Hostess sales jump due to new products

by Jeff Gelski
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Hostess Deep Fried Twinkies
Hostess launched Deep Fried Twinkies during the fiscal year.

KANSAS CITY – Pro forma net revenue increased 17% to $727,586,000 in the fiscal year ended Dec. 31, 2016, for Hostess Brands, Inc., which compared to $620,815,000 in the previous fiscal year. New product launches accounted for $44 million in revenue, and the recently acquired Superior Cake Products, Inc. contributed another $26.7 million.

Pro forma net income for the fiscal year was $82,442,000, or 55c per share on the common stock, a decrease of 7% from $88,760,000 in the previous fiscal year primarily resulting from the income tax provision for 2016. Hostess Brands did not give earnings per share for the previous fiscal year.

The company completed the acquisition of a controlling interest in Hostess Holdings, L.P. on Nov. 4, 2016, and changed its name to Hostess Brands, Inc. from Gores Holdings, Inc. The Kansas City-based company in its results for the fourth quarter and fiscal year presented pro forma combined financial information, giving effect to the business combination as if it had occurred on Jan. 1, 2016.

Hostess Sweet Shop Brownies, Milky Way and M&Ms
Hostess partnered with Mars to launch Sweet Shop brownies with M&Ms and Milky Way.

The results included those of Superior Cake Products, Inc. from May 10, 2016, the day of the acquisition, which allows Hostess Brands to compete in the in-store bakery section of grocery and club retailers. Excluding the Super Cake acquisition, pro forma net revenue increased 13%.

New products launched in the fiscal year included Deep Fried Twinkies and Hostess Sweet Shop brownies along with the relaunch of Suzy Q snack cakes. The sweet baked goods segment reported a pro forma net revenue increase of 10% to $670,406,000 from $609,895,000.

Hostess’ other segment reported an increase of 424% in pro forma net revenue to $57,181,000 million from $10,920,000, which primarily was due to the Superior Cake acquisition.

Hostess Suzy Qs
Hostess recently relaunched Suzy Q's snack cakes.

“We are pleased with our strong revenue and profit growth for the year,” said Bill Toler, president and chief executive officer, when results were given March 14. “Our financial performance this year benefitted from increased distribution and product innovation initiatives as well as continuing to build market share on our core products.”

In the fourth quarter, Hostess Brands had pro forma net income of $21,988,000, or 15c per share on the common stock, which was up 28% from $17,155,000. Pro forma net revenue in the fourth quarter was $178,829,000, which was up 22% from $147,026,000.

Hostess Brands in fiscal-year 2017 expects to continue to grow above the sweet baked foods category. The company anticipates net revenue of $781 million and adjusted EBITDA of $235 million, which would be up from pro forma adjusted EBITDA of $215.3 million in fiscal-year 2016. Strategic initiatives will focus on further core distribution expansion, continued product innovation and line extensions, as well as the pursuit of white space opportunities.
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