• | Pro forma combined net revenue increased 21.6%, or $31.8 million, to $178.8 million (revenue increased 14.8%, excluding Superior acquisition) |
• | Pro forma combined gross margin improved 150 basis points to 43.0% |
• | Pro forma combined net income was $22.0 million for the fourth quarter of 2016, an increase of $4.8 million compared to the fourth quarter of 2015 |
• | Pro forma combined EPS on a fully diluted basis was $0.14 per share |
• | Pro forma combined adjusted EBITDA increased 25.4%, or $10.7 million, to $52.9 million |
• | Pro forma combined net revenue increased 17.2%, or $106.8 million, to $727.6 million (revenue increased 12.9% excluding Superior acquisition) |
• | Pro forma combined gross margin improved 116 basis points to 43.4% |
• | Pro forma combined net income was $82.4 million for 2016, a decrease of $6.3 million compared to 2015 |
• | Pro forma combined EPS on a fully diluted basis was $0.54 per share |
• | Pro forma combined adjusted EBITDA increased 21.0%, or $37.4 million, to $215.3 million |
December 31, | December 31, | |||||||
ASSETS | 2016 | 2015 | ||||||
(Successor) | (Predecessor) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 26,855 | $ | 64,473 | ||||
Restricted cash | — | 4,655 | ||||||
Accounts receivable, net | 89,237 | 68,518 | ||||||
Inventories | 30,444 | 25,130 | ||||||
Prepaids and other current assets | 4,827 | 6,041 | ||||||
Total current assets | 151,363 | 168,817 | ||||||
Property and equipment, net | 153,224 | 128,078 | ||||||
Restricted cash | — | 17,225 | ||||||
Intangible assets, net | 1,946,943 | 263,579 | ||||||
Goodwill | 588,460 | 56,992 | ||||||
Deferred finance charges | — | 1,696 | ||||||
Other assets, net | 7,902 | 7,142 | ||||||
Total assets | $ | 2,847,892 | $ | 643,529 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY/PARTNERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Long-term debt and capital lease obligation payable within one year | $ | 11,496 | $ | 9,250 | ||||
Accounts payable | 34,083 | 28,053 | ||||||
Deferred distributions to partners | — | 4,655 | ||||||
Customer trade allowances | 36,691 | 29,638 | ||||||
Accrued expenses and other current liabilities | 21,656 | 21,162 | ||||||
Total current liabilities | 103,926 | 92,758 | ||||||
Long-term debt and capital lease obligation | 993,374 | 1,193,667 | ||||||
Tax receivable agreement | 165,384 | — | ||||||
Deferred tax liability | 353,797 | — | ||||||
Deferred distributions to partners | — | 17,225 | ||||||
Total liabilities | 1,616,481 | 1,303,650 | ||||||
Class A Common Stock (Successor), $0.0001 par value, 200,000,000 shares authorized, 98,250,917 issued and outstanding | 10 | — | ||||||
Class B Common Stock (Successor), $.0001 par value, 50,000,000 shares authorized 31,704,988 issued and outstanding | 3 | — | ||||||
Additional paid in capital (Successor) | 912,824 | — | ||||||
Retained earnings (accumulated deficit) | (15,618 | ) | — | |||||
Stockholders’ equity (Successor)/ partners’ deficit (Predecessor) | 897,219 | (622,130 | ) | |||||
Non-controlling interest | 334,192 | (37,991 | ) | |||||
Total liabilities and stockholders’ equity (partners' deficit) | $ | 2,847,892 | $ | 643,529 |
2016 | 2015 | 2014 | ||||||||||||||
(In thousands except per share data) | From November 4, 2016 through December 31, 2016 | From January 1, 2016 through November 3, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||||
(Successor) | (Predecessor) | (Predecessor) | (Predecessor) | |||||||||||||
Net revenue | $ | 111,998 | $ | 615,588 | $ | 620,815 | $ | 554,695 | ||||||||
Cost of goods sold | 73,284 | 346,864 | 355,963 | 320,763 | ||||||||||||
Special employee incentive compensation | — | 2,195 | 2,649 | — | ||||||||||||
Gross profit | 38,714 | 266,529 | 262,203 | 233,932 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Advertising and marketing | 5,245 | 30,626 | 31,967 | 32,197 | ||||||||||||
Selling expense | 5,033 | 25,730 | 29,484 | 25,664 | ||||||||||||
General and administrative | 7,322 | 38,391 | 31,531 | 33,122 | ||||||||||||
Special employee incentive compensation | — | 2,503 | 1,274 | — | ||||||||||||
Amortization of customer relationships | 3,922 | 1,185 | 851 | 623 | ||||||||||||
Impairment of property and equipment | — | 7,300 | 2,700 | 13,241 | ||||||||||||
Loss on sale/abandonment of property and equipment and bakery shutdown costs | — | 2,551 | 4,182 | 5,150 | ||||||||||||
Business combination transaction costs | — | 31,832 | — | — | ||||||||||||
Related party expenses | 26,799 | 3,539 | 4,306 | 4,468 | ||||||||||||
Total operating costs and expenses | 48,321 | 143,657 | 106,295 | 114,465 | ||||||||||||
Operating income (loss) | (9,607 | ) | 122,872 | 155,908 | 119,467 | |||||||||||
Other (income) expense: | ||||||||||||||||
Interest expense, net | 6,649 | 60,384 | 50,011 | 37,447 | ||||||||||||
(Gain) loss on debt extinguishment | (763 | ) | — | 25,880 | — | |||||||||||
Other expense (income) | 754 | 1,624 | (8,743 | ) | 556 | |||||||||||
Total other expense | 6,640 | 62,008 | 67,148 | 38,003 | ||||||||||||
Income (loss) before income taxes | (16,247 | ) | 60,864 | 88,760 | 81,464 | |||||||||||
Income tax expense (benefit) | (7,762 | ) | 439 | — | — | |||||||||||
Net income (loss) | (8,485 | ) | 60,425 | 88,760 | 81,464 | |||||||||||
Less: Net income (loss) attributable to the non-controlling interest | (4,081 | ) | 3,214 | 4,507 | 4,267 | |||||||||||
Net income (loss) attributable to Class A shareholders | $ | (4,404 | ) | $ | 57,211 | $ | 84,253 | $ | 77,197 | |||||||
Earnings (loss) per Class A share: | ||||||||||||||||
Basic | (0.05 | ) | ||||||||||||||
Diluted | (0.05 | ) | ||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 97,792 | |||||||||||||||
Diluted | 97,792 |
2016 | 2015 | 2014 | |||||||||||||||
Successor | Predecessor | ||||||||||||||||
(In thousands) | From November 4, 2016 through December 31, 2016 | From January 1, 2016 through November 3, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||
Net cash provided by operating activities | $ | 13,611 | $ | 102,221 | $ | 132,972 | $ | 108,329 | |||||||||
Net cash provided by (used in) investing activities | $ | (428,196 | ) | $ | (76,579 | ) | $ | 17,880 | $ | (91,393 | ) | ||||||
Net cash used in financing activities | $ | (232,345 | ) | $ | (31,596 | ) | $ | (296,002 | ) | $ | (9,769 | ) |
Unaudited Pro Forma Combined Statement of Operations For the Year Ended December 31, 2016 compared to the Year Ended December 31, 2015 | ||||||||||||||||||||
Historical (i) | ||||||||||||||||||||
(Successor) | (Predecessor) | Pro Forma Combined (Unaudited) | (Predecessor) | |||||||||||||||||
(In thousands except per share data) | From November 4, 2016 to December 31, 2016 | From January 1, 2016 to November 3, 2016 | Pro Forma Adjustments | Year Ended December 31, 2016 | Year Ended December 31, 2015 | |||||||||||||||
Net revenue | $ | 111,998 | $ | 615,588 | $ | — | $ | 727,586 | $ | 620,815 | ||||||||||
Cost of goods sold | 73,284 | 346,864 | (8,541 | ) | (ii) | 411,607 | 355,963 | |||||||||||||
Special employee incentive compensation | — | 2,195 | (2,195 | ) | (iii) | — | 2,649 | |||||||||||||
Gross profit | 38,714 | 266,529 | 10,736 | 315,979 | 262,203 | |||||||||||||||
Advertising and marketing | 5,245 | 30,626 | — | 35,871 | 31,967 | |||||||||||||||
Selling expenses | 5,033 | 25,730 | — | 30,763 | 29,484 | |||||||||||||||
General and administrative | 7,322 | 38,391 | (3,902 | ) | (iv) | 41,811 | 31,531 | |||||||||||||
Special employee incentive compensation | — | 2,503 | (2,503 | ) | (iii) | — | 1,274 | |||||||||||||
Amortization of customer relationships | 3,922 | 1,185 | 20,050 | (v) | 25,157 | 851 | ||||||||||||||
Impairment of property and equipment | — | 7,300 | — | 7,300 | 2,700 | |||||||||||||||
Loss on sale/abandonment of property and equipment and bakery shutdown costs | — | 2,551 | — | 2,551 | 4,182 | |||||||||||||||
Business combination transaction costs | — | 31,832 | (31,257 | ) | (vi) | 575 | — | |||||||||||||
Related party expenses | 26,799 | 3,539 | (26,747 | ) | (vii) | 3,591 | 4,306 | |||||||||||||
Total operating costs and expenses | 48,321 | 143,657 | (44,359 | ) | 147,619 | 106,295 | ||||||||||||||
Operating income (loss) | (9,607 | ) | 122,872 | 55,095 | 168,360 | 155,908 | ||||||||||||||
Other (income) expense: | ||||||||||||||||||||
Interest expense, net | 6,649 | 60,384 | (15,592 | ) | (viii) | 51,441 | 50,011 | |||||||||||||
(Gain) loss on debt extinguishment | (763 | ) | — | — | (763 | ) | 25,880 | |||||||||||||
Other (income) expense | 754 | 1,624 | — | 2,378 | (8,743 | ) | ||||||||||||||
Total other (income) expense | 6,640 | 62,008 | (15,592 | ) | 53,056 | 67,148 | ||||||||||||||
Pretax net income (loss) | (16,247 | ) | 60,864 | 70,687 | 115,304 | 88,760 | ||||||||||||||
Income tax expense | (7,762 | ) | 439 | 40,185 | (ix) | 32,862 | — | |||||||||||||
Net income (loss) | $ | (8,485 | ) | $ | 60,425 | $ | 30,502 | $ | 82,442 | $ | 88,760 | |||||||||
Less: Net income (loss) attributable to the non-controlling interest | (4,081 | ) | 3,214 | 29,565 | (x) | 28,698 | 4,507 | |||||||||||||
Net income (loss) attributable to Class A shareholders | $ | (4,404 | ) | $ | 57,211 | $ | 937 | $ | 53,744 | $ | 84,253 | |||||||||
Earnings (loss) per Class A share: | ||||||||||||||||||||
Basic | $ | (0.05 | ) | $ | 0.55 | |||||||||||||||
Diluted | $ | (0.05 | ) | $ | 0.54 | |||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||||||
Basic | 97,792 | (180 | ) | (xi) | 97,612 | |||||||||||||||
Diluted | 97,792 | 2,393 | (xii) | 100,185 |
i. | The amounts in these columns represent our Successor's and Predecessor's historical results of operations for the periods reflected. |
ii. | The adjustment reflects the incremental depreciation expense associated with the allocation of purchase price to property and equipment and is recorded in cost of goods sold. In addition, for cost of goods sold, approximately $8.9 million reflects the non-cash impact of the re-measurement of inventory at fair value as a result of the Business Combination. |
iii. | For cost of goods sold, this adjustment represents special payments we made to certain employees at our bakery facilities of $2.2 million and for special payments to corporate employees of $2.5 million as compensation for their efforts in connection with the Business Combination. |
iv. | Represents compensation for management profits interest plan of approximately $3.9 million that was recognized as part of the Business Combination. |
v. | Represents additional amortization expense associated with the fair value recognized for customer relationships in connection with the Business Combination. |
vi. | This adjustment consists primarily of legal and professional fees and other costs associated with the Business Combination. |
vii. | Represents non cash expenses incurred by Successor for stock awarded to Mr. Metropoulos as required under his new employment agreement. |
viii. | Represents the reduction in interest expense due to the paydown of Hostess Holdings L.P. debt pursuant to the terms of the Business Combination. |
ix. | Represents the effective income tax rate of 28.5% for the Successor, giving effect to the noncontrolling interest, a partnership for income tax purposes. |
x. | Represents the elimination of historical income attributable to the noncontrolling interest and attributes a portion of the pro forma income to the noncontrolling interest created in the Business Combination. Income is allocated to the noncontrolling interest based on its pro rata share of the total equity of Hostess Holdings, L.P. |
xi. | This adjustment annualized the basic weighted average number of class A shares outstanding. |
xii. | This adjustment includes the dilutive impact of the outstanding warrants that are considered anti-dilutive on a historical basis. |
Unaudited Pro Forma Combined Statement of Operations For the Quarter Ended December 31, 2016 compared to the Quarter Ended December 31, 2015 | ||||||||||||||||||||
Historical (i) | ||||||||||||||||||||
(Successor) | (Predecessor) | Pro Forma Combined | (Predecessor) | |||||||||||||||||
(In thousands, except share data) | From November 4, 2016 to December 31, 2016 | From October 1, 2016 to November 3, 2016 | Pro Forma Adjustments | Quarter Ended December 31, 2016 | Quarter Ended December 31, 2015 | |||||||||||||||
Net revenue | $ | 111,998 | $ | 66,831 | $ | — | $ | 178,829 | $ | 147,026 | ||||||||||
Cost of goods sold | 73,284 | 37,437 | (8,856 | ) | (ii) | 101,865 | 85,966 | |||||||||||||
Special employee incentive compensation | — | 2,195 | (2,195 | ) | (iii) | — | — | |||||||||||||
Gross profit | 38,714 | 27,199 | 11,051 | 76,964 | 61,060 | |||||||||||||||
Advertising and marketing | 5,245 | 3,097 | — | 8,342 | 6,866 | |||||||||||||||
Selling expenses | 5,033 | 2,555 | — | 7,588 | 6,701 | |||||||||||||||
General and administrative | 7,322 | 6,376 | (3,249 | ) | (iv) | 10,449 | 7,043 | |||||||||||||
Special employee incentive compensation | — | 2,503 | (2,503 | ) | (iii) | — | — | |||||||||||||
Amortization of customer relationships | 3,922 | 717 | 2,100 | (v) | 6,739 | 622 | ||||||||||||||
Impairment of property and equipment | — | 2,065 | — | 2,065 | 750 | |||||||||||||||
Loss on sale/abandonment of property and equipment and bakery shutdown costs | — | 33 | — | 33 | 3,177 | |||||||||||||||
Business combination transaction costs | — | 24,767 | (24,767 | ) | (vi) | — | — | |||||||||||||
Related party expenses | 26,799 | 108 | (26,747 | ) | (vii) | 160 | 606 | |||||||||||||
Total operating costs and expenses | 48,321 | 42,221 | (55,166 | ) | 35,376 | 25,765 | ||||||||||||||
Operating income (loss) | (9,607 | ) | (15,022 | ) | 66,217 | 41,588 | 35,295 | |||||||||||||
Other (income) expense: | ||||||||||||||||||||
Interest expense, net | 6,649 | 6,638 | (1,721 | ) | (viii) | 11,566 | 18,205 | |||||||||||||
Gain on debt extinguishment | (763 | ) | — | — | (763 | ) | — | |||||||||||||
Other (income) expense | 754 | (721 | ) | — | 33 | (65 | ) | |||||||||||||
Total other (income) expense | 6,640 | 5,917 | (1,721 | ) | 10,836 | 18,140 | ||||||||||||||
Pretax net income (loss) | (16,247 | ) | (20,939 | ) | 67,938 | 30,752 | 17,155 | |||||||||||||
Income tax expense | (7,762 | ) | 145 | 16,381 | (ix) | 8,764 | — | |||||||||||||
Net income (loss) | $ | (8,485 | ) | $ | (21,084 | ) | $ | 51,557 | $ | 21,988 | $ | 17,155 | ||||||||
Less: Net income (loss) attributable to the non-controlling interest | (4,081 | ) | (895 | ) | 12,610 | (x) | 7,634 | 871 | ||||||||||||
Net income (loss) attributable to Class A shareholders | $ | (4,404 | ) | $ | (20,189 | ) | $ | 38,947 | $ | 14,354 | $ | 16,284 | ||||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic | $ | (0.05 | ) | $ | 0.15 | |||||||||||||||
Diluted | $ | (0.05 | ) | $ | 0.14 | |||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||||||
Basic | 97,792 | (96 | ) | (xi) | 97,696 | |||||||||||||||
Diluted | 97,792 | 2,477 | (xii) | 100,269 |
i. | The amounts in these columns represent our Successor's and Predecessor's historical results of operations for the periods reflected. |
ii. | The adjustment reflects the incremental depreciation expense associated with the allocation of purchase price to property and equipment and is recorded in cost of goods sold. In addition, for cost of goods sold, approximately $8.9 million reflects the non-cash impact of the re-measurement of inventory at fair value as a result of the Business Combination. |
iii. | For cost of goods sold, this adjustment represents special payments we made to certain employees at our bakery facilities of $2.2 million and for operating costs this adjustment represents special payments to corporate employees of $2.5 million as compensation for their efforts in connection with the Business Combination. |
iv. | Represents compensation for management profits interest plan of approximately $3.2 million that was recognized as part of the Business Combination. |
v. | Represents additional amortization expense associated with the fair value recognized for customer relationships in connection with the Business Combination. |
vi. | This adjustment consists primarily of legal and professional fees and other costs associated with the Business Combination. |
vii. | Represents non cash expenses incurred by Successor for stock awarded to Mr. Metropoulos as required under his new employment agreement. |
viii. | Represents the reduction in interest expense due to the paydown of Hostess Holdings L.P. debt pursuant to the terms of the Business Combination. |
ix. | Represents the effective income tax rate of 28.5% for the Successor, giving effect to the noncontrolling interest, a partnership for income tax purposes. |
x. | Represents the elimination of historical income attributable to the noncontrolling interest and attributes a portion of the pro forma income to the noncontrolling interest created in the Business Combination. Income is allocated to the noncontrolling interest based on its pro rata share of the total equity of Hostess Holdings L.P. |
xi. | This adjustment annualized the basic weighted average number of class A shares outstanding. |
xii. | This adjustment includes the dilutive impact of the outstanding warrants that are considered anti-dilutive on a historical basis. |
Pro Forma Segment Data (Unaudited) | ||||||||||||||||||||
Historical | ||||||||||||||||||||
(In thousands) | From November 4, 2016 through December 31, 2016 | From January 1, 2016 through November 3, 2016 | Pro Forma Adjustments | Pro Forma Combined Year Ended December 31, 2016 | Year Ended December 31, 2015 | |||||||||||||||
(Successor) | (Predecessor) | |||||||||||||||||||
Net Revenue | $ | 111,998 | $ | 615,588 | — | $ | 727,586 | $ | 620,815 | |||||||||||
Cost of goods sold | 73,284 | 346,864 | $ | (8,541 | ) | (i) | 411,607 | 355,963 | ||||||||||||
Special employee incentive compensation | — | 2,195 | (2,195 | ) | (ii) | — | 2,649 | |||||||||||||
Gross Profit | $ | 38,714 | $ | 266,529 | $ | 10,736 | $ | 315,979 | $ | 262,203 | ||||||||||
Segment | ||||||||||||||||||||
Net Revenue | ||||||||||||||||||||
Sweet baked goods | $ | 101,319 | $ | 569,087 | $ | — | $ | 670,406 | 609,895 | |||||||||||
Other | 10,679 | 46,502 | — | 57,181 | 10,920 | |||||||||||||||
111,998 | 615,589 | — | 727,587 | 620,815 | ||||||||||||||||
Gross Profit | ||||||||||||||||||||
Sweet baked goods | 36,524 | 252,432 | 10,023 | (iii) | 298,979 | 258,248 | ||||||||||||||
Other | 2,190 | 14,097 | 713 | (iv) | 17,000 | 3,955 | ||||||||||||||
$ | 38,714 | $ | 266,529 | $ | 10,736 | $ | 315,979 | $ | 262,203 |
i. | Decreasing cost of goods by the $8.9 million due to the fair value adjustment of inventory in the Business Combination netted against additional $0.4 million of incremental depreciation from the write-up of property and equipment |
ii. | A special bonus payment was paid to employees at our bakery facilities as compensation for their efforts in the Business Combination |
iii. | The special employee incentive compensation related to sweet baked goods, as well as $8.2 million related to the fair value adjustment of inventory and incremental depreciation in connection with the Business Combination |
iv. | Decreasing cost of goods sold related to the fair value adjustment of inventory in the Business Combination |
Pro Forma Segment Data (Unaudited) | ||||||||||||||||||||
Historical | ||||||||||||||||||||
(In thousands) | From November 4, 2016 through December 31, 2016 | From October 1, 2016 through November 3, 2016 | Pro Forma Adjustments | Pro Forma Combined Quarter Ended December 31, 2016 | Quarter Ended December 31, 2015 | |||||||||||||||
(Successor) | (Predecessor) | |||||||||||||||||||
Net Revenue | $ | 111,998 | $ | 66,831 | — | $ | 178,829 | 147,026 | ||||||||||||
Cost of goods sold | 73,284 | 37,437 | $ | (8,856 | ) | (i) | 101,865 | 85,966 | ||||||||||||
Special employee incentive compensation | — | 2,195 | (2,195 | ) | (ii) | — | — | |||||||||||||
Gross profit | $ | 38,714 | $ | 27,199 | $ | 11,051 | $ | 76,964 | $ | 61,060 | ||||||||||
Segment | ||||||||||||||||||||
Net Revenue | ||||||||||||||||||||
Sweet baked goods | $ | 101,319 | $ | 60,798 | $ | — | $ | 162,117 | 142,757 | |||||||||||
Other | 10,679 | 6,033 | — | 16,712 | 4,269 | |||||||||||||||
111,998 | 66,831 | — | 178,829 | 147,026 | ||||||||||||||||
Gross Profit | ||||||||||||||||||||
Sweet baked goods | 36,524 | 25,110 | 10,338 | (iii) | 71,972 | 59,464 | ||||||||||||||
Other | 2,190 | 2,089 | 713 | (iv) | 4,992 | 1,596 | ||||||||||||||
$ | 38,714 | $ | 27,199 | $ | 11,051 | $ | 76,964 | $ | 61,060 |
i. | Decreasing cost of goods by the $8.9 million due to the fair value adjustment of inventory in the Business Combination netted against additional $0.1 million of incremental depreciation from the write-up of property and equipment |
ii. | A special bonus payment was paid to employees at our bakery facilities as compensation for their efforts in the Business Combination |
iii. | The special employee incentive compensation related to sweet baked goods, as well as $8.2 million related to the fair value adjustment of inventory and incremental deprecation in connection with the Business Combination |
iv. | Decreasing cost of goods sold related to the fair value adjustment of inventory in the Business Combination |
• | 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 expenses, or the cash requirements necessary to service interest or principal payments, on the Company's debt; and |
• | does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future. |
• | the Company's presentation of Adjusted EBITDA does not exclude the normal annual cash payments associated with its employment agreement with Mr. Metropoulos as the Chief Executive Officer and/or Executive Chairman. These amounts were $0.6 million for the quarter ended December 31, 2016, $1.1 million for the quarter ended December 31, 2015, $3.6 million for the year ended December 31, 2016 and $4.3 million for the year ended December 31, 2015. Following completion of the Business Combination, these expenses will be approximately $0.1 million quarterly. |
• | The Company’s Proxy Statement dated October 21, 2016 respecting its November 3, 2016 special meeting at which stockholders approved various items related to the Business Combination contained certain projections for 2016 provided by Hostess Holdings, L.P. to the Company in connection the Company’s consideration of the acquisition. These projections presented Adjusted EBITDA, consistent with the transaction agreement, excluding related party expenses associated with the employment arrangements with C. Dean Metropoulos. As noted above, the Company’s presentation of Adjusted EBITDA does not exclude such related party expenses, which were $3.6 million for the year ending December 31, 2016. In addition, the projected Adjusted EBITDA included $2.0 million of estimated pro forma adjusted EBITDA from Superior’s results prior to its acquisition in May 2016, which are not included in Adjusted EBITDA as presented by the Company. The projected Adjusted EBITDA for 2016 included in the proxy statement of $220.4 million, adjusted for these two items, would have been $214.8 million, compared to the Company’s reported 2016 pro forma combined Adjusted EBITDA of $215.3 million. |
2016 | 2016 | 2015 | |||||||||||||||
(Successor) | (Predecessor) | Pro Forma Combined | |||||||||||||||
(In thousands) | From November 4, 2016 through December 31, 2016 | From January 1, 2016 through November 3, 2016 | Year ended December 31, 2016 | Year Ended December 31, 2015 | |||||||||||||
Net income (loss) | $ | (8,485 | ) | $ | 60,425 | $ | 82,442 | $ | 88,760 | ||||||||
Plus non-GAAP adjustments: | |||||||||||||||||
Income tax provision | (7,762 | ) | 439 | 32,862 | — | ||||||||||||
Interest expense, net | 6,649 | 60,384 | 51,441 | 50,011 | |||||||||||||
(Gain) loss on debt extinguishment | (i) | (763 | ) | — | (763 | ) | 25,880 | ||||||||||
Depreciation and amortization | 5,843 | 10,265 | 36,520 | 9,836 | |||||||||||||
Executive chairman agreement termination and execution | (ii) | 26,747 | — | — | — | ||||||||||||
Unit-based compensation | — | 3,891 | — | 1,381 | |||||||||||||
Other expense (income) | (iii) | 751 | 1,624 | 2,375 | (8,743 | ) | |||||||||||
Impairment of property and equipment | (iv) | — | 7,300 | 7,300 | 2,700 | ||||||||||||
Loss on sale/abandonment of property and equipment and bakery shutdown costs | (v) | — | 2,551 | 2,551 | 4,182 | ||||||||||||
Business combination transaction costs | (vi) | — | 31,832 | 575 | — | ||||||||||||
Inventory fair value adjustment | (vii) | 8,914 | — | — | — | ||||||||||||
Special employee incentive compensation | (viii) | — | 4,698 | — | 3,923 | ||||||||||||
Adjusted EBITDA | $ | 31,894 | $ | 183,409 | $ | 215,303 | $ | 177,930 |
i. | For the Successor period November 4, 2016 through December 31, 2016 and pro forma combined year ended December 31, 2016, we recorded a gain on extinguishment of debt of $0.8 million, which consisted of penalties of $3.0 million, the write-off of deferred financing costs of $0.2 million net of debt premium write-offs of approximately $4.0 million. For the year ended December 31, 2015 (Predecessor), we recorded a loss on extinguishment related to our 2013 Term Loan of $25.9 million, which consisted of prepayment penalties of $9.9 million and write-off of deferred financing costs of $16.0 million. |
ii. | For the Successor period November 4, 2016 through December 31, 2016, we expensed $26.7 million related to stock awarded to Mr. Metropoulos as required under his new employment arrangements. |
iii. | For the Successor period November 4, 2016 through December 31, 2016, we recorded expenses of $0.8 million which primarily consisted of legal and professional fees and other post-Business Combination costs such as fees related to securities filings. For the Predecessor period from January 1, 2016 through November 3, 2016, other expense consisted of transaction costs attributable the pursuit of a potential acquisition that has since been abandoned, offset partially by one-time gain from the settlement of the Grain Craft peanut recall matter of approximately $0.8 million. For the year ended December 31, 2015 (Predecessor), other income consisted of $12.0 million of proceeds from the sale of foreign trademark rights and certain "know how" in certain countries in the Middle East, partially offset by $3.3 million for professional service fees related to the pursuit of a potential sale transactions. For the year ended, December 31, 2014 (Predecessor), other expense was $0.6 million. |
iv. | For the Predecessor period January 1, 2016 through November 3, 2016, and for the pro forma combined year ended December 31, 2016, we closed multiple production lines at the Indianapolis, Indiana bakery and transitioned production to other facilities resulting in a loss of $7.3 million. |
v. | For the Predecessor period January 1, 2016 through November 3, 2016, and for the pro forma combined year ended December 31, 2016, we incurred a loss on a sale/abandonment of property and bakery shutdown costs of $0.3 million, primarily due to utilities, insurance, taxes and maintenance expenses related to the Schiller Park, Illinois bakery. In addition, we incurred losses of approximately $2.6 million related to equipment that we no longer intended to use or had idled. |
vi. | For the Predecessor period from January 1, 2016 through November 3, 2016, business combination transaction costs consisted primarily of professional and legal costs. |
vii. | For the Successor period November 4, 2016 through December 31, 2016, we re-measured inventory at fair value at the Closing Date, resulting in additional non-cash cost of goods sold of $8.9 million. |
viii. | For the Predecessor period January 1, 2016 through November 3, 2016, a special bonus payment of $2.5 million and $2.2 million was paid to employees at the bakery facilities and corporate employees, respectively, as compensation for their efforts in the Business Combination. For the year ended December 31, 2015 (Predecessor), a special bonus payment of $2.6 million and $1.3 million was paid to employees at the bakery facilities and corporate employees, respectively, as compensation for their efforts in the recapitalization of the Company. |
(In thousands) | From November 4, 2016 through December 31, 2016 | From January 1, 2016 through November 3, 2016 | (Unaudited) Pro forma combined Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||||||||
(Successor) | (Predecessor) | (Predecessor) | (Predecessor) | ||||||||||||||||||
Net revenue | $ | 111,998 | $ | 615,588 | $ | 727,586 | $ | 620,815 | $ | 554,695 | |||||||||||
Cost of goods sold | 73,284 | 346,864 | 411,607 | 355,963 | 320,763 | ||||||||||||||||
Special employee incentive compensation | — | 2,195 | — | 2,649 | — | ||||||||||||||||
Gross Profit - US GAAP | $ | 38,714 | $ | 266,529 | $ | 315,979 | $ | 262,203 | $ | 233,932 | |||||||||||
Add back: | |||||||||||||||||||||
Special employee incentive compensation | (i) | — | 2,195 | — | 2,649 | — | |||||||||||||||
Inventory fair value adjustment | (ii) | 8,914 | — | — | — | — | |||||||||||||||
Adjusted Gross Profit | $ | 47,628 | $ | 268,724 | $ | 315,979 | $ | 264,852 | $ | 233,932 | |||||||||||
Gross Margin - GAAP | 34.6 | % | 43.3 | % | 43.4 | % | 42.2 | % | 42.2 | % | |||||||||||
Adjusted Gross Margin | 42.5 | % | 43.7 | % | 43.4 | % | 42.7 | % | 42.2 | % |
2016 | 2016 | 2015 | ||||||||||||||||
(Successor) | (Predecessor) | Pro Forma Combined | (Predecessor) | |||||||||||||||
(In thousands) | From November 4, 2016 through December 31, 2016 | From October 1, 2016 through November 3, 2016 | Quarter Ended December 31, 2016 | Quarter Ended December 31, 2015 | ||||||||||||||
Net income (loss) | $ | (8,485 | ) | $ | (21,084 | ) | $ | 21,988 | $ | 17,149 | ||||||||
Plus non-GAAP adjustments: | ||||||||||||||||||
Income tax provision | (7,762 | ) | 145 | 8,764 | — | |||||||||||||
Interest expense, net | 6,649 | 6,638 | 11,566 | 18,204 | ||||||||||||||
(Gain) loss on debt extinguishment | (763 | ) | — | (i) | (763 | ) | — | |||||||||||
Depreciation and amortization | 5,843 | 1,212 | 9,168 | 2,678 | ||||||||||||||
Executive chairman agreement termination and execution | 26,747 | — | — | — | ||||||||||||||
Unit-based compensation | — | 3,204 | — | 116 | ||||||||||||||
Other expense (income) | 754 | (721 | ) | (ii) | 33 | 58 | ||||||||||||
Business combination transaction cost | — | 24,767 | — | — | ||||||||||||||
Impairment of property and equipment | — | 2,065 | (iii) | 2,065 | 3,751 | |||||||||||||
Loss on sale/abandonment of property and equipment and bakery shutdown costs | — | 33 | (iv) | 33 | 176 | |||||||||||||
Inventory fair value adjustment | 8,914 | — | — | — | ||||||||||||||
Special employee incentive compensation | — | 4,698 | — | — | ||||||||||||||
Adjusted EBITDA | $ | 31,897 | $ | 20,957 | $ | 52,854 | $ | 42,132 |
i. | For the pro forma combined quarter ended December 31, 2016, the Company recorded a gain on partial extinguishment of debt of $0.8 million, which consisted of penalties of $3.0 million, the write-off of deferred financing costs of $0.2 million net of debt premium write-offs of approximately $4.0 million. |
ii. | For the pro forma quarter ended December 31, 2016, the Company recorded expenses of $0.7 million which primarily consisted of legal and professional fees post-combination costs such as registrations. For the Predecessor quarter ended December 31, 2015, other expense consisted of $0.1 million for professional service fees related to the pursuit of a potential sale of Hostess. |
iii. | For the pro forma combined quarter ended December 31, 2016, the Company impaired assets that had been idled, or otherwise qualified for impairment. |
iv. | For pro forma combined quarter ended December 31, 2016, the Company incurred losses of approximately $0.1 million related to equipment that the Company no longer intended to use or had idled. |
Unaudited 2017 Guidance Adjusted EBITDA Reconciliation | ||||
Estimated Year ended December 31, 2017 | ||||
Amounts in millions | ||||
Net income | $ | 100 | ||
Plus non-GAAP adjustments: | ||||
Income tax provision | 40 | |||
Interest expense, net | 44 | |||
Depreciation and amortization | 37 | |||
Share based compensation | (i) | 14 | ||
Adjusted EBITDA | $ | 235 |