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1
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HOSTESS BRANDS
Barclays Global Consumer Staples Conference
September 2017
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DISCLAIMER
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 Brands 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” from time to time in our Securities and Exchange
Commission filings.
Industry and Market Data
In this Investor Presentation, Hostess Brands relies on and refers to information and statistics regarding market shares in the sectors in which it competes and other industry data. Hostess Brands obtained this
information and statistics from third-party sources, including reports by market research firms, such as Nielsen. Hostess Brands 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 Brands’ management’s best view as to information that is not
publicly available. Hostess Brands 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 Brands on November 4, 2016 (the ”Business Combination”). Unless otherwise noted, financial information for 2016 and LTM ended June 30, 2017 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, amortization and other adjustments to eliminate the impact of certain items that we do not
consider indicative of our ongoing performance (“Adjusted EBITDA”), Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Profit Margin, Free Cash Flow and Free Cash Flow Conversion. Adjusted
EBITDA and Adjusted Gross Profit exclude certain items. 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 Brands believes that these non-GAAP financial measures provide useful information to management and investors regarding
certain financial and business trends relating to Hostess Brands’ financial condition and results of operations. Hostess Brands’ management uses these non-GAAP measures to compare Hostess Brands’
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 Brands’ board of directors. Hostess Brands 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 Brands 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 Brands’ 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.
2
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DEAN METROPOULOS
Executive Chairman
Founder and Executive Chairman of Metropoulos & Co.
More than 30 years of successful experience revamping iconic brands
throughout the consumer space
Strong track record of growing revenues, reducing costs and
enhancing capital efficiency of portfolio companies
3
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BILL TOLER
President & CEO
Former CEO and President of AdvancePierre Foods
Former President of Pinnacle Foods
30+ years of executive experience in the packaged food and consumer sectors
Proven track record of brand growth, strategic planning, operations management,
and profit growth
4
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5
AGENDA
COMPANY OVERVIEW
BRAND & CHANNEL POSITIONING
GROWTH DRIVERS
FINANCIAL OVERVIEW
APPENDIX
2
1
4
3
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COMPANY
OVERVIEW
1
6
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7
Kansas City, MO
Product Portfolio
with Numerous
Iconic Brands
#2 Market
Position
in $6.55bn 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
LTM Net Sales(1):
$763m
LTM Adj. EBITDA(2):
$226m
% Adj. EBITDA
margin(2): 30%
Source: Nielsen U.S. total universe, 52 weeks ending 8/12/17.
(1) Financial results for 2016 and LTM ended 6/30/17 are presented on a pro forma combined basis. See “Pro Forma Combined Financial Information” on page 2.
(2) See “Use of Non-GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures on page 2 and reconciliations to the comparable
GAAP measures.
HOSTESS BRANDS AT A GLANCE
Iconic American brand delivering new and classic
sweet treats to our customers for generations
ICONIC BRAND
Delivering New and Classic Sweet Treats
8
75+
YEARS OLD
50+
YEARS OLD
<50
YEARS OLD
BRANDS SINCE
RELAUNCH
EMOTIONAL BRAND CONNECTION
Consumers share a special emotional relationship with the
98 year old Hostess, a brand that defines the rapidly growing
“Indulgent Snacking” trend
98
Year history
90%+
Brand awareness
Source: Harmon Atchison, Awareness, Use and Status Perception Study, 12/8/14
9
SIGNIFICANT GROWTH SINCE RE-LAUNCH
WITH MEANINGFUL UPSIDE POTENTIAL
Net Revenue
($ in millions)
$555
$621
$728
$763
2014A 2015A 2016A LTM Ending 6/30/17
Total Increase 37.5%
17%12%
Note: Does not include Superior pre-acquisition revenue.
Financial results for 2016 and LTM Ending 6/30/16 are presented on a pro forma combined basis. See “Pro Forma Combined Financial Information.”
(1) Compared to $658m for the LTM Ended 06/30/16.
(2) Growth rate excluding the acquisition of Superior Cake Products, Inc. 10
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Growth Rate: 16%
Organic Growth Rate(2): 13%12% 10%
(1)
Created a Compelling Growth Story
Powerful
Hostess Brand
Aggressive
Capital
Investment
Competitively
Advantaged
Business Model
Compelling
Growth Story=
11
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SINCE THE RELAUNCH, HOSTESS HAS…
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12
Dean
Metropoulos
Executive
Chairman
Bill Toler
President
& CEO
Tom
Peterson
EVP & CFO
Michael
Cramer
EVP & Chief
Administrative
Officer
Andrew
Jacobs
EVP & Chief
Commercial
Officer
Burke
Raine
SVP &
CMO
Jolyn
Sebree
SVP,
General
Counsel &
Corporate
Secretary
Darryl
Riley
SVP,
Quality/
Food Safety
& R&D
EXPERIENCED SENIOR LEADERSHIP
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13
BRAND &
CHANNEL
POSITIONING
2
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Donuts
~$1.5B
Snack Cakes
~$1.7B
Pies, Bars
& Other
~$450M
Blondies,
Brownies
~$300M
Breakfast pastries,
Danish ~$1.3B
Muffins
~$500M
SBG
Cookies
~$800M
Danish, Honey
Buns, Sweet Rolls
Mini and
Jumbo
Muffins
Donettes
Twinkies®, Zingers®,
CupCakes, Ding
Dongs®, Ho Hos®
Fruit Pie
STRONG MARKET POSITION IN KEY SEGMENTS
14
In $6.55bn Sweet Baked Goods Category,
14% Increase Since Re-launch
Donuts
Regular Donuts,
Donut Sticks
~$500M
Bars & Other
Bars & Crisps
~$150MM
SBG Cookies
SBG Cookies
~$800MM
Total ~$1.5B
Source: Nielsen U.S. total universe, 52 weeks ending 8/12/17.
Note: Hostess data does not include Superior. The Company has transitioned to a new Nielsen database for Market Share and Industry Data, al l 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 are included (e.g., Nutty Fudge Bars, Oatmeal Cream Sandwiches, Whoopie Pies).
24%
11%
Sub-category where
Hostess does not
currently participate
32%
8%
8%
8%
= Hostess Share of
Retail Sales
Significant Untapped
Market Potential
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7.4%
12.5%
15.0%
16.1%
17.1%
22.8%
2013 2014 2015 2016 2017 OldCo
52 Weeks Ending August 12
FURTHER STRENGTHEN THE CORE BUSINESS
Hostess Still Has Significant Headroom
For Growth and Share Gains
15
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) Source: Nielsen, Total Nielsen Universe. $ Share, 52 weeks ending 8/17/13, 8/16/14, 8/15/15, 8/13/16 & 8/12/17 vs 12 weeks ending 10/13/2012 (“OldCo”)
Hostess $ share of SBG category(1)
Distribution expansion
(more items in more stores)
Custom SKUs
Seasonal flavors
Display execution
Significant Upside Remains
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CONTINUED CORE BRAND GROWTH
16
Top Six Hostess Brands Posted Consumption Growth YTD
Source: Nielsen Total Universe, Year To Date data through week ending 8/12/17.
4%
12%
10%
3%
30%
4%
5%
Hostess Zingers
Hostess Twinkies
Hostess Ho Hos
Hostess Donette
Hostess Ding Dongs
Hostess Cupcakes
Hostess
Hostess Brands $ % Change - First Half 2017
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1Q17 2Q17
Permanent Items since 2015 Seasonal & LTO Programs 2017 Innovation
2016 Innovation Discontinued Items
SOLID FIRST HALF POS PERFORMANCE
17
$280
$290
Total Nielsen POS
($ in millions)
Source: Total Nielsen Universe, Hostess Q1 dollars through 04/01/17, Q2 dollar through 07/01/17.
Growth vs. PY 8% 3%
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16.6%
16.8%
16.9% 16.9%
17.1%
17.3%
17.6% 17.7%
01/28/17 02/25/17 03/25/17 04/22/17 05/20/17 06/17/17 07/15/17 08/12/17
13 Weeks Ending
CATEGORY IS STRENGTHENING
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Source: Nielsen Total Universe, Sweet Baked Goods, Dollar Volume & % Chg through 8/12/17
(1) Represents Total Nielsen Universe Sweet Baked Goods for January through May 2017 and June through August 2017
$ Share Change
vs. PY
Hostess SBG Share (%)
Total Nielsen
SBG Category
$ % Chg (1)
-1.8% -0.2%
+1.3% +1.3% +1.4% +1.1% +1.0% +0.9% +0.7% +0.3%
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BROAD CHANNEL OPPORTUNITY
19
Small Format Total US Mass Total Food
16.3%
16.1%
16.9%
52WE
8/15/15
52WE
8/13/16
52WE
8/12/17
18.7%
21.1%
22.3%
52WE
8/15/15
52WE
8/13/16
52WE
8/12/17
Source: Hostess Market Dollar Share, 52 weeks ending 8/15/15, 8/13/16 and 8/12/17. (Oldco) shares,Total Nielsen Universe 12 weeks ending 10/13/12
Total US Mass revised from previously published documents to include additional retailers
Club includes only Sam’s and BJ’s.
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.
19.1%OldCo: 20.3%30.1%
$2.7B Category $1.3B Category $2.3B Category
11.6%
11.9%
12.8%
52WE
8/15/15
52WE
8/13/16
52WE
8/12/17
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20
GROWTH
DRIVERS
3
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FUTURE OPPORTUNITIES
21
Rebuild Core
Business
Innovation &
Renovation
White Space M&A
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REBUILD CORE PRODUCTS
22
More Items in
More Stores
Continue to Build
Distribution
10%+ TDP Growth
Drive Penetration
in Channels
Unlocked by
Warehouse Model
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2017 INNOVATION
23
Cinnamon Sugar
Crunch Donettes
White Fudge
Peanut Butter Apple Streusel Cupcake Expansion
Twinkies
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2017 RENOVATION
24
The Chocodile Pies
BrowniesSuzy Q’s
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WHITESPACE – KEY FOCUS AREAS
25
In-Store Bakery Foodservice International
1 2 3
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WHITESPACE OPPORTUNITY
In-Store Bakery (Sweets) is an $8.0 Billion Category
26
Source: Nielsen Perishable Group, In Store Bakery, Total US, 52 weeks ending 7/1/17.
Note: Total In-Store Bakery is $11.3B Category (including Bread and Rolls)
ISB –
$ Share
Breakfast
Bakery
28%
Desserts
and Sweet
Snacks
72% Introduced Hostess Bake
Shop™
Providing “Made With” for
Retailer Own Labels
Launching Incremental
Innovation in New Forms
Club Tub Donettes
Big Twinkie Cake
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M&A STRATEGY
27
Leverage Hostess Brand and/or warehouse model
Expand baking capabilities, including further into ISB, or move into
attractive adjacent categories
Facilitate building Hostess’ scale as broader snacking platform
Provide cash flow and EPS accretion
We are focused on potential targets that:
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28
FINANCIAL
OVERVIEW
4
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TOM PETERSON
EVP & CFO
Served as Hostess Corporate Controller since relaunch
Promoted to CFO in March 2016
Formerly a Managing Director at FTI Consulting and on the restructuring
team of Legacy Hostess
20+ years of accounting and finance expertise
29
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$555
$621
2014A 2015A 2016A LTM Ended
6/30/17
SIGNIFICANT GROWTH SINCE RE-LAUNCH WITH
MEANINGFUL UPSIDE POTENTIAL
30
Net Revenue(1)(2)
($ in millions)
Adjusted EBITDA(1)(2)(3)
($ in millions)
$145
$178
$226
2014A 2015A 2016A LTM Ended
6/30/17
% Adj. EBITDA
Margin(3)
26% 29% 30%
$215
12%
Total Increase 37.5%
$728
All growth rates are based on the comparable period in the prior year
(1) Does not include Superior pre-acquisition results.
(2) Financial results for 2016 and LTM Ended 6/30/17 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.
(4) Growth rate excluding the acquisition of Superior Cake Products, Inc.
30%
$763
Growth Rate 16%17%
12%Organic Growth Rate(4) 10%13%
Total Increase 55.9%
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MOMENTUM CONTINUES IN 1H 2017…
31
Net Revenue
($ in millions)
Adjusted Gross Profit(1)
($ in millions)
% Adj. Gross
Profit Margin(1)
Adjusted EBITDA(1)
($ in millions)
% Adj. EBITDA
Margin(1)
30%
(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.
Driven by new product initiatives and white space opportunities,
including ISB, Food Service and International channels
$353
$388
1H FY16 1H FY17
10%
$156
$168
1H FY16 1H FY17
7%
$107
$118
1H FY16 1H FY17
10%
30%43%44%
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2016 INNOVATION SUCCESS TO LAP
32
1Q17 2Q17 3Q17 4Q17
Note: M&M’s is a registered trademarks of Mars, Incorporated. Ghostbusters is a registered trademark of Columbia Pictures Industries, Inc.
Twinkies Innovation
Brownie Innovation
Return of Suzy Q
• Strong Results
and Share Gains
• Lap Gets Easier
• Return to Drivers
of Growth:
• Distribution
• Innovation
• Whitespace
Brownie
Innovation
Return of
Suzy Q
Lapping from 2Q16 Lapping from 3Q16
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STRONG CASH FLOW ENABLES MULTIPLE
VALUE CREATION OPPORTUNITIES
33
Notes: FCF defined as Adj. EBITDA-Capex and FCF conversion defined as Adj. EBITDA-Capex / Adj. EBITDA are non-GAAP financial measures. See “Use of Non-
GAAP Financial Measures” and the Appendix for an explanation of all non-GAAP measures and reconciliations to the comparable GAAP financial measures.
Financial results for 2016 are presented on a pro forma combined basis. See “Pro Forma Combined Financial Information.”
Anticipate 2017 net increase in cash of $95M to $105M after giving consideration to
capital expenditures, required debt payments and partnership tax distributions
Expect net leverage of approximately 3.65x to 3.75x at year end
Potential uses of cash include acquisitions, optional debt reductions and opportunistically
simplifying equity structure
$94
$153
$180
$195 - $205
2014A 2015A 2016A 2017 Estimated
FREE CASH FLOW
($ in millions)
FCF Conversion: 84%86%65% 83% - 87%
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CONCLUDING REMARKS
Differentiated Business Model
Drives Continued Growth
34
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
®
35
APPENDIX
®
36Footnotes on next page
$ in millions
Pro Forma
Combined,
Twelve Months
ended
30-Jun-17
Six Months
Ended
30-Jun-17
(Successor)
Pro Forma
Six Months
Ended
30-Jun-16
Successor
4-Nov-16 to
31-Dec-16
Predecessor
1-Jan-16 to
3-Nov-16
Pro Forma
Combined,
Year Ended
31-Dec-16
Year
Ended
31-Dec-15
Year
Ended
31-Dec-14
Net income (loss) $100.7 $52.4 $34.2 ($8.5) $60.4 $82.4 $88.8 $81.5
Plus non-GAAP adjustments:
Income tax provision 40.5 21.3 13.6 (7.8) 0.4 32.9 – –
Interest expense, net 44.8 19.9 26.5 6.6 60.4 51.4 50.0 37.4
(Gain) loss on debt extinguishment(1) (0.8) – – (0.8) – (0.8) 25.9 –
Depreciation and amortization 37.1 18.9 18.2 5.8 10.3 36.5 9.8 7.1
Executive chairman agreement termination and
execution(2)
– – – 26.7 – – – –
Share/Unit-based compensation(3) 4.4 4.4 – – 3.9 – 1.4 0.4
Other (income) expense(4) (3.1) 1.0 6.5 0.8 1.6 2.4 (8.7) 0.6
Business combination transaction costs(5) – – 0.6 – 31.8 0.6 – –
Impairment of property and equipment(6) – – 7.3 – 7.3 7.3 2.7 13.2
Loss on sale/abandonment of property and
equipment and bakery shutdown costs(7)
2.6 – – – 2.6 2.6 4.2 5.2
Inventory fair value adjustment(8) – – – 8.9 – – – –
Special employee incentive compensation(9) – – – – 4.7 – 3.9 –
Adjusted EBITDA $226.2 $117.7 $106.8 $31.9 $183.4 $215.3 $177.9 $145.3
Net Revenue $762.7 $387.7 $352.6 $112.0 $615.6 $727.6 $620.8 $554.7
Adjusted EBITDA Margin (Adj. EBITDA divided by
Net Rev.)
29.7% 30.4% 30.3% 28.5% 29.8% 29.6% 28.7% 26.2%
Capital Expenditures $34.5 $15.1 $15.7 $6.5 $28.6 $35.1 $25.1 $51.1
Free Cash Flow $191.7 $102.6 $91.1 $25.4 $154.8 $180.2 $152.8 $94.2
FCF Conversion (Adjusted EBITDA – Capital
Expenditures divided by Adjusted EBITDA)
84.7% 87.2% 85.3% 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
37
Footnotes from prior page:
(1) For the pro forma combined twelve months ended June 30, 2017, 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 of debt 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 pro forma combined twelve months ended June 30, 2017 and the six months ended June 30, 2017, we recorded expenses of $4.4 million related to units awarded under the Hostess Brands, Inc.
2016 Equity Incentive Plan.
(4) For the pro forma combined twelve months ended June 30, 2017, other income consisted of the recovery of previously accrued recall costs and a gain related to the modification of our long-term debt
offset by professional fees incurred related to the secondary public offering of common stock and the registration of certain privately held warrants. For the pro forma six months ended June 30, 2016, we
incurred costs associated with a Hostess voluntary recall. The recall loss was recovered during the third quarter of 2016. Other costs include professional fees incurred related to the secondary public
offering of common stock and the registration of certain privately held warrants offset by a gain recognized related to the modification of our long-term debt. 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 to 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 transaction. For the year ended, December 31, 2014, other expense was $0.6 million.
(5) For the pro forma six months ended June 30, 2016, for the Predecessor period from January 1, 2016 through November 3, 2016, and for the pro forma combined year ended December 31, 2016, business
combination transaction costs consisted primarily of professional and legal costs.
(6) For the pro forma six months ended June 30, 2016, 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.
(7) For the pro forma combined twelve months ended June 30, 2017, 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.
(8) 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.
(9) 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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38Footnotes 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
3-Nov-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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GLOSSARY
39
Term Definition
BFY Better-for-you
ISB In-store bakery
SBG Sweet baked goods
SKU Stock keeping unit