Milling & Baking News - November 22, 2016 - 16

Financial Results X

Increased distribution helps drive
sales and earnings gains at Hostess
KANSAS CITY - Reflecting the successful execution of its strategy to build out
its distribution opportunities and expand
through innovation and new product
launches, Hostess Brands, Inc. posted
strong sales and earnings for its subsidiary Hostess Holdings, L.P.
Net income attributable to Hostess Holdings in the third quarter ended Sept. 30 totaled $31,184,000, which compared with a
loss of $3,860,000 in the same period a year
ago. Last year's results included a loss on extinguishment of a term loan of $18.1 million.
Net revenues in the third quarter were
$196,197,000, up 24% from $158,213,000
in the same period a year ago. Hostess
said the increase primarily was due to an
increase in the number of cases sold as a
result of increased distribution in convenience and drug channels and expanded
product offerings. Hostess said Superior
Cake Products, Inc., which was acquired
on May 10, contributed $9.7 million in net
revenues during the third quarter.
"We are very pleased with Hostess's thirdquarter financial results, which are evidence

of the successful execution of our strategy
to continue to build out our white space
distribution opportunities and enhance our
product assortment through innovation and
new product development," said William D.
Toler, president and chief executive officer.
Hostess Holdings is divided into
two reportable business segments:
Sweet Baked Goods, which
consists of sweet baked goods
sold under the Hostess and
Dolly Madison brands, and
Other, which consists of branded bread,
buns and in-store bakery products, including Superior Cake Products.
Sweet Baked Goods revenues in
the third quarter increased 13% to
$173,997,000, up from $154,529,000, while
Other segment revenues jumped sharply
to $22,200,000 from $3,684,000.
Gross profit in the third quarter totaled
$86,579,000, up 45% from $59,622,000 in the
same period a year ago. After excluding a $4
million credit to recall costs related to flour
and $2.6 million of incentive compensation,
third-quarter gross profit was $85.2 million.

Hostess said ingredient costs were higher
as a percentage of net revenues for the third
quarter of 2015, primarily due to the reduced available egg supplies, which pushed
egg ingredient prices to record highs.
Elaborating on the $4 million credit, Hostess noted that in June, the company recalled
710,00 cases of snack cakes and donuts "as
a direct result of the recall by our supplier,
Grain Craft, of certain lots of its flour for undeclared peanut residue." Hostess
said the matter was resolved
by "mutual agreement" with
Grain Craft. With the $4 million credit, the recall "did not
result in any expense (not including lost sales during this period of time) for
the nine months ended Sept. 30, 2016, for
recall costs related to flour."
Sweet Baked Goods gross profit
in the third quarter increased 36% to
$79,697,000, up from $58,420,000, while
Other segment profit jumped sharply to
$6,882,000 from $1,202,000.
For the nine months ended Sept. 30, net
income attributable to Hostess Holdings
was $77,413,000, which compared with
$68,027,000 in the same period a year
ago. Net revenues totaled $548,758,000,
up from $473,789,000. MBN

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16 / November 22, 2016 XMilling & Baking News

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Milling & Baking News - November 22, 2016

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