360 ) 2,721 5,774 Tax
receivable agreement remeasurement and gain on buyout (50,222 ) —
(14,124 ) (64,346 ) Chicago bakery acquisition and integration
costs — — 1,864 1,864 Loss on debt modification 2,554 — — 2,554
Impairment of property and equipment 1,003 — 1,417 2,420 Tax Reform
bonuses — — 1,585 1,585 Other expense 1,216 (953 )
796 1,059 Adjusted EBITDA $ 230,212 $ (117,729
) $ 94,630 $ 207,113
Leverage Ratio
(Unaudited)
Twelve
Months Ended
June 30, 2018
(in thousands)
Estimated YearEnded December
31,2018(in millions)
Long-term debt and capital lease obligations, including current
maturities $ 993,596 $ 988 - $988 Less: capital lease obligation
(487 ) - Less: Unamortized debt premium and issuance costs (4,315 )
(4) - (4) Term loan debt 988,794 984 - 984 Less: cash and
cash equivalents (115,272 ) (140) - (145) Net term loan debt
$ 873,522 $ 844 - $839 Adjusted EBITDA $ 207,113 $
190 - $200 Leverage ratio 4.22 4.45 - 4.20
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180807005799/en/
Investors:Katie
TurnerICR646-277-1228katie.turner@icrinc.comorMedia:Hannah
ArnoldLAK Public Relations,
Inc.212-329-1417harnold@lakpr.comorMarie EspinelLAK Public
Relations, Inc.212-899-4744mespinel@lakpr.com
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