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1
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HOSTESS BRANDS
April 2017
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DISCLAIMERS
2
Forward Looking Statements
This investor presentation contains statements reflecting our views about our future performance that constitute “forward-looking statements” 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 our future operating
performance and statements addressing events and developments that we expect 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. Hostess 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 our reputation and brand image; protecting our intellectual property rights; leveraging our 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; our continued ability to produce and successfully market
products with extended shelf life; our ability to drive revenue growth in our key products or add products that are faster-growing and more profitable; volatility in commodity, energy, and other input prices; our dependence on
our major customers; our geographic focus could make us 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 our workforce belongs to unions and strikes or work stoppages could cause our business to suffer; product liability claims, product recalls, or regulatory enforcement actions;
unanticipated business disruptions; dependence on third parties for significant services; our insurance may not provide adequate levels of coverage against claims; failures, unavailability, or disruptions of our information
technology systems; our ability to achieve expected synergies and benefits and performance from our strategic acquisitions; dependence on key personnel or a highly skilled and diverse workforce; and our ability to finance
our indebtedness on terms favorable to us; and other risks as set forth under the caption “Risk Factors” in the preliminary prospectus supplement and accompanying prospectus and from time to time in our Securities and
Exchange Commission filings.
Industry and Market Data
In this Investor Presentation, Hostess relies on and refers to information and statistics regarding market shares in the sectors in which it competes and other industry data. Hostess obtained this information and statistics from
third-party sources, including reports by market research firms, such as Nielsen. Hostess has supplemented this information where necessary with information from discussions with Hostess customers and its own internal
estimates, taking into account publicly available information about other industry participants and Hostess’ management’s best view as to information that is not publicly available. Hostess has transitioned to a new Nielsen
database for Market Share and Industry Data. All prior periods have been restated utilizing the updated database.
Pro Forma Combined Financial Information
Hostess Brands, Inc. acquired a controlling interest in Hostess on November 4, 2016 (the ”Business Combination”). Unless otherwise noted, financial information for 2016 is presented on a pro forma combined basis given
effect to the Business Combination as if it occurred on January 1, 2016.
Use of Non-GAAP Financial Measures
This Investor Presentation includes non-GAAP financial measures, including earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted
Gross Profit Margin, Free Cash Flow and Free Cash Flow Conversion. In this Investor Presentation, Adjusted EBITDA and Adjusted Gross Profit exclude certain add-backs. Adjusted EBITDA Margin represents Adjusted
EBITDA divided by net revenues. Adjusted Gross Profit Margin represents Adjusted Gross Profit divided by net revenues, Free Cash Flow is defined as Adjusted EBITDA minus capital expenditures, and Free Cash Flow
conversion is defined as Free Cash Flow divided by Adjusted EBITDA. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the Appendix. Hostess believes that these non-GAAP
measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Hostess’ financial condition and results of operations. Hostess’ management
uses these non-GAAP measures to compare Hostess’ performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation, and for budgeting and planning purposes.
These measures are used in monthly financial reports prepared for management and Hostess’ board of directors. Hostess believes that the use of these non-GAAP financial measures provides an additional tool for investors
to use in evaluating ongoing operating results and trends. Management of Hostess does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP.
Other companies may calculate Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Profit Margin, Free Cash Flow, Free Cash Flow Conversion and other non-GAAP measures differently, and
therefore Hostess’ Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Profit Margin, Free Cash Flow , Free Cash Flow Conversion and other non-GAAP measures may not be directly
comparable to similarly titled measures of other companies.
Totals in this Investor Presentation may not add up due to rounding.
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3
AGENDA
COMPANY OVERVIEW
INVESTMENT HIGHLIGHTS
GROWTH DRIVERS
FINANCIAL OVERVIEW
APPENDIX
2
1
4
3
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COMPANY
OVERVIEW
1
4
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5
Kansas City, MO
Product portfolio with
numerous iconic
brands
#2 market
position
in $6.5bn Sweet Baked
Goods category
Modern and
efficient national
manufacturing system
Direct to
Warehouse
distribution model
driving industry
leading profitability
Proven
platform
with multiple avenues
of growth
KEY HIGHLIGHTS
2016 Net Sales(1)(2):
$728m
2016 Adj. EBITDA(1)(3):
$215m
% Adj. EBITDA
margin(3): 30%
HOSTESS BRANDS AT A GLANCE
Iconic American brand delivering new and classic
sweet treats to our customers for generations
Source: Nielsen U.S. total universe, 52 weeks ending 2/25/17.
(1) Does not include Superior pre-acquisition sales and Adjusted EBITDA results of $13.8m and $2.0m, respectively.
(2) Financial results for 2016 are presented on a pro forma combined basis. See “Pro Forma Combined Financial Information.”
(3) See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP
measures.
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BUSINESS TRANSFORMATION
6
Note: See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP
measures.
(1) See Appendix for an explanation of all non-GAAP measures and a reconciliation to the most comparable GAAP measures. Based on EBITDA margins of a group
of selected competitors per company fillings and FactSet data as of 4/7/2017.
(2) Defined as (Adj. EBITDA – Capex) / Adj. EBITDA. Capex includes maintenance capex and expansion capex.
Hostess Brands
Warehouse
Model
Shelf-life
Technology
Established a best-in-class financial position
Strong sales
growth trajectory
Industry-
leading
Adj. EBITDA
margins
of ~30%(1)
Significant
Adj. EBITDA to
Free Cash Flow
Conversion(2)
Clean balance
sheet – No
legacy issues
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STRONG MARKET POSITION
IN KEY SEGMENTS
7
Donuts
$1.5B
Snack Cakes
$1.7B
Pies, Bars
& Other
$459M
$308M
Blondies,
Brownies
Breakfast pastries,
Danish $1.3B
$482M
Muffins
$805M
SBG
Cookies
Danish, Honey Buns,
Sweet Rolls
Mini and
Jumbo
Muffins
Donettes
Twinkies®, Zingers®,
CupCakes, Ding Dongs®,
Ho Hos®
Fruit Pie
Sub-category where
Hostess does not
currently participate
32%
= Hostess Share of
Retail Sales
23%
7%
9%
12% 10%
Sweet Baked Goods (“SBG”) –
$6.5 billion of retail sales in 2016,
13% increase since relaunch
Recent acquisition of
Superior opens the door
to the growing $8.2bn
In-Store Bakery (“ISB”)
channel
Source: Nielsen U.S. total universe, 52 weeks ending 2/25/17. Nielsen Perishable Group, In-Store Bakery, 52 Weeks ending 12/31/16.
Note: Hostess data does not include Superior. The Company has transitioned to a new Nielsen database for Market Share and Industry Data, all prior periods have
been restated utilizing the updated database.
Sweet Baked Goods category includes items determined to be ‘Commercial Sweet Baked Goods’ (items wrapped for individual sale); All Fresh Bakery products
are excluded from the scope; Sunbelt Granola Bars are the only Granola Bars included – because they are a part of McKee’s total SBG business and targeted for
sale with SBG items. Only SBG Cookies or non-traditional aisle-cookies included (e.g., Nutty Fudge Bars, Oatmeal Cream Sandwiches, Whoopie Pies).
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BRAND STRENGTH DRIVING GROWTH
AND CATEGORY
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Note: Market share based on retail sales dollars. Hostess data does not include Superior. The Company has transitioned to a new Nielsen database for Market Share
and Industry Data, all prior periods have been restated utilizing the updated database.
(1) Nielsen U.S. total universe, 52 weeks ending 2/25/2017.
(2) Hostess market share, Total Nielsen Universe. Nielsen U.S. 12 weeks ending 10/13/2012 (we refer to the 12-week period prior to the shutdown of the legacy
Hostess business as “OldCo”), 24 weeks ending 1/4/2014, 52 weeks ending 1/3/2015, 1/2/2016, 12/31/2016, and 52 weeks ending 2/25/2017.
(3) Nielsen U.S. total universe, 12 weeks ending 10/13/2012 compared to 12 weeks ending 1/26/2013.
Special emotional relationship with consumers Selling at a premium price point to the competition(1)
96
year
history Brand
awareness
Private
label
®
$2.62
$3.40
$4.34 $4.41 $4.75
SBG
Avg.
$3.62
($ / lb.)
81%
premium
Driving category growth
Hostess has contributed over 100% of SBG’s recent 52 week category growth
Recent 52 weeks
(3)
(1)
Category growth
(8%)
13%
Hostess hiatus Category growth
since relaunch
174.5%
(74.5%)
Hostess All Other
Hostess’ contribution(1)
Significant runway for further growth(2)
Despite two years of rapid gains, a ~6% gap remains to OldCo
Hostess Market Share
11.1%
13.7%
15.6% 16.7% 16.9%
22.8%
2H13 2014 2015 2016 52-wk ending
2/25/17
OldCo
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KEY INVESTMENT
HIGHLIGHTS
2
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KEY INVESTMENT HIGHLIGHTS
Hostess is a $1.1bn brand at Retail with
significant upside potential
10Source: Nielsen U.S. total universe, 52 weeks ending 2/25/17.
Iconic American
brand
synonymous with
snacking
Innovation engine
across product
lines
DTW distribution
driving margins
and channel
penetration
Experienced
management team
that will continue
to deliver
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EMOTIONAL BRAND CONNECTION
U.S. consumers share a special emotional relationship with the
96 year old Hostess, a brand that defines the rapidly
growing “Indulgent Snacking” trend
ICONIC BRAND SYNONYMOUS
WITH SNACKING
Delivering New and Classic Sweet Treats
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INNOVATION ENGINE ACROSS
PRODUCT LINES
Successes in 2016
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The Return of Suzy Q Brownie Innovation Twinkies Innovation
Note: M&M’s is a registered trademarks of Mars, Incorporated. Ghostbusters is a registered trademark of Columbia Pictures Industries, Inc.
New & Improved Whole Grain
Mini Muffins
Premium Seasonal E-Commerce
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DTW DISTRIBUTION DRIVING MARGINS
AND CHANNEL PENETRATION
Competitively advantaged business model
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Warehouse
model
Close partnerships
with third party distributors
Enhanced in-store
merchandising capabilities
Compelling
retailer economics
Expanded
distribution reach
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DTW DISTRIBUTION DRIVING MARGINS
AND CHANNEL PENETRATION
Clear road to capitalizing on channel opportunity
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Hostess Share of Retail Sales – Small Formats
$93M $2.3B$320M
2016OldCoTotal Category Size
26.3%
0.9%
33.2%
49.1%
20.4% 21.5%
Total US Drug Total US Dollar Total US
Convenience
1.7%
19.3% 19.1%
1.4%
17.0%
12.4%
Total US Club
(excludes Costco)
Total US Mass Total US Food
Hostess Share of Retail Sales – Large Formats
$262M $2.3B$1.2B
Source: Hostess market share, Total Nielsen Universe. Nielsen U.S. 12 weeks ending 10/13/2012 (“OldCo”) compared to 52 weeks ending 2/25/2017.
Market share based on retail sales dollars. The Company has transitioned to a new Nielsen database for Market Share and Industry Data, all prior periods have
been restated utilizing the updated database. Club does not include Costco, only Sam’s and BJ’s.
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EXPERIENCED SENIOR LEADERSHIP
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Dean
Metropoulos
Executive
Chairman
Bill Toler
President
& CEO
Tom
Peterson
EVP & CFO
Michael
Cramer
EVP & Chief
Administrative
Officer
Andrew
Jacobs
SVP &
Chief
Customer
Officer
Stuart
Wilcox
SVP &
COO
Burke
Raine
SVP &
CMO
Jolyn
Sebree
SVP,
General
Counsel &
Corporate
Secretary
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GROWTH
DRIVERS
3
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HOSTESS HAS SIGNIFICANT ROOM
FOR GROWTH
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(1) Current sales, AC Nielsen total universe, 52 weeks ending 2/25/17.
(2) Estimated based on assumptions of reasonable share gains against market size in new snack categories.
$1.1B
~1.5x
potential
~2.0x
potential
TOD
A
Y
(1
)
IN
-A
IS
L
E
WHIT
E
S
P
A
C
E
(2
)
N
E
W
A
IS
L
E
S
A
N
D
C
H
A
N
N
E
L
S
(2
)
FOODSERVICE
CLUB
NEW
FORMS
NEW
FILLINGS
NEW
FLAVORS
LICENSING
BFY
®
FREEZER
AISLE
INTERNATIONAL
IN-STORE
BAKERY
®
16.9%
22.8%
52 weeks ending 2/25/2017 OldCo
FURTHER STRENGTHEN THE CORE BUSINESS
Hostess Still Has Significant Headroom
For Growth and Share Gains
18
Notes: Hostess data does not include Superior. The Company has transitioned to a new Nielsen database for Market Share and Industry Data, all prior periods have
been restated utilizing the updated database.
(1) Hostess market share, Total Nielsen Universe. Nielsen U.S. 12 weeks ending 10/13/2012 (“OldCo”) compared to 52 weeks ending 2/25/2017. Market share
based on retail sales dollars.
Hostess $ share of SBG category(1)
Distribution expansion (more items
in more stores)
Custom SKUs
Seasonal flavors
Display execution
Portfolio optimization
eCommerce
5.9% gap to
OldCo
Significant Upside Remains
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INNOVATION & LINE EXTENSIONS
Launching in 2017
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Cinnamon Sugar Crunch Donettes White Fudge Twinkies Innovation
Peanut Butter Apple Streusel Cupcake Expansion
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WHITESPACE OPPORTUNITY
In-Store Bakery (sweets) is a $8.2 billion category
20
Source: Nielsen Perishable Group, In-Store Bakery, 52 Weeks ending 12/31/16.
Note: Total In-Store Bakery was $11.6 Billion for 52 weeks ending 12/31/16.
ISB –
$ Share
Breakfast
Bakery
30%
Desserts
and Sweet
Snacks
70%
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WHITESPACE
21
Frozen Aisle Schools Club Channel
Licensing Canada Foodservice
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22
FINANCIAL
OVERVIEW
4
®
$555
$621
2014A 2015A 2016A
SIGNIFICANT GROWTH SINCE RE-LAUNCH WITH
MEANINGFUL UPSIDE POTENTIAL
23
Net Revenue(1)(2)
($ in millions)
Adjusted Gross Profit(1)(2)(3)
($ in millions)
$234
$265
2014A 2015A 2016A
% Adj. Gross
Profit Margin(3)
42% 43% 43%
Adjusted EBITDA(1)(2)(3)
($ in millions)
$145
$178
2014A 2015A 2016A
% Adj. EBITDA
Margin(3)
26% 29% 30%
$316
$215
17%
12%
Total increase $173m
$728
(1) Does not include Superior pre-acquisition 2016 sales of $13.8m, adj. gross profit of $3.5m, and adj. EBITDA of $2.0m.
(2) Financial results for 2016 are presented on a pro forma combined basis. See “Pro Forma Combined Financial Information.”
(3) See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP
measures.
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ATTRACTIVE MARGINS RELATIVE TO PEERS
24
Notes: FCF conversion defined as (Adj. EBITDA-Capex) / Adj. EBITDA is a non-GAAP metric.
(1) See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP
measures.
(2) Represents FY2016 Hostess FCF Conversion; Adj. EBITDA – $215.3 million, Capex $35.1 million; Hostess FY2016 FCF Conversion of 83.7%.
STRONG MARGIN PROFILE
Established margin structure driven by…
The health of the
SBG category
Hostess is a leading brand
sold at a premium price
Highly efficient
operating model
Hostess’ competitively advantaged business model contributes to its best in class financial position
Approximately 30% FY2016
Adjusted EBITDA Margins(1)
84% FY2016
Free Cash Flow Conversion(1)(2)
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EFFICIENT AND SCALABLE MANUFACTURING
FOOTPRINT WITH DIRECT-TO-WAREHOUSE
DISTRIBUTION
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(1) ISB consists of Superior, which we purchased in May 2016, and which manufactures and distributes eclairs, madeleines, brownies, and iced cookies in the ISB
section of grocery and club retailers.
(2) From 2013 acquisition through December 31, 2016.
Highly efficient production system
Investments made in state of the art
manufacturing technology and
automated packaging on certain high
volume production lines
Enhanced merchandising capabilities
Expansion of core distribution and
channel penetration
Improved inventory management
Kansas City, MO
~$160 million of capital invested in operations and systems (2)
3 Distribution centers (third-party) Headquarters3 SBG baking facilities 2 ISB(1) baking facilities
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SUSTAINABILITY OF MARGINS
26
Well invested
manufacturing
capabilities to
leverage
Fully built out SG&A
and distribution with
no legacy costs
Premium pricing
supported by superior
penny profits for
retailers
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STRONG CASH FLOW ENABLES MULTIPLE
VALUE CREATION OPPORTUNITIES
27
Notes: FCF conversion defined as (Adj. EBITDA-Capex) / Adj. EBITDA is a non-GAAP metric. See “Use of Non-GAAP Financial Measures” and the Appendix for an
explanation of all non-GAAP measures and reconciliations to the comparable GAAP measures. Financial results for 2016 are presented on a pro forma
combined basis. See “Pro Forma Combined Financial Information.”
(1) Represents FY2016 Hostess FCF Conversion; Adj. EBITDA – $215.3 million, Capex $35.1 million; Hostess FY2016 FCF Conversion of 83.7%.
84% FY2016
Free Cash Flow
Conversion (1)
Debt
paydown
Future
M&A
Investment in
manufacturing
capabilities
Innovation &
incremental
brand
investment
Cash available for:
(after tax related obligations)
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CONCLUDING REMARKS
Differentiated Business Model
Drives Continued Growth
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Hostess is well positioned for future growth…
Warehouse distribution
unique in SBG category
Supports strength of
innovation pipeline and
speed-to-market
Compelling opportunity for
continued market share
and volume gains across
distribution channels
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APPENDIX
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30Footnotes on next page
$ in millions
Successor
4-Nov-16 to
31-Dec-16
Predecessor
1-Jan-16 to
31-Dec-16
Pro Forma
Combined,
Year Ended
31-Dec-16
Year Ended
31-Dec-15
Year Ended
31-Dec-14
Net income (loss) ($8.5) $60.4 $82.4 $88.8 $81.5
Plus non-GAAP adjustments:
Income tax provision (7.8) 0.4 32.9 – –
Interest expense, net 6.6 60.4 51.4 50.0 37.4
(Gain) loss on debt extinguishment(1) (0.8) – (0.8) 25.9 –
Depreciation and amortization 5.8 10.3 36.5 9.8 7.1
Executive chairman agreement termination and execution(2) 26.7 – – – –
Unit-based compensation – 3.9 – 1.4 0.4
Other (income) expense(3) 0.8 1.6 2.4 (8.7) 0.6
Business combination transaction costs(4) – 31.8 0.6 – –
Impairment of property and equipment(5) – 7.3 7.3 2.7 13.2
Loss on sale/abandonment of property and equipment and
bakery shutdown costs(6)
– 2.6 2.6 4.2 5.2
Inventory fair value adjustment(7) 8.9 – – – –
Special employee incentive compensation(8) – 4.7 – 3.9 –
Adjusted EBITDA $31.9 $183.4 $215.3 $177.9 $145.3
Net Revenue $112.0 $615.6 $727.6 $620.8 $554.7
EBITDA Margin (Adjusted EBITDA divided by Net Revenue) 28.5% 29.8% 29.6% 28.7% 26.2%
Capital Expenditures $6.5 $28.6 $35.1 $25.1 $51.1
FCF Conversion (Adjusted EBITDA – Capital Expenditures
divided by Adjusted EBITDA)
79.6% 84.4% 83.7% 85.9% 64.9%
Footnotes on following page.
HOSTESS NON-GAAP RECONCILIATIONS
Adjusted EBITDA
®
HOSTESS NON-GAAP RECONCILIATIONS
Adjusted EBITDA
31
Footnotes from prior page:
(1) 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 Former First Lien 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.
(2) 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.
(3) 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 a gain from the settlement of the Grain Craft peanut recall matter of approximately $0.8 million. For the year ended
December 31, 2015, 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, other expense was $0.6 million.
(4) For the Predecessor period from January 1, 2016 through November 3, 2016, business combination transaction costs consisted primarily of professional and legal costs.
(5) For the 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.
(6) For the 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.
(7) 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.
(8) 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, 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.
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32Footnotes on next page
HOSTESS NON-GAAP RECONCILIATIONS
Adjusted Gross Profit
$ in millions
Successor
4-Nov-16 to
31-Dec-16
Predecessor
1-Jan-16 to
31-Dec-16
Pro Forma
Combined,
Year Ended
31-Dec-16
Year Ended
31-Dec-15
Year Ended
31-Dec-14
Net revenue $112.0 $615.6 $727.6 $620.8 $554.7
Cost of goods sold 73.3 346.9 411.6 356.0 320.8
Special employee incentive compensation – 2.2 – 2.6 –
Gross Profit – US GAAP $38.7 $266.5 $316.0 $262.2 $233.9
Add back:
Special employee incentive compensation(1) – $2.2 – $2.6 –
Inventory fair value adjustment(2) $8.9 – – – –
Adjusted Gross Profit $47.6 $268.7 $316.0 $264.9 $233.9
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%
(1) For the Predecessor period January 1, 2016 through November 3, 2016, a special bonus payment of $2.2 million was paid to employees at the bakery facilities as compensation for their efforts in the
Business Combination. For the year ended December 31, 2015, a special bonus payment of $2.6 million was paid to employees at the bakery facilities as compensation for their efforts in the
recapitalization of Hostess.
(2) For the Successor period November 4, 2016 through December 31, 2016, the Company re-measured inventory at fair value at the Business Combination date, resulting in additional non-cash cost of
goods sold of $8.9 million.
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T
WARRANT IMPACT ON EQUITY
33
Note: All dilution and repurchase information is for illustration only. Actual could differ from illustration.
(1) Share price as of 4/13/2017.
(2) For any 20 trading days within a 30 trading day period ending on the third business day before the Company sends the notice of redemption to the
warrant holders.
(3) Metropoulos may be granted up to 8.25m shares pursuant to certain earn-out agreements entered into in connection with the Business Combination.
No amounts were accrued for these earn-outs as of December 31, 2016, as management determined that it was not probable the applicable
thresholds would be met.
• There are currently 37.5m public
warrants and 19.0m private
warrants outstanding.
• Each warrant is convertible into half
a share at a strike price of $5.75
(effective strike price of $11.50
per share).
• Public warrants can be called for
redemption for $0.01 per warrant
when Hostess’ share price meets or
exceeds $24.00(2)
• Dilutive impact of warrants is
accounted for using the treasury
stock method.
• Metropoulos may be granted
additional shares contingent on
achieving certain EBITDA targets
for the years ended December 31,
2017 and December 31, 2018.
These shares are not included in
these calculations.(3)
Impact on equity valueTreasury stock methodOverview
(in millions other than per share data) (in millions other than per share data)
Shares issued Diluted shares outstanding
Warrants outstanding (public + private) 56.5 Class A shares outstanding 99.3
(x) Shares issued per warrant 0.5 Class B shares outstanding 31.1
Illustrative shares issued 28.3 (+) Illustrative new shares issued 7.5
Diluted shares outstanding 137.9
Shares repurchased
Illustrative shares issued 28.3 Equity value calculation
(x) Strike price per share $11.50 Diluted shares outstanding 137.9
Illustrative proceeds from warrant exercise $324.9 (x) Current share price(1) $15.68
(÷) Current share price(1) $15.68 Hostess equity value $2,162.6
Illustrative shares repurchased 20.7
Impact on earnings per share
Net shares issued Class A shares outstanding 99.3
Illustrative shares issued 28.3 (+) Illustrative new shares issued 7.5
(-) Illustrative shares repurchased 20.7 Share count for EPS calculations 106.8
Illustrative net shares issued 7.5
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GLOSSARY
34
Term Definition
BFY Better-for-you
ISB In-store bakery
SBG Sweet baked goods
SKU Stock keeping unit