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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended
September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-37540
twnk-20210930_g1.jpg
HOSTESS BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware
47-4168492
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)
7905 Quivira Road
66215
Lenexa,
KS
(Zip Code)
(Address of principal executive offices)
(816701-4600
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTicker Symbol Name of each exchange on which registered
Class A Common Stock, Par Value of $0.0001 per shareTWNKThe Nasdaq Stock Market LLC
Warrants, each exercisable for a half share of Class A Common StockTWNKWThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.:
Large accelerated filer
Accelerated
filer 
Non‑accelerated  filer Smaller reporting company Emerging growth company 
☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes  No 
Shares of Class A common stock outstanding - 138,377,187 shares at November 8, 2021




HOSTESS BRANDS, INC.
FORM 10-Q
For the Three Months Ended September 30, 2021

INDEX
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.










Cautionary Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. All statements contained in this Quarterly Report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. Statements that constitute 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 events and developments that we expect or anticipate will occur are also considered forward-looking statements. All forward-looking statements included herein are made only as of the date hereof. It is routine for our internal projections and expectations to change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter or year. Readers of this Quarterly Report are cautioned not to place undue reliance on any such forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Risks and uncertainties are identified under “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as updated by subsequent filings. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.






3



HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands, except shares and per share data)

September 30,December 31,
20212020
ASSETS
Current assets:
Cash and cash equivalents$228,096 $173,034 
Accounts receivable, net156,720 125,550 
Inventories49,309 49,348 
Prepaids and other current assets7,624 21,614 
Total current assets441,749 369,546 
Property and equipment, net318,492 303,959 
Intangible assets, net1,950,270 1,967,903 
Goodwill706,615 706,615 
Other assets, net17,861 17,446 
Total assets$3,434,987 $3,365,469 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt and lease obligations payable within one year$14,171 $13,811 
Tax receivable agreement payments payable within one year10,000 11,800 
Accounts payable 71,139 61,428 
Customer trade allowances55,157 46,779 
Warrant liabilities1,249 861 
Accrued expenses and other current liabilities46,541 55,715 
Total current liabilities198,257 190,394 
Long-term debt and lease obligations1,103,327 1,113,037 
Tax receivable agreement obligations137,274 144,744 
Deferred tax liability315,544 295,009 
Other long-term liabilities1,595 1,560 
Total liabilities1,755,997 1,744,744 
Commitments and Contingencies (Note 9)
Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 132,741,603 shares issued and 129,170,487 shares outstanding as of September 30, 2021 and 130,791,908 shares issued and 130,347,464 shares outstanding as of December 31, 2020
13 13 
Additional paid in capital1,300,329 1,281,018 
Accumulated other comprehensive loss(4,161)(10,407)
Retained earnings438,872 356,101 
Treasury stock(56,063)(6,000)
Stockholders’ equity1,678,990 1,620,725 
Total liabilities and stockholders’ equity$3,434,987 $3,365,469 
See accompanying notes to the unaudited condensed consolidated financial statements.
4


HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except shares and per share data)
Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Net revenue$287,969 $260,855 $844,875 $760,566 
Cost of goods sold188,990 169,700 545,271 500,700 
Gross profit98,979 91,155 299,604 259,866 
Operating costs and expenses:
Advertising and marketing
14,767 11,762 39,692 32,983 
Selling expense
8,166 8,675 26,250 39,173 
General and administrative
23,565 21,913 69,254 71,261 
Amortization of customer relationships
5,877 6,739 17,633 20,333 
Business combination transaction costs   4,282 
Other operating expense 729  756 
Total operating costs and expenses52,375 49,818 152,829 168,788 
Operating income 46,604 41,337 146,775 91,078 
Other expense (income):
Interest expense, net9,928 10,265 29,899 32,570 
Change in fair value of warrant liabilities228 (2,260)683 (64,978)
Other expense378 818 1,808 2,503 
Total other expense (income)10,534 8,823 32,390 (29,905)
Income before income taxes36,070 32,514 114,385 120,983 
Income tax expense9,878 6,281 31,614 12,022 
Net income 26,192 26,233 82,771 108,961 
Less: Net income attributable to the non-controlling interest 1,368  2,860 
Net income attributable to Class A stockholders$26,192 $24,865 $82,771 $106,101 
Earnings per Class A share:
Basic$0.20 $0.20 $0.63 $0.86 
Diluted$0.19 $0.18 $0.60 $0.33 
Weighted-average shares outstanding:
Basic129,846,551 124,905,538 130,679,974 123,889,306 
Diluted138,058,866 127,586,881 138,036,371 126,079,472 


See accompanying notes to the unaudited condensed consolidated financial statements.
5


HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, amounts in thousands)
Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Net income$26,192 $26,233 $82,771 $108,961 
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swap and foreign currency contracts designated as a cash flow hedge(192)(1,197)5,058 (16,992)
Reclassification into net income962 1,352 3,441 2,530 
Income tax benefit (expense)(203)(39)(2,253)3,611 
Comprehensive income (loss)26,759 26,349 89,017 98,110 
Less: Comprehensive loss attributed to non-controlling interest 1,375  2,034 
Comprehensive income (loss) attributed to Class A stockholders$26,759 $24,974 $89,017 $96,076 


See accompanying notes to the unaudited condensed consolidated financial statements.


6


HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, amounts in thousands)
Class A Voting
Common Stock
Additional
Paid-in Capital
Accumulated
Other Comprehensive Income (Loss)
Retained
 Earnings
Treasury StockTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balance–December 31, 2020130,347 $13 $1,281,018 $(10,407)$356,101 444 $(6,000)$1,620,725 
Comprehensive income— — — 6,162 26,732 — — 32,894 
Share-based compensation
146 — 2,723 — — — — 2,723 
Exercise of employee stock options20 — 262 — — — — 262 
Exercise of public warrants672 — 7,722 — — — — 7,722 
Payment of taxes for employee stock awards— — (843)— — — — (843)
Balance–March 31, 2021131,185 $13 $1,290,882 $(4,245)$382,833 444 $(6,000)$1,663,483 
Comprehensive income (loss)— — — (483)29,847 — — 29,364 
Share-based compensation
22 — 1,640 — — — — 1,640 
Exercise of employee stock options220 — 3,135 — — — — 3,135 
Exercise of public warrants209 — 2,405 — — — — 2,405 
Payment of taxes for employee stock awards— — (392)— — — — (392)
Repurchase of common stock(1,176)— — — — 1,176 (16,691)(16,691)
Balance–June 30, 2021130,460 $13 $1,297,670 $(4,728)$412,680 1,620 $(22,691)$1,682,944 
Comprehensive income (loss)— — — 567 26,192 — — 26,759 
Share-based compensation— — 2,642 — — — — 2,642 
Exercise of employee stock options19 — 255 — — — — 255 
Exercise of public warrants, net of fees of $500
643 — (494)— — — — (494)
Payment of taxes for employee stock awards— — (42)— — — — (42)
Reclassification of warrants— — 298 — — — — 298 
Repurchase of common stock(1,952)— — — — 1,952 (33,372)(33,372)
Balance–September 30, 2021129,170 $13 $1,300,329 $(4,161)$438,872 3,572 $(56,063)$1,678,990 

7


Class A Voting
Common Stock
Class B Voting
Common Stock
Additional
Paid-in Capital
Accumulated
Other Comprehensive Income (Loss)
Retained
 Earnings
Total
Stockholders’
Equity
Non-controlling
Interest
SharesAmountSharesAmount
Balance–December 31, 2019 122,107 $12 8,411 $1 $1,123,805 $(756)$251,425 $1,374,487 $94,432 
Comprehensive income (loss)— — — — — (8,810)81,448 72,638 (437)
Share-based compensation, including income taxes of $103
106 — — — 2,180 — — 2,180 — 
Exchanges969 — (969)— 11,819 (17)— 11,802 (11,802)
Distributions— — — — — — — — (1,613)
Exercise of employee stock options2 — — — 153 — — 153 — 
Payment of taxes for employee stock awards— — — — (1,004)— — (1,004)— 
Exercise of public warrants1 — — — 2 — — 2 — 
Tax receivable agreement arising from exchanges, net of income taxes of $1,341
— — — — (1,942)— — (1,942)— 
Balance–March 31, 2020 123,185 $12 7,442 $1 $1,135,013 $(9,583)$332,873 $1,458,316 $80,580 
Comprehensive income (loss)— — — — — (1,324)(212)(1,536)1,096 
Share-based compensation, net of income taxes of $496
46 — — — 1,929 — — 1,929 — 
Exchanges1,140 — (1,140)— 13,803 (127)— 13,676 (13,676)
Distributions— — — — — — — — (365)
Exercise of employee stock options and warrants37 — — — 408 — — 408 — 
Payment of taxes for employee stock awards— — — — (32)— — (32)— 
Tax receivable agreement arising from exchanges, net of income taxes of $952
— — — — (2,556)— — (2,556)— 
Balance–June 30, 2020124,408 $12 6,302 $1 $1,148,565 $(11,034)$332,661 $1,470,205 $67,635 
Comprehensive income (loss)— — — — — 109 24,865 24,974 1,375 
Share-based compensation, net of income taxes of $361
60 — — — 1,720 — — 1,720 — 
Distributions— — — — — — — — (1,445)
Exercise of employee stock options and warrants1 — — — 2 — — 2 — 
Exchanges680 — (680)— 8,244 (79)— 8,165 (8,165)
Payment of taxes for employee stock awards— — — — (347)— — (347)— 
Tax receivable agreement arising from exchanges, net of income taxes of $754
— — — — (1,431)— — (1,431)— 
Balance–September 30, 2020125,149 $12 5,622 $1 $1,156,753 $(11,004)$357,526 $1,503,288 $59,400 
See accompanying notes to the unaudited condensed consolidated financial statements.
8


HOSTESS BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Nine Months Ended
September 30, 2021September 30, 2020
Operating activities
Net income$82,771 $108,961 
Depreciation and amortization37,992 40,999 
Debt discount amortization931 977 
Change in fair value of warrant liabilities683 (64,978)
Tax receivable agreement remeasurement 610 
Unrealized foreign exchange losses(177)1,392 
Non-cash lease expense971 358 
Share-based compensation7,005 6,583 
Deferred taxes18,280 8,575 
Loss on sale of assets 317 
Change in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable(31,240)(7,106)
Inventories39 7,462 
Prepaids and other current assets 13,991 (4,334)
Accounts payable and accrued expenses7,949 2,186 
Customer trade allowances8,441 5,989 
Net cash provided by operating activities147,636 107,991 
Investing activities
Purchases of property and equipment(33,360)(33,382)
Acquisition of business, net of cash acquired (316,013)
Acquisition and development of software assets(3,330)(4,994)
Net cash used in investing activities(36,690)(354,389)
Financing activities
Repayments of long-term debt and lease obligations(8,375)(8,375)
Proceeds from long-term debt origination, net of fees paid 136,888 
Distributions to non-controlling interest (3,423)
Repurchase of common stock(50,063) 
Tax payments related to issuance of shares to employees(1,277)(1,383)
Cash received from exercise of options and warrants, net of fees13,285 565 
Payments on tax receivable agreement(9,270)(10,327)
Net cash provided by (used in) financing activities(55,700)113,945 
Effect of exchange rate changes on cash and cash equivalents(184)(337)
Net increase (decrease) in cash and cash equivalents55,062 (132,790)
Cash and cash equivalents at beginning of period173,034 285,087 
Cash and cash equivalents at end of period$228,096 $152,297 
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest$29,019 $31,883 
Net taxes paid$1,568 $5,403 
Supplemental disclosure of non-cash investing:
Accrued capital expenditures$5,603 $3,124 
See accompanying notes to the unaudited condensed consolidated financial statements.
9


HOSTESS BRANDS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business
Hostess Brands, Inc. is a Delaware corporation headquartered in Lenexa, Kansas. The condensed consolidated financial statements include the accounts of Hostess Brands, Inc. and its subsidiaries (collectively, the “Company”). The Company is a leading sweet snacks company focused on developing, manufacturing, marketing, selling and distributing snacks in North America under the Hostess® and Voortman® brands. The Company produces a variety of new and classic treats including iconic Hostess® Donettes®, Twinkies®, CupCakes, Ding Dongs® and Zingers® as well as a variety of Voortman® cookies and wafers.
Basis of Presentation
The Company’s operations are conducted through wholly-owned operating subsidiaries. The condensed consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The results of operations for any quarter or a partial fiscal year period are not necessarily indicative of the results to be expected for other periods or the full fiscal year. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. For the periods presented, the Company has one reportable segment.
Adoption of New Accounting Standards
In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”. This update provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. This update is effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the effect of this ASU on the Company’s condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. ASU No. 2020-04 is elective and effective as of March 12, 2020 through December 31, 2022. Once elected, this ASU must be applied prospectively for all eligible contract modifications. The Company will adopt Topic 848 when its relevant contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 to have a material impact on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes (Topic 740)”. This ASU simplifies the accounting for certain income tax related items, including intraperiod tax allocations, deferred taxes related to foreign subsidiaries and step-up in tax basis of goodwill. The ASU is effective for fiscal years beginning after December 15, 2020 and early adoption is permitted. The Company adopted the standard effective January 1, 2021. Adoption of Topic 740 did not have a material impact on the Company’s condensed consolidated financial statements.

Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.    
10


HOSTESS BRANDS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and for the reported amounts of revenues and expenses during the reporting period. Management utilizes estimates, including, but not limited to, valuation and useful lives of tangible and intangible assets, valuation of expected future payments under the tax receivable agreement, and reserves for trade and promotional allowances. Actual results could differ from these estimates.
Accounts Receivable
Accounts receivable represents amounts invoiced to customers for performance obligations which have been satisfied. As of September 30, 2021 and December 31, 2020, the Company’s accounts receivable were $156.7 million and $125.6 million, respectively, which have been reduced by an allowance for damages occurring during shipment, quality claims and doubtful accounts in the amount of $2.6 million and $3.5 million for the periods ending September 30, 2021 and December 31, 2020, respectively.
Inventories
Inventories are stated at the lower of cost or net-realizable value on a first-in first-out basis. Abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) are expensed in the period they are incurred.
The components of inventories are as follows:
(In thousands)
September 30,
2021
December 31,
2020
Ingredients and packaging$22,785 $22,965 
Finished goods23,798 23,583 
Inventory in transit to customers2,726 2,800 
$49,309 $49,348 
Software Costs

Capitalized software is included in “other assets, net” in the condensed consolidated balance sheets in the amount of $15.1 million and $14.7 million as of September 30, 2021 and December 31, 2020, respectively. Capitalized software costs are amortized over their estimated useful life of five years commencing when such assets are ready for their intended use. Software amortization expense included in general and administrative operating expense was $1.0 million and $2.9 million for the three and nine months ended September 30, 2021, compared to $1.4 million and $4.0 million for the three and nine months ended September 30, 2020, respectively.
Disaggregation of Revenue
Net revenue consists of sales of packaged food products in the United States, primarily within the Sweet Baked Goods category. The Company also sells products in the United States and Canada within the Cookies category.
11


HOSTESS BRANDS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables disaggregate revenue by geographical market and category.
Three Months Ended September 30, 2021
(In thousands)
Sweet Baked GoodsCookiesTotal
United States$258,818 $25,185 $284,003 
Canada 3,966 3,966 
$258,818 $29,151 $287,969 
Three Months Ended September 30, 2020
(In thousands)
Sweet Baked GoodsCookiesTotal
United States$234,103 $22,328 $256,431 
Canada 4,424 4,424 
$234,103 $26,752 $260,855 
Nine Months Ended September 30, 2021
(In thousands)Sweet Baked GoodsCookiesTotal
United States$759,010 $73,394 $832,404 
Canada 12,471 12,471 
$759,010 $85,865 $844,875 
Nine Months Ended September 30, 2020
(In thousands)Sweet Baked GoodsCookiesTotal
United States$693,085 $56,094 $749,179 
Canada 11,387 11,387 
$693,085 $67,481 $760,566 
Concentrations
For the three months ended September 30, 2021 and 2020, the Company has one customer (together with its affiliates) that accounted for 18.0% and 19.7% of total net revenue, and for the nine months ended September 30, 2021 and 2020, 18.8% and 21.0% of total net revenue, respectively.
Foreign Currency Remeasurement

Certain Voortman Cookies Limited (“Voortman”) sales and costs are denominated in the Canadian dollar (“CAD”). CAD transactions have been remeasured into US dollars (“USD”) on the condensed consolidated statement of operations using the average exchange rate for the reporting period. Balances expected to be settled in CAD have been remeasured into USD on the condensed consolidated balance sheet using the exchange rate at the end of the period. During both the three and nine months ended September 30, 2021, the Company recognized a gain on remeasurement of $0.2 million, which is reported within other expense on the condensed consolidated statement of operations. During the three and nine months ended September 30, 2020, the Company recognized losses on remeasurement of $0.4 million and $1.1 million, respectively, reported within other expense on the condensed consolidated statement of operations.

12


HOSTESS BRANDS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Property and Equipment
Property and equipment consists of the following:
(In thousands)
September 30,
2021
December 31,
2020
Land and buildings$64,663 $59,774 
Right of use assets, operating32,192 31,354 
Machinery and equipment272,971 255,821 
Construction in progress34,071 25,041 
403,897 371,990 
Less accumulated depreciation and amortization(85,405)(68,031)
$318,492 $303,959 
Depreciation expense was $5.9 million and $17.4 million for the three and nine months ended September 30, 2021, compared to $6.3 million and $16.6 million for the three and nine months ended September 30, 2020, respectively.

3. Accrued Expenses and Other Current Liabilities
Included in accrued expenses and other current liabilities are the following:
(In thousands)September 30,
2021
December 31,
2020
Incentive compensation$14,239 $16,199 
Payroll, vacation and other compensation10,447 9,886 
Interest rate swap and foreign currency contracts5,229 13,694 
Accrued interest4,768 4,815 
Other11,858 11,121 
$46,541 $55,715 

4. Debt and Lease Obligations
A summary of the carrying value of the debt and lease obligations are as follows:
(In thousands)September 30,
2021
December 31,
2020
Term Loan (3.0% as of September 30, 2021)
Principal$1,094,388 $1,102,763 
Unamortized debt premium and issuance costs(3,987)(4,917)
1,090,401 1,097,846 
Lease obligations27,097 29,002 
Total debt and lease obligations1,117,498 1,126,848 
Less: Current portion of long term debt and lease obligations(14,171)(13,811)
Long-term portion$1,103,327 $1,113,037 

13


HOSTESS BRANDS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2021, minimum debt repayments under the term loan are due as follows:
(In thousands)
2021$2,792 
202211,167 
202311,167 
202411,167 
20251,058,095 

Leases

The Company has entered into operating leases for certain properties which expire at various times through 2026. The Company determines if an arrangement is a lease at inception.
At September 30, 2021 and 2020, right of use assets related to operating leases are included in property and equipment, net on the condensed consolidated balance sheet (see Note 2. Property and Equipment). As of September 30, 2021 and 2020, the Company has no outstanding financing leases. Lease liabilities for operating leases are included in the current and non-current portions of long-term debt and lease obligations on the condensed consolidated balance sheet.
The table below shows the composition of lease expense:
Three Months EndedNine Months Ended
(In thousands)September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Operating lease expense$1,504 $1,209 $4,928 $4,273 
Short-term lease expense501 456 1,083 2,014 
Variable lease expense367 445 1,109 1,466 
$2,372 $2,110 $7,120 $7,753 

5. Derivative Instruments

Warrants
As of September 30, 2021 and December 31, 2020, there were 40,866,087 and 53,936,776 public warrants outstanding, and 419,011 and 541,658 private placement warrants outstanding, respectively. Each warrant entitles its holder to purchase one-half of one share of Class A common stock at an exercise price of $5.75 per half share, to be exercised only for a whole number of shares of Class A common stock. The warrants expire on November 4, 2021, or earlier upon redemption or liquidation. The Company may call the outstanding public warrants for redemption at a price of $0.01 per warrant, if the last sale price of the Company’s common stock equals or exceeds $24.00 per share 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. The private placement warrants, however, are nonredeemable so long as they are held by Gores Sponsor, LLC or its permitted transferees. The potential resale of the private placement warrants, which would result in a conversion to public warrants, has been registered with the SEC. When sold to the public, the private placement warrants will become public warrants.
In July 2021, the agreement governing the Company’s public and private placement warrants was amended. Subsequent to the amendment, the exercise price for all outstanding warrants is payable through a “cashless exercise” with a premium of $0.25 added to the valuation price of each share for purposes of calculating the number of shares issuable upon exercise of the warrants.