Exhibit 99.1

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS


The unaudited pro forma statements of operations for the three and six months ended June 30, 2016 and three and nine months ended September 30, 2016 present our consolidated results of operations giving pro forma effect as if the Business Combination (as defined below) had occurred as of January 1, 2016. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions on the historical financial information of our predecessor entity.
On November 4, 2016 (the “Closing Date”), in a transaction referred to as the “Business Combination,” Hostess Brands, Inc. (the "Company"), then known as Gores Holdings, Inc. acquired a controlling interest in Hostess Holdings, L.P. (“Hostess Holdings”), an entity owned indirectly by C. Dean Metropoulos and certain equity funds managed by affiliates of Apollo Global Management, LLC (the “Apollo Funds”). Hostess Holdings had acquired the Hostess brand and certain strategic assets out of the bankruptcy liquidation proceedings of its prior owner (“Old Hostess”), free and clear of all past liabilities, in April 2013, and relaunched the Hostess brand later that year.
The Business Combination was accounted for using the acquisition method of accounting. The initial estimated fair values of the acquired assets and assumed liabilities as of the Closing Date, which are based on the consideration paid and estimates and our assumptions, are reflected herein. The total purchase price of approximately $2.4 billion to acquire Hostess Holdings, has been allocated to the assets acquired and assumed liabilities of Hostess Holdings based upon estimated fair values at the date of acquisition. Third party valuation specialists conducted analyses in order to assist our management in determining the fair values of the acquired assets and liabilities assumed. The Company has estimated the fair value of assets acquired and liabilities assumed at the date of acquisition. The unaudited pro forma consolidated financial information is included for informational purposes only and does not purport to reflect the results of operations of Hostess Brands, Inc. that would have occurred had the Business Combination occurred as of January 1, 2016.
The unaudited pro forma financial information contains a variety of adjustments, assumptions and estimates, is subject to numerous other uncertainties and the assumptions and adjustments as described in the accompanying notes hereto and should not be relied upon as being indicative of our results of operations had the Business Combination occurred on January 1, 2016. The unaudited pro forma financial information also does not project our results of operations for any future period or date. The acquisition of Superior Cake Products, Inc. (“Superior”) occurred in May 2016. The unaudited pro forma consolidated financial information for the three and six months ended June 30, 2016 and three and nine months ended September 30, 2016 includes the results of the Superior acquisition and its related operations from the date of acquisition through the respective period end. We evaluated the impact of the Superior acquisition on the Company’s financial statements and concluded that the impact was not significant and did not require nor separately warrant the inclusion of pro forma financial results assuming the acquisition of Superior at January 1, 2016 under applicable SEC rules and regulations or under GAAP.
On November 18, 2016, we refinanced our first and second lien term loans (the “Former First and Second Lien Term Loans”) into one new first lien term loan in the aggregate principal amount of $998.8 million and with a maturity date of August 3, 2022 (the “New First Lien Term Loan”). We evaluated the impact of the refinancing of existing debt pursuant to the New First Lien Term Loan, completed on November 18, 2016, and concluded that the impact was not significant and did not require nor separately warrant the inclusion of pro forma financial results assuming the completion of the refinancing on January 1, 2016.
The pro forma adjustments give effect to the items identified in the pro forma tables below in connection with the Business Combination.






Unaudited Pro Forma Consolidated Statement of Operations


Historical(i)
 
 
 
Pro Forma
 
Historical(i)
 
 
 
Pro Forma
(In thousands, except share and per share data)
Three Months
Ended June 30,
2016

Pro Forma
Adjustments

Three Months
Ended June 30,
2016
 
Six Months
Ended June 30,
2016

Pro Forma
Adjustments

Six Months
Ended June 30,
2016






 





Net revenue
$
192,343


$
—


$
192,343

 
$
352,560


$
—


$
352,560

Cost of goods sold
105,917


242

(ii)
106,159

 
195,809


500

(ii)
196,309

Gross profit
86,426


(242
)

86,184

 
156,751


(500
)

156,251








 
 






 
Operating costs and expenses:








 








Advertising and marketing
9,949


—


9,949

 
17,148


—


17,148

Selling expense
8,109


—


8,109

 
14,904


—


14,904

General and administrative
11,593


(251
)
(ii)
11,342

 
21,231


(307
)
(ii)
20,924

Amortization of customer relationships
156


5,979

(iii)
6,135

 
312


12,012

(iii)
12,324

Impairment of property and equipment
—


—


—

 
7,267


—


7,267

Loss on sale/abandonment of property and equipment and bakery shutdown costs
80


—


80

 
260


—


260

Business combination transaction costs
2,801


(2,226
)
(iv)
575

 
3,016


(2,441
)
(iv)
575

Related party expenses
1,138


—


1,138

 
2,373


—


2,373

Total operating costs and expenses
33,826


(3,502
)

37,328

 
66,511


9,264


75,775

Operating income
52,600


(3,744
)

48,856

 
90,240


(9,764
)

80,476

Other expense:






—

 








Interest expense, net
17,893


(4,624
)
(v)
13,269

 
35,742


(9,248
)
(v)
26,494

Other expense
4,918


—


4,918

 
6,172


—


6,172

Total other expense
18,811


(4,624
)

18,187

 
41,914


(9,248
)

32,666

Income before income taxes
29,789


880


30,669

 
48,326


(516
)

47,810

Income tax expense
317


8,425

(vi)
8,742

 
317


13,308

(vi)
13,625

Net income
29,472


(7,545
)

21,927

 
48,009


(13,824
)

34,185

Less: Net income attributable to the non-controlling interest
852


6,733

(vii)
7,585

 
1,780


10,102

(vii)
11,882

Net income attributable to Class A shareholders
$
28,620


$
(14,278
)

$
14,342

 
$
46,229


$
(23,926
)

$
22,303

Earnings per Class A share:








 
 
 
 
 
 
Basic






$
0.15

 
 
 
 
 
$
0.23

Diluted






$
0.15

 
 
 
 
 
$
0.23

Weighted-average shares outstanding:








 
 
 
 
 
 
Basic



97,589,217

(viii)
97,589,217

 
 
 
97,589,217

(viii)
97,589,217

Diluted



97,589,217

(viii)
97,589,217

 
 
 
97,589,217

(viii)
97,589,217





i.
The amounts in these columns represent Hostess Holdings historical results of operations for the period reflected. Certain amounts previously reported within the 2016 Hostess Holdings quarterly financial statements have been reclassified to conform with financial statement presentation within the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
ii.
Represents the adjustment to depreciation expense associated with the allocation of purchase price to property and equipment.
iii.
Represents additional amortization expense associated with the fair value recognized for customer relationships in connection with the Business Combination.
iv.
This adjustment consists primarily of legal and professional fees and other costs associated with the Business Combination.
v.
Represents the reduction in interest expense due to the repayment of Hostess Holdings debt pursuant to the terms of the Business Combination.
vi.
Represents the effective income tax rate of 28.5%, giving effect to the non-controlling interest, a partnership for income tax purposes.
vii.
Represents the elimination of historical income attributable to the non-controlling interest and attributes a portion of the pro forma income to the non-controlling interest created in the Business Combination. Income is allocated to the non-controlling interest based on its pro rata share of the total equity of Hostess Holdings.
viii.
Represents the basic and diluted weighted average number of Class A shares that would have been outstanding had the Business Combination occurred on January 1, 2016. The outstanding warrants were determined not to be dilutive.




Results of Operations by Segment—For the Unaudited Pro Forma Three and Six Months Ended June 30, 2016

 
Historical(i)
 
 
 
Pro Forma
 
Historical(i)
 
 
 
Pro Forma
(In thousands)
Three Months
Ended June 30,
2016
 
Pro Forma
Adjustments
 
Three Months
Ended June 30,
2016
 
Six Months
Ended June 30,
2016
 
Pro Forma
Adjustments
 
Six Months
Ended June 30,
2016
Net revenue
$
192,343

 
$
—

 
$
192,343

 
$
352,560

 
$
—

 
$
352,560

Cost of goods sold
105,917

 
242

(ii)
106,159

 
195,809

 
500

(ii)
196,309

Gross profit
86,426

 
(242
)
 
86,184

 
156,751

 
(500
)
 
156,251

 
 
 
 
 
 
 
 
 
 
 
 
Segment
 
 
 
 
 
 
 
 
 
 
 
Net Revenue
 
 
 
 
 
 
 
 
 
 
 
Sweet baked goods
179,088

 
—

 
179,088

 
333,815

 
—

 
333,815

Other
13,255

 
—

 
13,255

 
18,745

 
—

 
18,745

 
192,343

 
—

 
192,343

 
352,560

 
—

 
352,560

Gross Profit
 
 
 
 
 
 
 
 
 
 
 
Sweet baked goods
82,152

 
(242
)
(ii)
81,910

 
150,545

 
(500
)
(ii)
150,045

Other
4,274

 
—

 
4,274

 
6,206

 
—

 
6,206

 
$
86,426

 
$
(242
)
 
$
86,184

 
$
156,751

 
$
(500
)
 
$
156,251


i.
The amounts in these columns represent Hostess Holdings historical results of operations for the period reflected.
ii.
Represents the adjustment to depreciation expense associated with the allocation of purchase price to property and equipment.





Unaudited Pro Forma Consolidated Statement of Operations

 
Historical(i)
 
 
 
Pro Forma
 
Historical(i)
 
 
 
Pro Forma
(In thousands, except share and per share data)
Three Months
Ended
September 30,
2016
 
Pro Forma
Adjustments
 
Three Months
Ended
September 30,
2016
 
Nine Months
Ended
September 30,
2016
 
Pro Forma
Adjustments
 
Nine Months
Ended
September 30,
2016
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue
$
196,197

 
$
—

 
$
196,197

 
$
548,757

 
$
—

 
$
548,757

Cost of goods sold
113,618

 
(185
)
(ii)
113,433

 
309,427

 
315

(ii)
309,742

Gross profit
82,579

 
185

 
82,764

 
239,330

 
(315
)
 
239,015

 
 
 
 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
Advertising and marketing
10,381

 
—

 
10,381

 
27,529

 
—

 
27,529

Selling expense
8,271

 
—

 
8,271

 
23,175

 
—

 
23,175

General and administrative
10,784

 
(346
)
(ii)
10,438

 
32,015

 
(653
)
(ii)
31,362

Amortization of customer relationships
156

 
5,938

(iii)
6,094

 
468

 
17,950

(iii)
18,418

Impairment of property and equipment
—

 
—

 
—

 
7,267

 
—

 
7,267

Loss on sale/abandonment of property and equipment and bakery shutdown costs
226

 
—

 
226

 
486

 
—

 
486

Business combination transaction costs
4,049

 
(4,049
)
(iv)
—

 
7,065

 
(6,490
)
(iv)
575

Related party expenses
1,058

 
—

 
1,058

 
3,431

 
—

 
3,431

Total operating costs and expenses
34,925

 
1,543

 
36,468

 
101,436

 
10,807

 
112,243

Operating income
47,654

 
(1,358
)
 
46,296

 
137,894

 
(11,122
)
 
126,772

Other expense:
 
 
 
 
—

 
 
 
 
 
 
Interest expense, net
18,004

 
(4,623
)
(v)
13,381

 
53,746

 
(13,871
)
(v)
39,875

Other expense (income)
(3,827
)
 
—

 
(3,827
)
 
2,345

 
—

 
2,345

Total other expense
14,177

 
(4,623
)
 
9,554

 
56,091

 
(13,871
)
 
42,220

Income before income taxes
33,477

 
3,265

 
36,742

 
81,803

 
2,749

 
84,552

Income tax expense
(23
)
 
10,496

(vi)
10,473

 
294

 
23,804

(vi)
24,098

Net income
33,500

 
(7,231
)
 
26,269

 
81,509

 
(21,055
)
 
60,454

Less: Net income attributable to the non-controlling interest
2,329

 
6,852

(vii)
9,181

 
4,109

 
16,954

(vii)
21,063

Net income attributable to Class A shareholders
$
31,171

 
$
(14,083
)

$
17,088

 
$
77,400

 
$
(38,009
)

$
39,391

Earnings per Class A share:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
$
0.18

 
 
 
 
 
$
0.40

Diluted
 
 
 
 
$
0.18

 
 
 
 
 
$
0.40

Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
 
97,589,217

(viii)
97,589,217

 
 
 
97,589,217

(viii)
97,589,217

Diluted
 
 
97,589,217

(viii)
97,589,217

 
 
 
97,589,217

(viii)
97,589,217






i.
The amounts in these columns represent our Hostess Holdings historical results of operations for the period reflected. Certain amounts previously reported within the 2016 Hostess Holdings quarterly financial statements have been reclassified to conform with financial statement presentation within the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
ii.
Represents the adjustment to depreciation expense associated with the allocation of purchase price to property and equipment.
iii.
Represents additional amortization expense associated with the fair value recognized for customer relationships in connection with the Business Combination.
iv.
This adjustment consists primarily of legal and professional fees and other costs associated with the Business Combination.
v.
Represents the reduction in interest expense due to the repayment of Hostess Holdings debt pursuant to the terms of the Business Combination.
vi.
Represents the effective income tax rate of 28.5%, giving effect to the non-controlling interest, a partnership for income tax purposes.
vii.
Represents the elimination of historical income attributable to the non-controlling interest and attributes a portion of the pro forma income to the non-controlling interest created in the Business Combination. Income is allocated to the non-controlling interest based on its pro rata share of the total equity of Hostess Holdings.
viii.
Represents the basic and diluted weighted average number of Class A shares that would have been outstanding had the Business Combination occurred on January 1, 2016. The outstanding warrants were determined not to be dilutive.




Results of Operations by Segment—For the Unaudited Pro Forma Three and Nine Months Ended September 30, 2016

 
Historical(i)
 
 
 
Pro Forma
 
Historical(i)
 
 
 
Pro Forma
(In thousands)
Three Months
Ended
September 30,
2016
 
Pro Forma
Adjustments
 
Three Months
Ended
September 30,
2016
 
Nine Months
Ended
September 30,
2016
 
Pro Forma
Adjustments
 
Nine Months
Ended
September 30,
2016
Net revenue
$
196,197

 
$
—

 
$
196,197

 
$
548,757

 
$
—

 
$
548,757

Cost of goods sold
113,618

 
(185
)
(ii)
113,433

 
309,427

 
315

(ii)
309,742

Gross profit
82,579

 
185

 
82,764

 
239,330

 
(315
)
 
239,015

 
 
 
 
 
 
 
 
 
 
 
 
Segment
 
 
 
 
 
 
 
 
 
 
 
Net Revenue
 
 
 
 
 
 
 
 
 
 
 
Sweet baked goods
174,473

 
—

 
174,473

 
508,288

 
—

 
508,288

Other
21,724

 
—

 
21,724

 
40,469

 
—

 
40,469

 
196,197

 
—

 
196,197

 
548,757

 
—

 
548,757

Gross Profit
 
 
 
 
 
 
 
 
 
 
 
Sweet baked goods
76,777

 
185

(ii)
76,962

 
227,322

 
(315
)
(ii)
227,007

Other
5,802

 
—

 
5,802

 
12,008

 
—

 
12,008

 
$
82,579

 
$
185

 
$
82,764

 
$
239,330

 
$
(315
)
 
$
239,015


i.
The amounts in these columns represent Hostess Holdings historical results of operations for the period reflected.
ii.
Represents the adjustment to depreciation expense associated with the allocation of purchase price to property and equipment.






Reconciliation of Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure commonly used in the Company's industry and should not be construed as an alternative to net income as an indicator 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). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The Company has included Adjusted EBITDA because it believes it provides 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.
We define 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 important 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 expenses, or the cash requirements necessary to service interest or principal payments, on the Company's debt;
•
does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; 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.
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 $1.1 million and $2.4 million for the three and six months ended June 30, 2016, and $1.1 million and $3.4 million, for the three and nine months ended September 30, 2016, respectively. Following completion of the Business Combination, these expenses will be approximately $0.1 million quarterly.





Reconciliation of Adjusted EBITDA—For the Unaudited Pro Forma Three Months and Six Months Ended June 30, 2016

Reconciliation of Adjusted EBITDA
(Unaudited)
 
 
 
 
 
 
(In thousands)
 
Pro Forma
Three Months
Ended June 30,
2016
 
 
Pro Forma
Six Months
Ended June 30,
2016
 
 
 
 
 
 
Net income
 
$
21,927

 
 
$
34,185

Plus non-GAAP adjustments:
 
 
 
 
 
Income tax provision
 
8,742

 
 
13,625

Interest expense, net
 
13,269

 
 
26,494

Depreciation and amortization
 
9,184

 
 
18,249

Other (income) expense
i.
4,915

 
 
6,169

Impairment of property and equipment
ii.
—

 
 
7,267

Loss on sale/abandonment of property and equipment and bakery shutdown costs
iii.
80

 
 
260

Business combination transaction costs
iv.
575

 
 
575

Adjusted EBITDA
 
$
58,692

 
 
$
106,824


i.
Other expense primarily consisted of costs associated with a Hostess voluntary recall of approximately 710,000 cases of snack cakes and donuts resulting from the recall by Hostess' supplier, Grain Craft, of certain lots of its flour for undeclared peanut residue, professional fees attributable to the pursuit of a potential acquisition that has since been abandoned, and other special projects. The recall loss was recovered during the third quarter of 2016.
ii.
During the first quarter of 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.
iii.
For the three and six months ended June 30, 2016, we incurred a loss on a sale/abandonment of property and bakery shutdown costs, primarily due to utilities, insurance, taxes and maintenance expenses related to the Schiller Park, Illinois bakery. In addition we incurred losses related to equipment that we no longer intended to use or had idled.
iv.
For the three and six months ended June 30, 2016, business combination transaction costs consisted of professional and legal costs for the acquisition of Superior.




Reconciliation of Adjusted EBITDA—For the Unaudited Pro Forma Three Months and Nine Months Ended September 30, 2016

Reconciliation of Adjusted EBITDA
(Unaudited)
 
 
 
 
 
 
(In thousands)
 
Pro Forma
Three Months Ended
September 30,
2016
 
 
Pro Forma
Nine Months Ended
September 30,
2016
 
 
 
 
 
 
Net income
 
$
26,269

 
 
$
60,454

Plus non-GAAP adjustments:
 
 
 
 
 
Income tax provision
 
10,473

 
 
24,098

Interest expense, net
 
13,381

 
 
39,875

Depreciation and amortization
 
9,103

 
 
27,352

Other (income) expense
i.
(3,827
)
 
 
2,342

Impairment of property and equipment
ii.
—

 
 
7,267

Loss on sale/abandonment of property and equipment and bakery shutdown costs
iii.
226

 
 
486

Business combination transaction costs
iv.
—

 
 
575

Adjusted EBITDA
 
$
55,625

 
 
$
162,449


i.
Other (income) expense primarily consisted of the recovery of a loss related to a Hostess voluntary recall of approximately 710,000 cases of snack cakes and donuts resulting from the recall by Hostess' supplier, Grain Craft, of certain lots of its flour for undeclared peanut residue, professional fees attributable to the pursuit of a potential acquisition that has since been abandoned, and other special projects.
ii.
During the first quarter of 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.
iii.
For the three and nine months ended September 30, 2016, we incurred a loss on a sale/abandonment of property and bakery shutdown costs, primarily due to utilities, insurance, taxes and maintenance expenses related to the Schiller Park, Illinois bakery. In addition we incurred losses related to equipment that we no longer intended to use or had idled.
iv.
For the nine months ended September 30, 2016, business combination transaction costs consisted of professional and legal costs for the acquisition of Superior.