Hostess Brands Annual Report 2020

← All annual reports

FY2020 Annual Report · Hostess Brands

Loading PDF…

Outside Cover

Outside Back

Outside Front

Hostessbrands.com

Annual Report
Annual Report
2020
2020

Inside Front

Inside Back

Inside Cover

LETTER FROM OUR PRESIDENT & CEO

DEAR FELLOW STOCKHOLDERS,

2020 proved to be one of the most challenging and rewarding years for Hostess Brands! Our agility
and nimbleness to react to ever-changing consumer behaviors, manufacturing requirements and
safety needs of our employees and communities was tested like never before. Thanks to the
extraordinary daily efforts of our team members and retail partners we were able to achieve record
financial results while navigating through these unprecedented challenges. The resiliency of the
Hostess Brands team and our retail and supply-chain partners is inspiring, and we will continue to
prioritize their health and well-being as we look forward to another successful year of profitable growth
and delivering increased stockholder value.

Our key accomplishments in 2020 include:
Net revenue growth of 15.7%* and adjusted EBITDA growth of 20.1%*;

Adjusted gross profit increased 21.2%* and adjusted gross margin expanded by 140 basis

points*;
Generated operating cash flows of $159 million and on track to achieve leverage of approximately

3x by the end of 2021;
Seamlessly executed the Voortman acquisition and integrated the business, including transition to

the warehouse model, ahead of schedule and under budget, establishing a profitable platform for
innovation and market opportunities and serving as yet more proof that we have a platform
well-suited for complementary acquisitions;
Drove strong market share gains in convenience and other key channels with growth in repeat

consumers, particularly in younger demographic groups, supporting our strong foundation for
long-term growth;
Achieved a 5.8% increase in our rolling 3-year innovation revenue contribution driven by strong

performance of our 2020 innovation and a 39% increase in our innovation velocities; and

Exchanged all remaining shares of Class B common stock for Class A common stock, which
eliminated the non-controlling interest reported on the consolidated statement of operations and
simplified the capital structure.

Rooted in our core values, our team rose to the occasion and delivered in an uncertain and changing
environment brought on by COVID-19. Over the course of the year, we made strategic decisions to
enhance our portfolio and focus on higher margin growth opportunities. Such actions are paying off as
shown by an overall expansion of our margins. We achieved this through the execution of the
margin-accretive Voortman acquisition, strong growth of our Hostess® brand and an invigorated focus
on the development of key ESG initiatives.

Our development in high growth sub-segments of snacking where we have leading market positions
consistently drives growth ahead of the category and gives us the confidence that we can achieve
significant growth in innovation revenue as we bring differentiated ideas to market. We are pleased that
we delivered for our consumers, customers and investors and are well positioned to continue this
strong momentum and performance.

As we turn to fiscal year 2021, we are confident we will continue our sustainable, profitable growth
momentum and stockholder value creation over the long term behind our strong execution, high
penetration in growing consumer segments, expansion of Voortman and ability to deleverage with our
strong cash flow, while continuing to focus on key operational and ESG initiatives.

$1 Billion
2020 Annual
Net Revenue

$240
Million
2020 Annual
Adjusted EBITDA

$159 Million
2020 Annual
Operating Cash
Flow

Andrew P. Callahan
President & Chief Executive Officer

*Excluding the In-Store Bakery (“ISB”) business sold in 2019. Including ISB, net revenue grew 12.7%, Adjusted EBITDA grew 17.3%, Adjusted Gross Proﬁt grew 18.8% and Adjusted Gross Margin grew 185 bps.
Note: Adjusted measures above are non-GAAP ﬁnancial measures that exclude certain items which aﬀect comparability. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operation in our Form 10-K/A included in this Annual Report for a reconciliation of non-GAAP ﬁnancial measures to their respective comparable GAAP measures.

BOARD OF DIRECTORS

Jerry D. Kaminski

Independent Director and Chairman

Director, President and Chief Executive Officer

Executive Vice President and Chief Operating Officer

President and Chief Executive Officer

Chief Executive Officer of the Beck Group NJ LLC

Chief Executive Officer of Bulletproof 360, Inc.

EXECUTIVE OFFICERS

Andrew P. Callahan

Brian T. Purcell

Chief Financial Officer

Michael J. Cramer

Chief Administrative Officer

Andrew W. Jacobs

Chief Customer & Experience Officer

John L. Kalal

Chief Supply Chain Officer

Dan O’Leary

Chief Growth Officer

Darryl P. Riley

Jolyn J. Sebree

General Counsel

Robert C. Weber

Chief People Officer

of Land O’Lakes Inc.

Andrew P. Callahan

Director

Olu Beck

Independent Director

Laurence Bodner

Independent Director

Gretchen R. Crist

Independent Director

for RSR Partners, Inc.

Rachel P. Cullen

Independent Director

Food Products Inc.

Hugh G. Dineen

Independent Director

Management

Ioannis Skoufalos

Independent Director

& Gamble Co.

Craig D. Steeneck

Independent Director

ACCOUNTING FIRM

KPMG LLP

1000 Walnut

Suite 1100

Kansas City, MO 64106

WEBSITE

www.hostessbrands.com

Managing Director, Consumer Goods and Services,

Senior Vice President of Quality, Food Safety and R&D

Former President and Chief Executive Officer of Ruiz

Former Senior Vice President and Chief Marketing

Officer of MetLife US and MetLife Global Investment

INVESTOR RELATIONS

Amit Sharma

asharma@hostessbrands.com

(917) 922-0211

Former Global Product Supply Officer of The Procter

Former Executive Vice President and Chief Financial

Officer of Pinnacle Foods Inc.

INDEPENDENT REGISTERED PUBLIC

please contact:

NASDAQ LISTING

Our Class A Common Stock is listed on the NASDAQ

Capital Market under the ticker symbol: TWNK.

Warrants to purchase shares of our Class A Common

Stock are listed on the NASDAQ Capital Market under

the ticker symbol: TWNKW.

REGISTRAR AND TRANSFER AGENT

If you have a question about your account or would

like to report a change in your name or address,

Continental Stock Transfer & Trust Company

1 State Street

New York, NY 10004

(212) 509-4000

cstmail@continentalstock.com

ANNUAL MEETING

June 28, 2021 at 9:00 a.m. CT

Live Online Meeting

https://www.cstproxy.com/hostessbrands/2021

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

☒

☐

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number 001-37540

HOSTESS BRANDS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation
or organization)

7905 Quivira Road, Lenexa,

(Address of principal executive offices)

47-4168492

(I.R.S. Employer Identification No.)

66215

(zip code)

(816) 701-4600
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act

Title of Each Class

Ticker Symbol

Name of Each Exchange on Which
Registered

Class A Common Stock, par value of $0.0001 per share

TWNK

The Nasdaq Stock Market LLC

Warrants, each exercisable for half share of Class A Common Stock

TWNKW

The Nasdaq Stock Market LLC

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Securities registered pursuant to Section 12(g) of the Act: None.

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 x No o

Indicate by check mark whether the registrant has submitted electronically and 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 x No o

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2020, computed by reference to the closing price
reported on the Nasdaq Capital Market on such date was $1,516,537,841 (124,102,933 shares at a closing price per share of $12.22).

Shares of Class A common stock outstanding - 131,294,192 shares at May 10, 2021
Shares of Class B common stock outstanding - no shares at May 10, 2021

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement relating to its 2021 annual meeting of stockholders (the “2021 Proxy Statement”) are incorporated by reference into
Part III of this Annual Report on Form 10-K/A where indicated. The 2021 Proxy Statement was filed with the U.S. Securities and Exchange Commission on April 30, 2021.

Explanatory Note

This Amendment No. 1 to Form 10-K/A (this “Amendment” or “Form 10-K/A”) amends the Hostess Brands, Inc.’s
(the “Company”) Annual Report on Form 10-K for the year ended December 31, 2020, which was originally filed
with the U.S. Securities and Exchange Commission (“SEC”) on February 24, 2021 (the “Original Filing”).

On April 12, 2021,
the SEC issued a statement (the “SEC Statement”) on the accounting and reporting
considerations for warrants issued by special purpose acquisition companies (“SPAC”). The SEC Statement
discussed certain features of warrants issued in SPAC transactions that may be common across many entities. The
SEC Statement indicated that when one or more of such features is included in a warrant, the warrant should be
classified as a liability at fair value, with changes in fair value each period reported in earnings. Following
consideration of the guidance in the SEC Statement, the Company concluded that certain of its warrants should have
been classified as liabilities and measured at fair value, with changes in fair value each period reported in earnings.

This Amendment is being filed solely to (i) restate the financial statements for the accounting error associated with
certain warrants previously classified as equity which should have been classified as liabilities (and make
corresponding changes to the Risk Factors and the Management’s Discussion and Analysis of Financial Condition
and Results of Operations sections in this Amendment) and (ii) amend Part II Item 9A (Controls and Procedures).

Impact of Restatement

As a result of this restatement, the impacted warrants are now reflected as liabilities measured at fair value on the
Company's consolidated balance sheet, and the change in the fair value of such liability in each period is recognized
as a gain or loss in the Company’s consolidated statements of operations and comprehensive income (loss).

The impact of these adjustments on net income for the years ended December 31, 2020, 2019 and 2018 were a gain
of $39.9 million, a loss of $58.8 million and a gain of $79.2 million, respectively. The adjustments increased total
liabilities at December 31, 2020 and 2019 by $0.9 million and $111.3 million, respectively, with corresponding
decreases to total equity. The restatement of the financial statements had no impact on the Company’s net revenue,
operating income, liquidity, cash, or cash equivalents, or cash flows from operating, investing and financing
activities. See Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Amendment for
additional information on the restatement and the related financial statement effects.

Internal Control Considerations

In light of the restatement discussed above, the Company has reassessed the effectiveness of its internal controls
over financial reporting as of December 31, 2020, and has concluded that it has a material weakness related to the
determination of the appropriate accounting and classification of our warrant agreements.

Items Amended in this Form 10-K/A

The following sections in the Original Filing are revised in this Form 10-K/A to reflect the restatement:

•
•
•
•
•

Part I - Item 1 - Business
Part I - Item 1A - Risk Factors
Part II - Item 7 - Management's Discussion and Analysis
Part II - Item 8 - Financial Statements and Supplemental Data
Part II - Item 9A - Controls and Procedures

Our principal executive officer and principal financial officer have also provided new certifications as required by
Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications are included in this Form 10-K/A as
Exhibits 31.1, 31.2, 32.1 and 32.2.

For the convenience of the reader, this Form 10-K/A sets forth the information in the Original Filing in its entirety,
as such information is modified and superseded where necessary to reflect the restatement and related revisions.
Except as provided above, this Amendment does not reflect events occurring after the filing of the Original Filing
and does not amend or otherwise update any information in the Original Filing. Accordingly, this Form 10-K/A
should be read in conjunction with our filings with the SEC subsequent to the date on which we filed the Original
Filing with the SEC.

Page

31
31

45
85

85
88

88
88

HOSTESS BRANDS, INC.
FORM 10-K/A
FOR THE YEAR ENDED December 31, 2020

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Item 3.

Properties

Legal Proceedings

Item 4. Mine Safety Disclosures

INDEX

Part I

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Selected Financial Data

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8.
Item 9.

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures
Item 9B. Other Information

Part III

Item 10. Directors, Executive Officers and Corporate Governance
Item 11.

Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

Item 12.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accounting Fees and Services

Item 15.

Exhibits, Financial Statement Schedules

Part IV

Cautionary Note Regarding Forward Looking Statements

This Annual Report on Form 10-K as amended by Amendment No. 1 on 10-K/A (“Annual Report”) 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 Annual 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 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. 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 Annual 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 and discussed in Item 1A-Risk Factors in this Annual Report. 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. The discussion and analysis of our
financial condition and results of operations included in Item 7- Management’s Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with our consolidated financial
statements and related notes included in Item 8 of this Annual Report.

Other Pertinent Information

Hostess Brands, Inc. (f/k/a Gores Holdings, Inc.) was originally incorporated in Delaware on June 1, 2015 as a
special purpose acquisition company and consummated its initial public offering, on August 19, 2015, following
which its shares began trading on the Nasdaq Capital Market (“Nasdaq”).

On November 4, 2016, in a transaction referred to as the “Hostess Business Combination,” Gores Holdings, Inc.
acquired a controlling interest in Hostess Holdings, L.P. (“Hostess Holdings”), an entity owned indirectly by C.
Dean Metropoulos (the “Metropoulos Entities”) and certain equity funds managed by affiliates of Apollo Global
Management, LLC (together with the Metropoulos Entities, the “Legacy Hostess Equityholders”).

In connection with the closing of the Hostess Business Combination, Gores Holdings, Inc. changed its name to
Hostess Brands, Inc. and its trading symbols on Nasdaq from “GRSH” and “GRSHW,” to “TWNK” and
“TWNKW”.

Item 1. Business

Hostess - Who We Are

PART I

We are a leading packaged food company focused on developing, manufacturing, selling and distributing snack
products in North America. We produce a variety of new and classic treats including Hostess® CupCakes,
Twinkies®, Donettes®, Ding Dongs®, and Zingers®, Danishes, Honey Buns and Coffee Cakes, as well as
Voortman® branded cookies, wafer and sugar-free products. Our strategic vision is to be an iconic snack company
that builds brands and categories to delight our consumers and customers. We seek to leverage our differentiated
core competencies of strong brand equity, continuous innovation, efficient manufacturing and distribution model,
collaborative customer partnerships, and significant cash flows to drive profitable and sustainable growth by
engaging consumers with our products while seeking opportunities in adjacent snacking categories.

We operate in the growing snacking market where indulgent, sweet snacking continues to be a top preference for
consumers1. Our Sweet Baked Goods (“SBG”) products represented 19.5% of their category according to Nielsen
total universe for the 52-weeks ended December 26, 2020. Our cookie and wafer products provide a significant
opportunity to grow in the adjacent cookie category. We believe our strong brand history and market position in the
categories in which we compete, combined with our innovative spirit and scalable operating model, provide a strong
platform to execute our strategic initiatives.

We have invested significantly in retailer and consumer data analytics to identify distribution and pricing
opportunities and in automated baking and packaging lines to enhance production efficiencies. These investments,
combined with our Direct-to-Warehouse (“DTW”) distribution model, support our leading brand position within the
$6.9 billion U.S. SBG category and have increased our distribution channels, paving a path towards future
sustainable, profitable growth.

Our DTW distribution model uses centralized distribution centers and common carriers to fill orders, with products
generally delivered to our customers’ warehouses. This model has eliminated the need for direct-store-delivery
(“DSD”) routes and drivers, which allows us to expand our core distribution while gaining access to new channels.
During 2020, we successfully transitioned the distribution of Voortman® products, which were acquired as part of
our acquisition of Voortman Cookies Limited, from a DSD model to our DTW distribution network. This transition
created significant cost savings and unlocked opportunities to penetrate the convenience, drug store and dollar
channels.

Brands and Products

Hostess® has been an iconic American brand for generations. Our extensive portfolio of timeless and universally
recognized names such as Twinkies®, HoHos® and Ding Dongs® evoke an emotional affinity with consumers that
has the potential to be further unlocked through effective marketing and consumer-insight based innovation. We also
produce Voortman®, Dolly Madison®, Cloverhill® and Big Texas® branded products. Each brand targets different
markets and consumer needs.

1 Mintel Snacking Motivations and Attitudes, January 2019

COVID-19

The COVID-19 pandemic and efforts to stem its spread have caused significant economic disruption. We continue
to monitor the impact of the pandemic and adjust our operations in response. As discussed further below, as well as
in “Risk Factors” included in Item 1A and “Management's Discussion and Analysis of Financial Condition and
Results of Operations” in Item 7, we have taken action to respond to these disruptions to protect the health and well-
being of our entire team, their families and the communities we serve.

Our Growth Strategy

We are executing our growth strategy by strengthening our core Hostess® brand and expanding into adjacent
categories through innovation and strong partnerships with our customers, leveraging our highly efficient and
profitable business model and executing strategic acquisitions to accelerate growth, while effectively managing our
capital structure.

Optimize the core Hostess® brand and expand into adjacent categories

We believe that we have maintained the Hostess® brand power and category awareness for over a century by
satisfying consumers’ need for great-tasting sweet treats. We have established our leadership position in the SBG
category through the strength and quality of our products, developing and promoting brands which unite our loyal
consumer base and by pricing our products at a reasonable premium to other snacking alternatives. Our acquisition
of Voortman, another premium brand with a reputation for quality, enables us to leverage production capabilities
and brand recognition to gain market share in the adjacent category.

We plan to capitalize on the strength of our brands and our effective retailer economics to drive growth by attracting
new consumers and increasing the number of stores carrying our products. With the potential of extended reach
under our DTW distribution model, our market share gains are expected to come from traditional channels (“core
expansion”) through our investment in quality, targeted marketing, product innovation and a focus on our most
effective brands and products. Our brand strategy, combined with investments in highly effective marketing and
brand-building, has resulted in what we believe to be one of the strongest brand equities in snacking, evidenced by
our 90% brand awareness for Hostess®2.

Innovation is key to fueling our growth. We are devoted to maintaining our iconic brands while contemporizing
them in order to stay relevant with our consumer base and attract new consumers. We believe that to support our
market position, we must continually evolve with changing consumer preferences and trends. We are focused on
continuing to innovate and expand our core products by launching new flavors of iconic products and expanding
new product forms, pack-sizes and packaging to leverage the brand’s power and drive incremental revenue and
profit. The success of our product innovation is in part driven by understanding consumer preferences, providing
awareness and trials by partnering with our customers, all while maintaining our iconic brands and product quality.

2 AYTM Awareness Study, July 2020

The addition of the Voortman® brand provides us opportunities to respond to additional consumer preferences. In
2021, our new Super Grains cookies will be introduced. We believe these cookies satisfy the consumer need for a
baked indulgence with wholesome ingredients. Our new Crispy Minis products were introduced in late 2020 and
leverage Voortman's production capacities, extending the Hostess® brand into a new bite-size wafer form.

We are driving incremental growth in the Hostess® brand through extensions of our core products and limited time
offerings. Fun seasonal items such as Valentine Ding Dongs® and Mint Chocolate Twinkies®, and Key Lime and
S'mores flavored CupCakes, continue to engage our target consumers and provide a fresh perspective to the brand.

During 2020, growth in the breakfast sub-category outpaced total sweet baked goods growth, as more consumers
chose sweets in the morning. This consumption trend plays to our strengths as our products conveniently come
packaged in both single-serve and multipack varieties. We believe our breakfast portfolio, which includes Hostess®
Donettes®, Coffee Cakes, Cinnamon Rolls and Danishes as well as new product forms planned for 2021, including
Baby Bundts, Pecan Spins and Muff'n Stix, meet the consumer demand for on-the-go sweet snacking.

We continue to launch new partnerships and enter into licensing agreements that leverage our iconic brands. We
have partnered with companies in various industries to bring our iconic brands and flavor profiles to products
ranging from flavored coffees and creamers to protein powders and dessert mixes. Outside of the United States, our
products are sold throughout Canada and are also distributed by third parties internationally, including products
packaged specifically for Mexico and the United Kingdom, among others. In addition, our products are also sold on
various e-commerce platforms.

We understand the need to continually evolve while maintaining the traditional offerings our loyal consumer base
has come to know and love. We continue to invest in new product development and building our long-term pipeline,
leveraging our innovation portfolio and commercialization process to bring new products to market in a timely
fashion.

Leverage highly efficient and profitable business model

When we relaunched the Company, we set out to disrupt the status quo business model of the SBG category. We
established our innovative DTW distribution model and heavily invested in our bakeries, which has resulted in
energy, labor and time savings, along with the ability to produce quality products. These investments also paved the
way for new product innovation.

The DTW model uses centralized distribution centers and common carriers. We ship the majority of our products
from a centralized distribution center in Edgerton, Kansas. This centralization improves visibility and control of
distribution and is a key component of our operating model. We utilize other smaller distribution centers for certain
products and geographic areas. The distribution centers are able to fill customer orders and reduce inventory on-
hand as a result of this centralized consolidation of inventory. Products are delivered to customers’ warehouses from
the distribution centers using common carriers. A small number of our customers pick up their orders directly from
our distribution centers.

The DTW model is enabled by our extended shelf life (“ESL”) technology. As a result of our DTW model, we do
not keep a significant backlog of finished goods inventory, as our bakery products are promptly shipped to our
distribution centers after being produced. Some of our products are shipped frozen at the request of certain
customers.

We believe our DTW distribution model enables access to a substantial whitespace opportunity. It provides greater
reach into convenience, drug and dollar stores. Distributing to these channels under a DSD model can be inefficient
due to small average drop size. Historically, DSD snack cake companies have competed with candy and tobacco
companies for distribution; however, under our DTW model we partner with these third-party distributors to
profitably penetrate both the convenience store and drug store channels and who are looking for opportunities to
gain share in the SBG category. In 2020, convenience and drug stores accounted for 30.1% of our net revenues. We
have established a strong presence and market share in the convenience and drug channels and are focused on

continuously expanding coverage. These partnerships further expand our distribution reach in a highly efficient
manner, and we believe they will add to our growth potential going forward. The conversion of the Voortman
operations to the DTW model provides an opportunity to introduce new product forms and pack-types into the
convenience store channel, such as single-serve Mega Size wafer products, which will be available in stores in 2021.

We have a tailored channel-based go-to-market model that demonstrates key capabilities for growth. We continue to
invest in data capabilities, which enables focus on store-level compliance and growth opportunities with our Hostess
Partner Program (“HPP”). We also have a unique consortium retail merchandising approach where we partner with
brokers to drive in-store performance at lower costs.

We believe that impulse purchase decisions are another fundamental driver of retail sales of our products, which
makes prominent in-store placement an essential growth lever. The DTW and centralized distribution model provide
us with a competitive advantage through the ability to utilize retail-ready corrugate displays. These pre-built displays
are visually impactful, economically produced, and require minimal in-store labor to assemble or load; thus
providing cost-efficient display vehicles that benefit both us and the retailer. Preloaded displays also allow us full
control over our brand marketing and the ability to execute retailer-wide campaigns regionally or nationally in a
consistent manner, providing a unique competitive advantage across the entire SBG category, which our competitors
predominantly serve through a DSD model.

COVID-19 modified consumer behaviors, including increasing in-home consumption and disrupting the timing and
extent of certain seasonal trends. In response, we made changes to certain merchandising efforts and promotional
programs. In addition, our marketing efforts increased in key areas to accelerate growth, including developing new
digital programming, which will continue to support our next phase of growth.

Our business model is supported by cost-advantaged manufacturing and distribution, expanded channel/retail store
reach and enhanced in-store merchandising capabilities and offers our retail partners attractive margins that
incentivize further distribution of our products.

We continue to invest in the business to further our strategic initiatives. Our disciplined capital investment focus will
be on operational capabilities that directly support or expand our growth and innovation with strong return on
investment metrics. Further, we anticipate continued investment in automation, which allows for improved product
quality, consistency and efficiency.

Execute strategic acquisitions to accelerate growth

We have a solid platform for growth through acquisitions. Within the fragmented consumer packaged goods market
the opportunity exists to drive value creation through acquisitions by leveraging our brand, infrastructure and
performance-driven management culture. We are committed to seeking out opportunities that add new capabilities to
our already broad offerings.

The acquisition of Voortman in January 2020 diversified and expanded our product offerings and manufacturing
capabilities in the attractive, adjacent $6.9 billion cookie category (based on Nielsen data as of December 26, 2020).
The Voortman® brand and its unique product offerings have the #1 share of the sugar-free and wafer segments
within this category. The acquisition also leverages our broad customer reach and lean and agile business model.
During 2020, we integrated Voortman's distribution model into our DTW structure, with all Voortman U.S. sales
shipping through our centralized distribution center. In addition to sharing established, efficient infrastructure, we
can benefit from the strengthening of collaborative retail partnerships in the United States and Canada.

As we explore other strategic acquisition opportunities, we will consider our ability to leverage our existing brands
or reinvigorate acquired brands within the snacking category. We will also consider our ability to integrate
acquisitions with our existing business and the opportunities to generate synergies through leveraging our existing
assets and warehouse model. The successful integration of Voortman during 2020 exhibits our ability to execute and
integrate acquisitions in adjacent categories. We believe our scale, access to capital and management experience will
allow us to execute and integrate additional acquisitions.

The Category: Large and Attractive

The average American consumer eats 2 to 3 snacks per day with snacking occasions spread throughout the day
starting at breakfast. The U.S. SBG category is one of the largest categories within the broader U.S. Total Snack
category, with retail sales of $6.9 billion according to the Nielsen U.S. total universe for the 52-weeks ended
December 26, 2020. The SBG category includes breakfast items (e.g., donuts, breakfast danishes and muffins) and
all-day snacking items (e.g., snack cakes, pies, bars and brownies). With consumer snacking needs ranging from
satisfying hunger, providing an emotional lift and increasing social connection, we believe our product portfolio is
well positioned to benefit from these broader snacking trends.

Our expansion into the cookie category with the purchase of Voortman in 2020 provides another platform to
capitalize on the growth in consumer snacking. Voortman's products are in the specialty cookie segment and play
into consumer trends towards high quality and better-for-you ingredients.

Competitive landscape

Hostess® is the #2 brand in the U.S. SBG category. The top three brands, Hostess®, Little Debbie, and Entenmann's
account for 65.2% of the SBG retail sales according to Nielsen, while the rest of the category remains fairly
fragmented. With limited private label penetration in the category, consumers have shown a strong preference for
trusted brands within the SBG category. The leading positions are solidified through extensive product portfolios,
strong brand awareness, established distribution capabilities and long-standing relationships with critical high-
volume retailers. Furthermore, high levels of capital investment are required to establish manufacturing and
distribution capabilities of meaningful scale, providing additional barriers to entry.

Voortman® has the #1 creme wafer and sugar-free cookie products within the larger cookie category. Nabisco® is
the top brand with approximately 44% of the category according to Nielsen. There is higher private label penetration
in the cookie category than the SBG category.

We face competition from other brands, large national bakeries, smaller regional operators and supermarket chains
with their own private label brands. The key competitive factors in the industry include product quality, price,
customer service, brand recognition and loyalty, promotional activities, access to retail outlets, sufficient shelf-space
and ability to identify and satisfy consumer preferences. Some of our largest national competitors include Flowers
Foods, Inc., Grupo Bimbo, S.A., McKee Foods Corporation and Mondelez International, Inc. In addition, we also
compete with regional manufacturers and other companies that produce cookies, candies and other snacks. At times,
we experience pricing pressure in certain markets from competitor promotions and other pricing practices. However,
we believe our brand recognition, product quality and innovation have generated consumer loyalty to many of our
products which helps mitigate this impact.

Seasonality

Sweet baked goods revenues tend to be moderately seasonal, with declines during the early winter period, which we
believe are attributable to altered consumption patterns during the holiday season. We expect this trend to continue
to be applicable to our business. We strive to mitigate the seasonality by running certain targeted promotional
campaigns. Certain promotional campaigns, including Back to School and Halloween were modified in 2020 to
respond to changes in consumer habits due to the impact of COVID-19.

Production

We have a lean, agile and scalable model that delivers quality results. We produce our products at five bakeries
located in Emporia, Kansas; Columbus, Georgia; Indianapolis, Indiana; Chicago, Illinois; and Burlington, Ontario.
We have made significant efforts to protect the safety of our bakery employees during the COVID-19 pandemic
through additional safety protocols and sanitation measures. Our state of the art auto-bake technologies have resulted
in significant energy, labor and time savings. The technology provides fully-automated industrial baking ovens and
systems, combining cost efficient, compact and continuous baking solutions that can be custom configured. With the
increase in demand for our Hostess® branded products, we continue to make adjustments to our production
schedules, product assortment and equipment to maximize production capacity in our existing facilities. A portion of
our products are manufactured and packaged by third parties under our brands and distributed through our facilities.

Raw Materials

Our principal raw materials are flour, sweeteners, edible oils and compound coating, as well as corrugate and films
used to package our products. We utilize various buying strategies to lock in prices for certain raw materials and
packaging to reduce the impact of commodity price fluctuations. In addition, we are dependent on natural gas as fuel
for firing our ovens. Our third-party common carriers use gasoline and diesel as fuel for their trucks.

We have strategic, long-term relationships with our key suppliers for our raw materials and packaging that help
leverage our buying power. While the cost of some raw materials has, and may continue to increase or decrease over
time, we believe that we will be able to purchase an adequate supply of raw materials as needed. We also sole source
certain raw materials. We have multiple vendors that meet our supply requirements for the sole sourced materials,
except in the case of certain enzymes used in our ESL technology. With respect to these enzymes, we continue to
evaluate other sources in order to maintain business continuity and flexibility. Through cooperation with our
suppliers, we have experienced no significant disruption to our supply chain during the COVID-19 pandemic.

Customers

Our top 10 customers in 2020 accounted for 59.4% of total net revenue. During 2020, our largest customer, Wal-
Mart and related entities, represented 20.2% of our net revenue. No other customer accounted for more than 10% of
2020 net revenue. The loss of, or a material negative change in, our relationship with Wal-Mart or any of our other
top 10 customers could have a material adverse effect on our business. Our customers include mass merchandisers,
supermarkets and other retailers and distributors, convenience, drug and dollar stores.

Trademarks and Other Intellectual Property

We believe that our intellectual property has substantial value and has contributed to the success of our business. In
particular, our trademarks, including our registered Hostess®, Voortman®, Dolly Madison®, Cloverhill®, and Big
Texas® brand trademarks and our sub-brand trademarks, including Twinkies®, Ding Dongs®, Ho Hos®, Zingers®,
Sno Balls®, and Donettes®, are valuable assets that we believe reinforce our consumers’ favorable perception of our
products. These trademarks have a perpetual life, subject to renewal. This provides us the opportunity to sell our
products at premium price points and pursue licensing opportunities.

From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours
and, we believe, have infringed or misappropriated our intellectual property rights. Third parties have also, from
time to time, opposed our trademarks and challenged our intellectual property rights. We respond to these actions on
a case-by-case basis. We rely on laws and regulations, as well as contractual restrictions, to protect our intellectual
property and proprietary rights.

Research and Development

The majority of our research and development spend is dedicated to enhancing and expanding our product lines,
responding to changing consumer preferences and trends and continuing to enhance the taste of our products. In
addition, our research and development organization provides technical support to ensure that our core products are
consistently produced in accordance with our high standards of quality and specifications. Finally, our research and
development department is charged with developing processes to reduce our costs without adversely affecting the
quality of our products. During 2020, we opened a new innovation lab within our Lenexa, Kansas corporate office.
This lab provides us the testing capabilities, analytics and market research insights we need to support innovation
that meets consumer needs and expectations.

Government Regulation

Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of
products, are subject to regulation by various federal agencies, including the Food and Drug Administration (the
“FDA”), the Federal Trade Commission (the “FTC”), and the Environmental Protection Agency (the “EPA”), as
well as the Canadian Food Inspection Agency (“CFIA”) and Health Canada for Canadian Operations. Our products
are subject to various local, state, and federal laws, regulations and administrative practices affecting our business.
We must comply with provisions regulating registrations and licensing, health and sanitation standards, ingredient
standards, current Good Manufacturing Practices and traceability, hazard analysis and risk-based preventative
controls, food labeling and advertising, hazard reporting and recall requirements, equal employment, wage and hour
requirements, and environmental protection, among others. Also, during 2020, we were subject to compliance with
movement restrictions and other efforts by local governments to mitigate the spread of COVID-19. We take
compliance and the safety of our products and employees seriously and take all steps that we consider necessary or
appropriate to comply with all applicable laws, rules and regulations.

Human Capital

As of December 31, 2020, we employed approximately 3,000 people. Of our total workforce, approximately 90%
were located at our bakery facilities. The remaining workers comprised functions including operations management,
sales and supply chain, among other corporate functions.

Safety is one of our top priorities, and we are proud to have shown a 3-year track record of improvement, with 2020
results for key metrics ahead of industry benchmarks for categories consistent with Occupational Safety & Heath
Administration (OSHA) standards. We develop and maintain safety policies in our operating facilities and conduct
periodic audits to ensure compliance. We believe new automation, safety investments and behavioral safety training
have resulted in higher employee engagement and lower workers’ compensation costs. We have taken additional
measures during 2020 to maintain a safe working environment for our employees amid the COVID-19 pandemic,
including remote work (where practical), enhanced safety and sanitation protocols, employee health screenings and
providing face coverings.

We have entered into collective bargaining agreements with the local unions of the Bakery, Confectionery, Tobacco
Workers and Grain Millers Union in Indianapolis, Indiana, Columbus, Georgia and International (through our
Burlington, Ontario facility); AFL-CIO and the Chemical Production Workers Union Local No. 30 in Chicago,
Illinois. Approximately 1,200 employees are covered by these collective bargaining agreements. We consider our
relations with employees to be good and have not experienced a strike or significant work stoppage.

Our ability to achieve sustained, profitable results is predicated on our ability to attract, retain, and engage a team of
employees aligned on a common purpose: to deliver products that create moments of joy for our customers and
consumers. We are committed to providing a safe work environment, competitive wage and benefits packages,
career development opportunities and an inclusive culture that encourages employees to bring their whole self to
work.

Maintaining a positive work culture is critical to our ability to achieve our performance goals. We believe diversity,
equity, and inclusion efforts are key to maintaining our positive culture. We focus on our culture through a
combination of regular training for employees at all levels, policies and practices in support of these goals, and a
variety of internal and community based events and actions that reinforce the power of our shared Company values
and the unique characteristics of each of our employees.

To ensure we know what is important to our employees, we conduct periodic engagement surveys, roundtable
meetings with groups of employees, and action planning processes to track progress against identified themes. Many
of these actions are employee developed and led; all employees can lead, regardless of title.

The Company’s culture is an integral part of our strategy, built on innovation, collaboration and a competitive spirit.
Embodying these tenets is a strong and experienced management team, led by Andy Callahan, our President and
Chief Executive Officer. Members of the management team have extensive experience in the consumer packaged
goods industry across the sales, operations, marketing, legal and finance disciplines.

Our management team is complemented by an experienced Board of Directors, all of whom have senior executive
leadership experience and bring with them extensive consumer products knowledge. Our board members and
management include:

Board of Directors:

Management:

Jerry D. Kaminski, Chairman

Andy P. Callahan, President and Chief Executive Officer

Andy P. Callahan, Director

Brian T. Purcell, Executive Vice President, Chief Financial Officer and Treasurer

Olu Beck, Director

Michael J. Cramer, Executive Vice President, Chief Administrative Officer

Laurence E. Bodner, Director

Andrew W. Jacobs, Executive Vice President, Chief Customer and Experience Officer

Gretchen R. Crist, Director

John L. Kalal, Senior Vice President, Chief Supply Chain Officer

Rachel P. Cullen, Director

Dan O'Leary, Executive Vice President, Chief Growth Officer

Hugh G. Dineen, Director

Darryl P. Riley, Senior Vice President of Quality, Food Safety and R&D

Ioannis Skoufalos, Director

Jolyn J. Sebree, Senior Vice President, General Counsel and Secretary

Craig D. Steeneck, Director

Robert C. Weber, Senior Vice President, Chief People Officer

A detailed biography of each of our board members and key management team members can be found at
www.hostessbrands.com. Unless expressly stated otherwise, the information contained on or accessible through our
website is not incorporated by reference into this Annual Report on Form 10-K/A.

Available Information

This discussion of the business should be read in conjunction with, and is qualified by reference to, Management's
Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) under Item 7 herein. In
addition, the information set forth under the headings “Forward Looking Statements,” and “Introduction” in the
MD&A and the segment and geographic information included in Item 8, Financial Statements and Supplementary
Data - Note 7. Segment Reporting are incorporated herein by reference in partial response to this Item 1.

The Company’s Internet website address is www.hostessbrands.com. The Company makes available free of charge
(other than an investor’s own Internet access charges) through its Internet website its Annual Report on Form 10-K/
A, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, on the same
day they are electronically filed with, or furnished to, the Securities and Exchange Commission. The SEC maintains
an internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC at http://www.sec.gov. The Company is not including the information contained on
or available through its website or the SEC's website as part of, or incorporating such information by reference into,
this Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A.

Item 1A. Risk Factors

You should carefully consider the following risk factors, together with all of the other information included in this
Annual Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A. The risks described below are
those which we believe are the material risks that we face. Additional risks not presently known to us or which we
currently consider immaterial may also have an adverse effect on us. Any risk described below may have a material
adverse impact on our business or financial condition. Under these circumstances, the trading price of our Class A
common stock could decline, and you may lose all or part of your investment.

RISKS RELATED TO OUR BRANDS, REPUTATION AND COMPETITION

Maintaining, extending and expanding our reputation and brand image are essential to our business success.

We have many iconic brands with long-standing consumer recognition. Our success depends on our ability to
maintain our brand image for our existing products, extend our brands to new platforms, and expand our brand
image with new product offerings.

We seek to maintain, extend, and expand our brand image through marketing investments, including advertising and
consumer promotions, and product innovation. Increasing attention on the role of food marketing could adversely
affect our brand image. It could also lead to stricter regulations and greater scrutiny of marketing practices. Existing
or increased legal or regulatory restrictions on our labeling, advertising, consumer promotions and marketing, or our
response to those restrictions, could limit our efforts to maintain, extend and expand our brands. Moreover,
regulatory or legal action against us, product recalls or other adverse publicity could damage our reputation and
brand image, undermine our customers’ confidence and reduce long-term demand for our products, even if these
actions are unfounded or not material to our operations.

In addition, our success in maintaining, extending, and expanding our brand image depends on our ability to adapt to
a rapidly changing media environment. We increasingly rely on social media and online dissemination of advertising
campaigns. Social and digital media increases the speed and extent that information or misinformation and opinions
can be shared. Negative posts or comments about us, our brands or our products on social or digital media, whether
or not valid, could seriously damage our brands and reputation. If we do not maintain, extend, and expand our brand
image, then our product sales, financial condition and operating results could be materially and adversely affected.

Our intellectual property rights are valuable, and our failure to protect them could reduce the value of our
products and brands.

We consider our intellectual property rights, including our trademarks, trade names, copyrights, trade secrets and
trade dress, to be a significant and valuable part of our business. We attempt to protect our intellectual property
rights by taking advantage of a combination of applicable laws, registrations of our intellectual property, third-party
agreements (including non-disclosures, assignments, distribution and/or manufacturing, licenses, consents and co-
existence) and policing and enforcement of third-party misuse or infringement of our intellectual property. Our
failure to obtain or adequately protect our intellectual property rights, or any change in law or other changes that
serve to lessen or
intellectual property, may diminish our
legal protections of our
competitiveness and could materially harm our business. In addition, third-party claims of intellectual property
infringement might require us to pay monetary damages or enter into costly license agreements. We also may be
subject to injunctions against development and sale of certain of our products.

remove the current

Any litigation regarding intellectual property (including third-party infringement claims or litigation initiated by us
to protect our intellectual property rights) could be costly and time-consuming and could divert management’s and
other key personnel’s attention from our business operations. Any of the occurrences outlined above could
materially and adversely affect our reputation, product sales, financial condition and operating results.

We may be unable to leverage our brand value to compete against lower-priced alternative brands.

In most of our product categories, we compete with lower-priced alternative products. Our products must provide
higher value and/or quality to our consumers than alternatives, particularly during periods of economic uncertainty.
Consumers may not buy our products if relative differences in value and/or quality between our products and retailer
or other economy brands change in favor of competitors’ products or if consumers perceive this type of change. If
consumers choose the lower-priced brands, then we could lose market share or sales volumes, which could
materially and adversely affect our product sales, financial condition, and operating results.

We may be unable to correctly predict, identify and interpret changes in consumer preferences and demand and
offer new products or methods of distribution to meet those changes.

Consumer preferences for food and snacking products change continually. Our success will depend on our ability to
predict, identify and interpret the tastes, dietary habits, purchasing behavior and other preferences of consumers and
to offer products that appeal to these preferences. Moreover, weak economic conditions, recession or other factors
could affect consumer preferences and demand. If we do not offer products that appeal to consumers or if we
misjudge consumer demand for our products, our sales and market share will decrease and our profitability could
suffer.

We continually introduce new products or product extensions and our operating results and growth will depend upon
the market reception of such new products. There can be no assurance that new products will find widespread
acceptance among consumers, and unsuccessful product launches may decrease our profitability and damage our
brands’ reputation.

The continued prevalence of e-commerce and other methods of distribution outside of traditional retail shopping
could also impact our sales and profitability if we are unable to adequately modify the marketing and distribution of
our products in response.

In addition, prolonged negative perceptions concerning the health implications of certain food products could
influence consumer preferences and acceptance of some of our products and marketing programs. For example,
consumers are increasingly focused on health and wellness, and aware of product ingredients such as added sugar
and artificial flavors or colors. We might be unsuccessful in our efforts to effectively respond to changing consumer
preferences and social expectations. Negative perceptions regarding our products and failure to satisfy consumer
preferences could materially and adversely affect our reputation, product sales, financial condition and operating
results.

We operate in a highly competitive industry.

The snacking industry is highly competitive. Numerous brands and products compete for shelf space and sales, with
competition based primarily on product quality, brand recognition and loyalty, price, trade promotion, consumer
promotion, customer service, and the ability to identify and satisfy emerging consumer preferences. We face
competition from other large national brands, smaller regional operators, supermarket chains with their own private
labeled brands and diversified food companies. Our competitors include a significant number of companies of
varying sizes, including divisions, subdivisions, or subsidiaries of larger companies. Many of these competitors have
multiple product lines, substantially greater financial and other resources available to them, and may be substantially
less leveraged than us. We may not be able to compete successfully with these companies. Competitive pressures or
other factors could cause us to lose market share, which may require us to lower prices, increase marketing and
advertising expenditures, or increase the use of discounting or promotional campaigns, each of which could
materially and adversely affect our margins and could result in a decrease in our operating results and profitability.

Our success will depend on our continued ability to produce and successfully market products with extended shelf
life.

We have invested to extend our product shelf life, while maintaining our products’ taste, texture and quality.
Extended shelf life, or ESL, is an important component of our DTW model. Our ability to produce and successfully
market existing and new products with ESL, while maintaining taste, texture and quality, is essential to our success.
If we are unable to continue to produce products with ESL or if the products are not accepted by consumers, we
could be forced to make changes to our distribution model and that could have an adverse effect on our product
sales, financial condition and operating results.

We may be limited in our ability to pass cost increases on to our customers in the form of price increases or may
realize a decrease in sales volume in the event price increases are implemented.

We may not be able to pass some or all of any increases in the price of raw materials, energy, and other input costs
to our customers by raising prices. In the event we increase our prices, customers and consumers may choose to
purchase competing products or may shift purchases to private label or other lower-priced offerings, which may
adversely affect our operating results.

Consumers may be less willing or able to pay a price differential for our branded products, and may increasingly
purchase lower-priced offerings and may forego some purchases altogether, especially during economic downturns.
Retailers may also increase levels of promotional activity for lower-priced offerings as they seek to maintain sales
volumes during times of economic uncertainty. Accordingly, sales volumes of our branded products could be
reduced or lead to a shift in sales mix toward our lower-margin offerings. As a result, decreased demand for our
products may adversely affect our operating results.

RISKS RELATED TO OUR GROWTH STRATEGIES

Our growth may be limited by our inability to maintain or add additional shelf or retail space for our products.

Our results will depend on our ability to drive revenue growth, in part, by expanding the distribution channels for
our products. However, our ability to do so may be limited by our inability to secure additional shelf, display, or
other retail space for our products. Retail space for snacks is limited and subject to competitive and other pressures,
and there can be no assurance that retail operators will provide us sufficient space for our products to enable us to
meet our growth objectives. If we are unable to maintain or increase our retail space we could experience an adverse
impact on our product sales, financial condition and operating results.

We may not successfully identify or complete strategic acquisitions, alliances, divestitures or joint ventures.

From time to time, we may evaluate acquisition candidates, alliances or joint ventures that may strategically fit our
business objectives, or we may consider divesting businesses that do not meet our strategic objectives, growth or
profitability targets. These activities may present financial, managerial, and operational risks, including, but not
limited to, diversion of management’s attention from existing core businesses. In addition, to the extent we
undertake acquisitions, alliances or joint ventures or other developments outside our core geography or in new
categories, we may face additional risks related to such developments. For example, the acquisition of Voortman in
2020 created new exposure to Canadian regulatory, market and currency exchange risks. Any of these factors could
materially and adversely affect our product sales, financial condition, and operating results.

If we do not successfully integrate and manage our acquired businesses or brands, our operating results may be
adversely affected.

From time to time, we acquire businesses or brands to expand our product portfolio and distribution. We may incur
unforeseen liabilities and obligations in connection with the acquisition, integration, or management of the acquired
businesses or brands and may encounter unexpected difficulties and costs in integrating them into our operating and
internal control structures. We may also experience delays in extending our internal control over financial reporting
to a newly acquired business, which may increase the risk of failure to prevent misstatements in their financial
records and in our consolidated financial statements. Our financial performance depends in large part on how well
we can manage and improve the performance of acquired businesses or brands. We cannot assure you, however, that
we will be able to achieve our strategic and financial objectives for such acquisitions. If we are unable to achieve
such objectives, our financial condition and operating results could be negatively affected.

We may be unable to drive revenue growth in our key products or add products that are faster-growing and more
profitable.

The Snacking industry’s overall growth is linked to population growth. Our future results will depend on our ability
to drive revenue growth in our key products. Because our operations are concentrated in the North American
snacking industry, our success also depends in part on our ability to enhance our portfolio by adding innovative new
products. There can be no assurance that new products will find widespread acceptance among consumers. Our
failure to drive revenue growth in our key products or develop innovative new products could materially and
adversely affect our profitability, financial condition and operating results.

RISKS RELATED TO OUR OPERATIONS

The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, could
adversely impact or cause disruption to our business, financial condition, results of operations and cash flows.
Further, the COVID-19 pandemic which has caused severe disruptions in the U.S. and global economy, may
further disrupt financial markets and could potentially create widespread business continuity issues.

In response to the novel coronavirus (“COVID-19”), certain governmental authorities have issued stay-at-home
orders, proclamations and/or directives aimed at minimizing the spread of the pandemic. More restrictive
proclamations and/or directives may be issued in the future. As a food producer, we are an essential service and the
majority of our employees continue to work within our production and distribution facilities. However, we have had
increased labor costs resulting from the payment of overtime to certain of our employees while other employees
have been on paid sick leave or unpaid leaves of absence. We have also incurred expenses related to additional
sanitization and safety measures we have instituted throughout our facilities. Although the temporary reductions in
production at our facilities to enable sanitization and implementation of our other safety and employee welfare
programs have not materially affected our operations, other food producers have experienced significant shutdowns
of production. COVID-19 has also led to delays in FDA inspections of food production facilities. We cannot assure
you that our health and safety measures will prevent a widespread outbreak of COVID-19 at our facilities. Such an
outbreak could lead to a suspension of production or increased labor and other costs, each of which could have a
material adverse effect on our business, financial condition and results of operations.

We are actively monitoring the potential impact of the pandemic on our operations and distribution. Our products
are manufactured in North America and we may experience disruptions to our operations. We are unable to
accurately predict the impact that the coronavirus will have due to various uncertainties, including the severity of the
disease and its potential variants, the duration of outbreaks, the effectiveness of vaccines or other treatments and
actions that may be taken by governmental authorities. We also cannot predict the effects of any future outbreak of
other highly infectious or contagious diseases.

The cost to manufacture our products is subject to pricing volatility.

We purchase and use large quantities of commodities, including flour, sweeteners, edible oils and compound coating
to manufacture our products. In addition, we purchase and use significant quantities of corrugate and films to
package our products.

Prices for commodities, energy, transportation and other inputs are volatile and can fluctuate due to conditions that
are difficult to predict, including global competition for resources, currency fluctuations, severe weather, the
potential effects of climate change, consumer, industrial or investment demand, and changes in regulatory, trade,
alternative energy, or agricultural policies. Rising commodity, energy, transportation and other input costs could
materially and adversely affect our cost of operations, which could materially and adversely affect our financial
condition and operating results.

We monitor our exposure to commodity prices as an integral part of our overall risk management program, and seek
to utilize forward buying strategies through short-term and long-term advance purchase contracts, to lock in prices
for certain high-volume raw materials, packaging components and fuel inputs. These strategies, however, may not
protect us from increases in specific raw materials costs.

We are also actively monitoring the potential impact of the COVID-19 pandemic on our supply chain. We source
the significant majority of our ingredients, raw materials and packaging within North America. However, global
supply may become constrained, which may cause the price of certain ingredients, raw materials and packaging used
in our products to increase, such ingredients may become unavailable and/or we may experience disruptions to our
the coronavirus will have due to various
the impact
operations. We are unable to accurately predict
uncertainties, including the severity of the disease, the duration of the outbreak, the timing, effectiveness and public
acceptance of vaccines and actions that may be taken by governmental authorities. We also cannot predict the effects
of another wave of COVID-19 or any future outbreak of other highly infectious or contagious diseases.

that

Continued volatility or sustained increases in the prices of commodities, transportation and other supplies we
purchase could increase the costs of our products, and our profitability could suffer. Moreover, increases in the
prices of our products to cover these increased costs may result in lower sales volumes. If we are not successful in
our buying strategies, or if we are unable to price our products to cover increased costs, then commodity and other
input price volatility or increases could materially and adversely affect our financial condition and operating results.

The ability to distribute our products is subject to significant changes in the availability and pricing of
transportation.

We utilize third-party carriers to ship our products to our distribution centers and to customers. The availability of
timely and reliable transportation and the associated costs are subject to market demand, carrier capacity, fuel prices
and regulatory oversight. Our procurement of transportation services from a diversified group of carriers and
continuous monitoring of carrier usage and pricing could be insufficient to protect us from changes in market
demand or carrier capacity.

If we lose one or more of our major customers, or if any of our major customers experience significant business
interruption, our operating results could be adversely affected.

We have several large customers that account for a significant portion of our sales. Wal-Mart together with its
affiliates is our largest customer and represented approximately 20.2% of our net revenue for the year ended
December 31, 2020. Cumulatively, including Wal-Mart, our top ten customers accounted for 59.4% of total net
revenue for the year ended December 31, 2020.

We do not have long-term supply contracts with any of our major customers. The loss of one or more major
customers, a material reduction in sales to these customers for any reason, including but not limited to a significant
business interruption of our customers’ operations or our inability to forecast demand and plan production to fulfill
customer orders would result in a decrease in our product sales, financial condition and operating results.

Our results could be adversely impacted as a result of increased labor and employee-related expenses.

Inflationary pressures and any shortages in the labor market could increase labor costs, which could have a material
adverse effect on our consolidated operating results or financial condition. Our labor costs include the cost of
providing employee benefits, including health and welfare, and severance benefits. The annual costs of benefits vary
with increased costs of health care and the outcome of collectively-bargained wage and benefit agreements.

Various federal and state labor laws govern our relationships with our employees and affect operating costs. These
laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax
rates, workers’ compensation rates, overtime, family leave, safety standards, payroll taxes, citizenship requirements
and other wage and benefit requirements for employees classified as non-exempt. As our employees are paid at rates
set above, but related to, the applicable minimum wage, further increases in the minimum wage could increase our
labor costs. Significant additional government regulations could materially and adversely affect our business,
financial condition and operating results.

A portion of our workforce belongs to unions. Failure to successfully negotiate collective bargaining agreements,
or strikes or work stoppages could cause our business to suffer.

Approximately 41% of our employees, as of December 31, 2020, are covered by collective bargaining agreements
and other employees may seek to be covered by collective bargaining agreements. Strikes or work stoppages or
other business interruptions could occur if we are unable to renew these agreements on satisfactory terms or enter
into new agreements on satisfactory terms, which could impair manufacturing and distribution of our products or
result in a loss of sales, which could adversely impact our business, financial condition or operating results. The
terms and conditions of existing, renegotiated or new collective bargaining agreements could also increase our costs
or otherwise affect our ability to fully implement future operational changes to enhance our efficiency or to adapt to
changing business needs or strategy.

We may be subject to product liability claims should the consumption of any of our products cause injury, illness
or death.

We sell food products for human consumption, which involves risks such as product contamination or spoilage,
mislabeling, product tampering and other adulteration of food products. Consumption of a mislabeled, adulterated,
contaminated or spoiled product may result in personal illness or injury. We could be subject to claims or lawsuits
relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or exceed our
insurance coverage. Even if product liability claims against us are not successful or fully pursued, these claims could
be costly and time consuming and may require our management to spend time defending the claims rather than
operating the business. In addition, publicity regarding these claims could adversely affect our reputation and
brands.

Product recalls may increase our costs, negatively impact our brands’ reputation, and adversely affect our
business.

A product that has been actually or allegedly misbranded or becomes adulterated could result in product withdrawals
or recalls, destruction of product inventory, negative publicity, temporary plant closings, substantial cost of
compliance or remediation, and potentially significant product liability judgments against us. Any of these events
could result in a loss of demand for our products, which would have a material adverse effect on our financial
condition, operating results or cash flows. While we carry insurance to cover the direct costs of such events, we
cannot guarantee that these costs will be covered. We could also be adversely affected if consumers lose confidence
in our product quality, safety and integrity generally.

We rely on third parties for services related to sales, marketing and distribution.

We utilize third-party sales and marketing services and common carriers to execute order fulfillment for the majority
of our products. While these services have increased our market penetration and expanded our distribution reach, we
are dependent upon these third parties to effectively market, sell and distribute our products. We do not have long-
term contracts with any of these third-party service providers. Accordingly, any termination by a third-party
provider of their services to us, or any failure by these third parties to perform their obligations to us, would have a
material adverse impact on our business and operating results.

RISKS RELATED TO OUR INDUSTRY AND ECONOMIC CONDITIONS

The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy, may further disrupt
financial markets and could potentially create widespread business continuity issues.

In response to the COVID-19 pandemic, certain governmental authorities have issued stay-at-home orders,
proclamations and/or directives aimed at minimizing the spread of the pandemic. Additional, more restrictive
proclamations and/or directives may be issued in the future. We cannot predict the economic impact of additional
waves of COVID-19 infections or governmental measures and directives in response thereto. Although U.S. and
foreign regulatory agencies have approved several vaccines for treatment of the virus, the effectiveness, public
acceptance and widespread availability of the vaccines remain uncertain. While we do not expect that the virus will
have a material adverse effect on our business or financial results at this time, we are unable to accurately predict the
impact that the coronavirus will have due to various uncertainties, including the severity of the disease, the duration
of the outbreak, the economic impact on our customers, and actions that may be taken by governmental authorities.

We also cannot predict the effects of another wave of COVID-19 or any future outbreak of other highly infectious or
contagious diseases.

Our geographic focus makes us particularly vulnerable to economic and other events and trends in North
America.

We operate in North America and are particularly susceptible to adverse United States regulations, trade policies,
economic climate, consumer trends, market fluctuations, including commodity price fluctuations or supply shortages
of our ingredients and other production inputs, and other adverse events. The concentration of our businesses in
North America could present challenges and may increase the likelihood that an adverse event in the United States
would materially and adversely affect our product sales, financial condition and operating results.

The consolidation of retail customers could adversely affect us.

Retail customers may continue to consolidate, resulting in fewer customers for our business. Consolidation also
produces larger retail customers that may seek to leverage their position to improve their profitability by demanding
improved efficiency, lower pricing, increased promotional programs, or specifically tailored products. In addition,
larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to
develop and market their own retailer brands. Retail consolidation and increased retailer power could materially and
adversely affect our product sales, financial condition, and operating results.

Retail consolidation also increases the risk that adverse changes in our customers’ business operations or financial
performance will have a corresponding material and adverse effect on us. For example, if our customers cannot
access sufficient funds or financing, then they may delay, decrease, or cancel purchases of our products, or delay or
fail to pay us for previous purchases, which could materially and adversely affect our product sales, financial
condition, and operating results.

OTHER GENERAL RISKS RELATED TO OUR BUSINESS

Unsuccessful implementation of business strategies to reduce costs may adversely affect our business, financial
condition, results of operations and cash flows.

Many of our costs, such as freight, raw materials and energy, are subject to factors outside of our control. Therefore,
we must seek to reduce costs in other areas, such as through operating efficiency. If we are not able to complete
projects designed to reduce costs and increase operating efficiency on time or within budget, our business, financial
condition, results of operations and cash flows may be adversely impacted. In addition, if the cost-saving initiatives
we have implemented, or any future cost-saving initiatives, do not generate the expected cost savings and synergies,
our business, financial condition, results of operations and cash flows may be adversely affected.

Legal claims or other regulatory enforcement actions could subject us to civil and criminal penalties.

As a large food company, we operate in a highly regulated environment with constantly evolving legal and
regulatory frameworks. Various laws and regulations govern food production, storage, distribution, sales, labeling,
advertising and marketing, as well as licensing, trade, labor, tax and environmental matters, and health and safety
practices. Government authorities regularly change laws and regulations and their interpretations. Consequently, we
are subject
to heightened risk of legal claims or other regulatory enforcement actions. Although we have
implemented policies and procedures designed to ensure compliance with existing laws and regulations, there can be
no assurance that our employees, contractors, or agents will not violate our policies and procedures. Moreover, a
failure to maintain effective control processes could lead to violations, unintentional or otherwise, of laws and
regulations. Legal claims or regulatory enforcement actions arising out of our failure or alleged failure to comply
with applicable laws and regulations could subject us to civil and criminal penalties that could materially and
adversely affect our product sales, reputation, financial condition, and operating results.

We are subject to laws and regulations relating to protection of the environment, worker health, and workplace
safety. Costs to comply with these laws and regulations, or claims with respect to environmental, health and safety
matters, could have a significant negative impact on our business.

Our operations are subject to various federal, state and local laws and regulations relating to the protection of the
environment, including those governing the discharge of pollutants into the air and water, the management and
disposal of solid and hazardous materials and wastes, employee exposure to hazards in the workplace and the
cleanup of contaminated sites. We are required to obtain and comply with environmental permits for many of our
operations, and sometimes we are required to install pollution control equipment or to implement operational
changes to limit air emissions or wastewater discharges and/or decrease the likelihood of accidental releases of
hazardous materials. We could incur substantial costs, including cleanup costs, civil or criminal fines or penalties,
and third-party claims for property damage or personal injury as a result of any violations of environmental laws and
regulations, noncompliance with environmental permit conditions or contamination for which we may be
responsible that is identified or that may occur in the future. Such costs may be material.

Under federal and state environmental laws, we may be liable for the costs of investigation, removal or remediation
of certain hazardous or toxic substances, as well as related costs of investigation and damage to natural resources, at
various properties, including our current and former properties and the former properties of our predecessors, as well
as off-site waste handling or disposal sites that we or our predecessors have used. Liability may be imposed upon us
without regard to whether we knew of or caused the presence of such hazardous or toxic substances. Any such
locations we currently own or occupy, or locations that we may acquire in the future, may result in liability to us
under such laws or expose us to third-party actions such as tort suits based on alleged conduct or environmental
conditions. In addition, we may be liable if hazardous or toxic substances migrate from properties for which we may
be responsible to other properties.

In addition to regulations applicable to our operations, failure by any of our suppliers to comply with regulations, or
allegations of compliance failure, may disrupt their operations and could result in potential liability. Even if we were
able to obtain insurance coverage or compensation for any losses or damages resulting from the noncompliance of a
supplier with applicable regulations, our brands and reputation may be adversely affected by negative perceptions of
our brands stemming from such compliance failures.

We cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or
how existing or future laws or regulations will be enforced, administered or interpreted. We also cannot predict the
amount of future expenditures that may be required in order to comply with such environmental or health and safety
laws or regulations or to respond to environmental claims.

Our operations are subject to regulation by the FDA, FTC and other governmental entities, and such regulations
are subject to change from time to time which could impact how we manage our production and sale of products.

Our and our contract manufacturers’ operations are subject to extensive regulation by the FDA, the FTC and other
national, state, and local authorities in the US, as well as the CFIA and provincial and local authorities in Canada.
For example, we are subject to the Food, Drug and Cosmetics Act (“FDCA”) and regulations promulgated
thereunder by the FDA. This comprehensive regulatory program governs, among other things, the registration of all
points in the food supply chain, manufacturing, processing, composition and ingredients, labeling, packaging,
holding, distribution and safety of food. Under this program, the FDA regulates manufacturing practices for foods
through, among other things, its current “good manufacturing practices” regulations, or cGMPs, and specifies the
ingredients for certain foods. Our processing facilities and products are subject to periodic inspection by federal,
state, and local authorities. The Food Safety Modernization Act increased the number of inspections at food facilities
in the United States in an effort to enhance the detection of food-borne illness outbreaks and order recalls of tainted
food products. It also imposes greater responsibility upon parties throughout the food chain to design and implement
effective hazard analysis and critical control point program using preventive controls in food safety programs
throughout the supply chain. Failure to follow cGMPs and have an adequate food safety program results in food
being adulterated and could require product recalls. cGMPs require certain reports of hazardous food products to be
submitted to the FDA and provides authority for the FDA to take corrective action including recall of adulterated or
misbranded food products.

Similarly, the facility in Burlington, Ontario is subject to the Canadian Food and Drugs Act (“CFDA”) and the Safe
Food for Canadian’s Act (“SFCA”) and regulations promulgated thereunder by Health Canada and the CFIA. The
CFDA and SFCA govern the import, export, manufacture, distribution, composition, packaging,
labelling,
advertising, and sale of food products in Canada. Under the SFCA, the CFIA, among other things, issues licenses for
the importation, manufacturing, processing, packaging and labelling of foods, and enforces requirements for food
safety, preventive controls, traceability, and product complaints, investigations and recalls. Failure to implement
appropriate preventive controls and have an adequate food safety program may result in food being unsafe and could
require product recalls. Under the SFCA, companies are required to report to the CFIA if a food presents a risk of
injury to human health, whether due to adulteration or misbranding, and CFIA has authority to take corrective action
including recall of the affected food products.

The FDA also has extensive and specific regulations concerning food labeling, including use of certain terms such as
sugar free, healthy, low sodium, and low fat. Improper labeling of a food causes it to be misbranded and could result
in a recall. Under the FDCA, the FDA can issue a Warning Letter or Untitled Letter, or take other regulatory action
such as a product seizure and detention, product recall, refuse to allow the export of the product, or with the
Department of Justice, criminal or civil penalties, injunction against or restriction of product manufacture or
distribution, consent decrees, disgorgement, restitution, against misbranded or adulterated food products. The FTC
and state authorities regulate how we market and advertise our products, and we could be the target of claims
relating to alleged false or deceptive advertising under federal, state, and foreign laws and regulations. In Canada,
the CFIA enforces the detailed labelling and advertising requirements and restrictions promulgated under the CFDA
and the SFCA, and has broad authority to take regulatory action such as product seizure and detention, stop sale,
product recall, license suspension, impose administrative monetary penalties or pursue criminal prosecution for non-
compliant food product or food advertising that is allegedly false or deceptive. Changes in these laws or regulations
or the introduction of new laws or regulations could increase the costs of doing business for us or our customers or
suppliers or restrict our actions, causing our operating results to be adversely affected.

We seek to comply with applicable laws and regulations through a combination of employing internal personnel to
ensure quality-assurance compliance and contracting with third-party laboratories that conduct analysis of products
for the nutritional-labeling requirements. Compliance with regulations is costly and time-consuming. From time to
time, we have been subject to civil claims alleging that we failed to comply with applicable laws and regulations.
Any failure to comply or maintain permits and licenses relating to our operations could subject us to fines,
injunctions, recalls or seizures, as well as potential criminal sanctions or suspensions or revocations of our
registration, permits or licenses, which could result in increased operating costs resulting in a material adverse effect
on our business, financial condition, and operating results. Requirements to comply with applicable laws and
regulations or maintain permits and licenses relating to our operations have resulted in civil litigation against us
alleging non-compliance and could subject us to fines, injunctions, recalls or seizures, as well as potential criminal
sanctions or suspensions or revocations of our registration, permits or licenses, which could result in increased
operating costs resulting in a material adverse effect on our business, financial condition, and operating results.

Significant additional labeling or warning requirements or limitations on the marketing or sale of our products
may reduce demand for such products and could adversely affect our business or operating results.

Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are
considering imposing, product labeling or warning requirements or limitations on the marketing or sale of certain of
our products as a result of ingredients or substances contained in such products. These types of provisions have
required that we provide a label that highlights perceived concerns about a product or warns consumers to avoid
consumption of certain ingredients or substances present in our products and have also prohibited or limited the use
of certain words or phrases in connection with describing a products’ qualities,. For example, in California,
Proposition 65 requires a specific warning on any product that contains a substance listed by the State of California
as having been found to cause cancer or birth defects, unless the level of such substance in the product is below a
safe harbor level. We have been subject to civil claims alleging non-compliance with these requirements and may be
subject to such claims in the future.

In addition, the United States has imposed new nutrition labeling regulations that require food manufacturers to
declare the quantity of added sugar, as well as a national bio-engineered food disclosure standard that requires food
manufacturers to disclose bio-engineered food ingredients. Our new product labeling may impact the consumption
and public perception of our products.

The imposition or proposed imposition of additional product labeling or warning requirements could reduce overall
consumption of our products, lead to negative publicity (whether based in scientific fact or not) or leave consumers
with the perception (whether or not valid) that our products do not meet their health and wellness needs. Such
factors could adversely affect our business and operating results.

A material impairment in the carrying value of acquired goodwill or other intangible assets could negatively
affect our consolidated operating results and net worth.

A significant portion of our assets are goodwill and other intangible assets, the majority of which are not amortized
but are reviewed for impairment at least annually and more often if indicators of impairment exist. If the carrying
value of these assets exceeds the current estimated fair value, the asset is considered impaired, and this would result
in a noncash charge to earnings, which could be material. Events and conditions that could result in impairment
include a sustained drop in the market price of our Class A common stock, increased competition or loss of market
share, obsolescence, product claims that result in a significant loss of sales or profitability over the product life,
deterioration in macroeconomic conditions, or declining financial performance in comparison to projected results.

Our business operations could be disrupted if our information technology systems fail to perform adequately.

The efficient operation of our business depends on our information technology systems, most of which are managed
by third-party service providers. We rely on our information technology systems to effectively manage our business
data, communications, supply chain, order entry and fulfillment, and other business processes. The failure of our
information technology systems to perform as we anticipate could disrupt our business and could result in
transaction errors, processing inefficiencies, and the loss of sales and customers, causing our business and operating
results to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from
circumstances beyond our control, including fire, natural disasters, the potential effects of climate change, power
outages, systems failures, security breaches, cyber-attacks and viruses. Any such damage or interruption could have
a material adverse effect on our business.

We continuously monitor and update our information technology networks and infrastructure to prevent, detect,
address and mitigate the risk of unauthorized access, misuse, and other events that could have a security impact. We
invest to protect our data and business processes against risk of data security breach and cyber-attacks. We believe
our security processes provide adequate measures of protection against security breaches. Nevertheless, despite
continued vigilance in these areas, disruptions in information technology systems, including unauthorized use of
data, are possible and could have a negative impact on our operations or business reputation. Failure of our systems,
including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause
transaction errors, loss of customers and sales, and could have negative consequences to our operations, our
employees and those with whom we do business. This in turn could have a negative impact on our financial
condition and results or operations.

We may be unable to hire or retain and develop key personnel or a highly skilled and diverse workforce or
manage changes in our workforce.

We must hire, retain and develop a highly skilled and diverse workforce. We compete to hire new personnel in the
many regions in which we manufacture and market our products and then to develop and retain their skills and
competencies. Unplanned turnover or failure to develop adequate succession plans for leadership positions or hire
and retain a diverse workforce with the skills and in the locations we need to operate and grow our business could
deplete our institutional knowledge base and erode our competitiveness.

We also face increased personnel-related risks. These risks could lead to operational challenges, including increased
competition for employees with the skills we require to achieve our business goals, and higher employee turnover,
including employees with key capabilities. Furthermore, we might be unable to manage changes in, or that affect,
our workforce appropriately or satisfy the legal requirements associated with how we manage and compensate our
employees. These risks could materially and adversely affect our reputation, ability to meet the needs of our
customers, product sales, financial condition and operating results.

Risks Related to Our Capital Structure

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit
our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our
variable rate debt, and prevent us from meeting our obligations under our indebtedness.

As of December 31, 2020, our total balance on long term debt, excluding deferred financing charges, discount,
premium, and lease obligations, was $1,102.8 million. Our degree of leverage could have important consequences,
including:

• requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal

and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our
operations, capital expenditures, and future business opportunities or to pay dividends;

• exposing us to the risk of increased interest rates because the portion of our borrowings not hedged by

swap agreements are subject to variable rates;

• making it more difficult for us to make payments on our indebtedness;
• increasing our vulnerability to general economic and industry conditions;
• restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
• subjecting us to restrictive covenants that may limit our flexibility in operating our business;
• limiting our ability to obtain additional financing for working capital, capital expenditures, product
development, debt service requirements, acquisitions, and general corporate or other purposes; and
• placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.

Despite our significant leverage, we may be able to incur significant additional amounts of debt, which could further
exacerbate the risks associated with our significant leverage.

Changes in interest rates may adversely affect our earnings and/or cash flows.

Our term loan and revolving line of credit bear interest at variable interest rates that use the London Inter-Bank
Offered Rate (“LIBOR”) as a benchmark rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority
(“FCA”), which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit
LIBOR quotations after 2021 (the “FCA Announcement”). The FCA Announcement, as updated by more recent
pronouncements, indicates that the continuation of LIBOR on the current basis cannot and will not be assured after
2023, and LIBOR may cease to exist or otherwise be unsuitable for use as a benchmark. Recent proposals for
LIBOR reforms may result in the establishment of new methods of calculating LIBOR or the establishment of one or
more alternative benchmark rates. Although our credit agreement provides for successor base rates, the successor
base rates may be related to LIBOR, and the consequences of any potential cessation, modification or other reform
of LIBOR cannot be predicted at this time. We work to reduce our exposure to LIBOR through swap contracts
which effectively fix a portion of our variable-rate interest payments. If LIBOR ceases to exist, we may need to
amend our credit agreement and swap contracts. As a result, our interest expense may increase, and our available
cash flow may be adversely affected.

We may be unable to obtain additional financing to fund our operations and growth.

We may require additional financing to fund our operations or growth. The failure to secure additional financing
could have a material adverse effect on our continued development or growth. None of our officers, directors or
stockholders are required to provide any financing to us.

Our only significant asset is our ownership interest in our operating subsidiaries and such ownership may not be
sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock
or satisfy our other financial obligations, including our obligations under the Tax Receivable Agreement.

to our common stock, and to satisfy our obligations under

in our operating
We have no direct operations and no significant assets other than our ownership interest
subsidiaries. We depend on our operating subsidiaries for distributions, loans and other payments to generate the
funds necessary to meet our financial obligations, including our expenses as a publicly traded company, to pay any
dividends with respect
the Tax Receivable
Agreement. See Note 9. Tax receivable agreement to the consolidated financial statements in Part II, Item 8 of this
Annual Report on Form 10-K, as amended by Amendment No 1 on Form 10-K/A for information on the Tax
Receivable Agreement. The financial condition and operating requirements of our operating subsidiaries may limit
our ability to obtain cash from our operating subsidiaries. The earnings from, or other available assets of, our
operating subsidiaries may not be sufficient to pay dividends or make distributions or loans to enable us to pay any
dividends on our common stock or satisfy our other financial obligations, including our obligations under the Tax
Receivable Agreement.

The ability of our operating subsidiaries (other than subsidiaries which have been designated as unrestricted
pursuant to our ability to do so in certain limited circumstances) to make distributions, loans and other payments to
us for the purposes described above and for any other purpose are governed by the terms of our credit facilities and
will be subject to the negative covenants set forth therein. Any loans or other extensions of credit will be subject to
the investment covenants contained therein, which provide for several exceptions including, among others (i) a
general investment basket equal to the greater of a fixed dollar amount and a percentage of EBITDA and (ii) an
unlimited investment basket based on satisfying a total net leverage ratio on a pro forma basis. Similarly, any
dividends, distributions or similar payments will be subject to the dividends and distributions covenant under such
credit facilities, which also provide for several exceptions including, among others (i) for payment of overhead and
certain fees and expenses of parent companies, (ii) for tax distributions, subject to certain limitations, (iii) a general
dividend and distribution basket equal to the greater of a fixed dollar amount and a percentage of EBITDA and (iv)
an unlimited dividend and distribution basket based on satisfying a total net leverage ratio on a pro forma basis.

RISKS RELATED TO OUR CLASS A COMMON STOCK

Our stock price may be volatile

The market price of our Class A common stock could be subject to wide fluctuations in response to various factors,
many of which are beyond our control. Purchases or sales of large quantities of our stock, or significant short
positions in our stock could have an unusual or adverse effect on our market price. These fluctuations may also
cause short sellers to periodically enter the market in the belief that we will have poor results in the future.
Abnormal trading activity, including activity that is considered market manipulation, can lead to irrational and/or
temporary movements in the price of our Class A common stock, which, in turn, may increase its risk and volatility.
We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our
Class A common stock will be stable or appreciate over time.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of
Delaware law, could impair a takeover attempt.

Our certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that
stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under
Delaware law, which could delay or prevent a change of control. Together, these provisions may make more
difficult the removal of management and may discourage transactions that otherwise could involve payment of a
premium over prevailing market prices for our securities. These provisions include:

•

no cumulative voting in the election of directors, which limits the ability of minority stockholders to
elect director candidates;
the right of our board to elect a director to fill a vacancy created by the expansion of our board or the
resignation, death or removal of a director in certain circumstances, which prevents stockholders from
being able to fill vacancies on our board;

•

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at
an annual or special meeting of our stockholders;
a prohibition on stockholders calling a special meeting and the requirement that a meeting of
stockholders may only be called by members of our board, which may delay the ability of our
stockholders to force consideration of a proposal or to take action, including the removal of directors;
advance notice procedures that stockholders must comply with in order to nominate candidates to our
board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or
deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of
directors or otherwise attempting to obtain control of us.

RISKS RELATED TO THE AMENDMENT OF PREVIOUSLY ISSUED REPORTS

The restatement of certain of our financial statements has subjected us to increased costs and may subject us to
additional risks and uncertainties, including the increased possibility of legal proceedings.

On April 30, 2021, management and the audit committee of our board of directors determined that our previously
issued quarterly and year-to-date unaudited consolidated financial statements for March 31, 2020, June 30, 2020,
September 30, 2020, December 31, 2020 and our audited consolidated financial statements for the years ending
December 31, 2020, 2019 and 2018 should no longer be relied upon. In addition, we determined that related press
releases, earnings releases, and investor communications describing our financial statements for these periods should
no longer be relied upon. The errors identified are non-cash and related to our classification of certain outstanding
warrants. Accordingly, we are restating the annual, quarterly and year-to-date audited and unaudited consolidated
financial statements for the foregoing periods.

As a result of our restatement, we incurred increased accounting and legal costs and may become subject to
additional risks and uncertainties, including, among others, the increased possibility of legal proceedings or a review
by the SEC and other regulatory bodies. The costs of defending against such legal proceedings or administrative
actions could be significant. In addition, we could face monetary judgments, penalties or other sanctions that could
have a material adverse effect on our business, financial condition results of operations and could negatively impact
our stock price.

Our failure to maintain an effective system of internal control over financial reporting has resulted in the need
for us to restate previously issued financial statements. As a result, current and potential stockholders may lose
confidence in our financial reporting, which could harm our business and value of our stock.

Our management has determined that, as of December 31, 2020, we did not maintain effective internal controls over
financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework as a result of an identified material weakness in our internal
control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility that a material misstatement of the
Company's annual or interim financial statements will not be prevented or detected on a timely basis. As of the date
of this filing, management has determined that we have yet to fully remediate the previously identified material
weakness.

We believe our failure to maintain effective systems of internal controls over financial reporting has resulted in our
need to restate the following previously issued quarterly and year-to-date unaudited consolidated financial
statements for March 31, 2020, June 30, 2020, September 30, 2020, December 31, 2020 and our audited
consolidated financial statements for the years ending December 31, 2020, 2019 and 2018.

We are remediating certain internal controls and procedures, which, if not successful, could result in additional
misstatements in our financial statements negatively affecting our results of operations.

Our management has concluded that certain internal controls around the accounting for warrants were not effective.
We are in the process of implementing remediation actions. To the extent these steps are not successful, not
sufficient to correct our material weakness in internal control over financial reporting or are not completed in a
timely manner, future financial statements may contain material misstatements and we could be required to restate
our financial results. Any of these matters could adversely affect our business, reputation, results of operations,

financial condition and stock price and limit our ability to access the capital markets through equity or debt
issuances.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2020, we operated the following facilities, supporting our Snacking reporting segment's
operations, as shown in the chart below.

Type

Location

Owned/Leased

Size (Sq. Ft.)

Bakery

Distribution Center

Commercial Office Space

Office Space

Corporate Headquarters
Third-Party Warehouse

Third-Party Warehouse
Third-Party Warehouse

Emporia, Kansas

Columbus, Georgia

Indianapolis, Indiana

Chicago, Illinois

Burlington, Ontario

Chicago, Illinois

Edgerton, Kansas

Emporia, Kansas

Chicago, Illinois

Burlington, Ontario

Lenexa, Kansas
Kansas City, Kansas

Brantford, Ontario
Carthage, Missouri

Hobart, Indiana
Belvidere, Illinois

Atlanta, Georgia
Fogelsville, Pennsylvania

Owned
Leased(1)
Owned

Owned

Leased

Owned
Other(2)
Other(2)
Other(2)
Other(2)
Other(2)
Other(2)
Other(2)

278,500

313,700

195,000

137,000

250,000

64,816

765,000

24,112

9,325

12,647

50,200
—

—
—

(1) The Columbus, Georgia facility is available to the Company for the purchase amount of $100.
(2) Variable usage fees are charged on a per-pallet basis.

Item 3. Legal Proceedings

We are involved in lawsuits, claims and proceedings arising in the ordinary course of business. These matters may
involve personnel and employment issues, personal injury, contract and other proceedings arising in the ordinary
course of business. Although we do not expect the outcome of these proceedings to have a material adverse effect on
our financial condition or results of operations, litigation is inherently unpredictable. Therefore, we could incur
judgments or enter into settlements or claims that could materially impact our results.

The information required to be furnished by us under this Part I, Item 3 (Legal Proceedings) is incorporated by
reference to the information contained in Note 16. Commitments and Contingencies to the consolidated financial
statements included in Part II, Item 8 on this Annual Report on Form 10-K/A.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Our Class A common stock and warrants are currently quoted on Nasdaq under the symbols “TWNK” and
“TWNKW,” respectively.

As of May 10, 2021, there were approximately 5 stockholders of record of our Class A common stock and no
stockholders of record of our Class B common stock. Our Board of Directors periodically reviews our capital return
policy to determine whether the payment of cash dividends or repurchases of securities are in the best interests of the
Company and our stockholders.

We currently do not pay dividends and have not paid any cash dividends on our common stock to date.

Securities Authorized for Issuance Under Equity Compensation Plans

(A)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights

(B)
Weighted Average
Exercise Price of
Outstanding
Options,
Warrants, and
Rights

(C)
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plan (excluding
securities reflected
in column (A))

3,219,648 (1) $

13.43 (2)

2,770,885 (3)

—
3,219,648

—

13.43

—
2,770,885

Plan Category
Equity Compensation Plans approved
by stockholders.....................................
Equity Compensation Plans not
approved by stockholders.....................
Total.....................................................

(1) Consists of shares subject to outstanding stock options, restricted stock units and performance restricted

stock units under the Hostess Brands, Inc. 2016 Equity Incentive Plan (the “2016 Plan”), some of which are
vested and some of which remain subject to the vesting and/or performance criteria relating to the
respective equity award.

(2) Represents the weighted average exercise price of 2,071,115 stock options and excludes the impact of

1,148,533 shares of restricted stock units for which no exercise price is payable.

(3) Consists of shares available for future issuance under the 2016 Plan.

For additional information, refer to Item 11 of Part III of this Annual Report on Form 10-K/A.

Unregistered Sales of Equity Securities and Use of Proceeds

During the year ended December 31, 2020, the Metropoulos Entities exchanged their remaining Class B units in
Hostess Holdings, together with shares of Class B common stock for shares of our Class A common stock on a one-
for-one basis. At December 31, 2020, there were no remaining Class B units or shares of Class B common stock
outstanding. Other than any shares of Class A common stock issued in such exchanges, we did not issue any equity
securities without registration during the period covered by this Annual Report on Form 10-K/A.

Issuer Purchase of Equity Securities

Period

Total number of
securities
repurchased

Average price
paid per share

Total number of
securities
purchased as
part of publicly
announced plans
or programs

Approximate
dollar value of
securities that
may yet be
purchased under
the program (in
millions) (1)

October 1 - 31, 2020...........

—

November 1 - 30, 2020 (2).

444,444

November 1 - 30, 2020 (3).

2,000,000

December 1 - 31, 2020.......

—

2,444,444

—

13.50

1.00

—

— $

444,444

2,000,000

—

2,444,444

100.0

94.0

92.0

(1) In November 2020, the Company's Board of Directors approved a securities repurchase program of up to
$100 million of its outstanding securities. The program has no expiration date. The program may be
amended, suspended or discontinued at any time at the Company's discretion and does not commit the
Company to repurchase its securities.

(2) Repurchase of shares of Class A common stock

(3) Repurchase of private placement warrants, each exercisable for one half share of Class A common stock

Warrants

there were 53,936,776 public warrants and 541,658 private placement warrants
As of December 31, 2020,
outstanding. Each warrant entitles its holder to purchase one half of one share of our 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 our Class A common
stock. The warrants became exercisable on December 4, 2016 and expire on November 4, 2021 or earlier upon
redemption or liquidation. The Company may redeem the outstanding public warrants at a price $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 private warrants were registered with the SEC for future
potential sales to the public. When sold to the public, the private placement warrants will become public warrants.
During the year ended December 31, 2020, we repurchased 2,000,000 private placement warrants for cash.

Performance Graph

The following graph and related information shall not be deemed “soliciting material” or be deemed to be “filed”
with the Commission, nor shall such information be incorporated by reference into any future filing, except to the
extent that we specifically incorporate it by reference into such filing. The following stock performance graph
compares, for the period November 30, 2015 (the first day our common stock was traded following our initial public
offering) through December 31, 2020 (the last trading day of our fiscal year), the cumulative total stockholder return
for (1) the Company’s common stock, (2) the Standard & Poor’s 500 and (3) the Standard & Poor’s composite 1500
Packaged Foods and Meats Sub-Index. The graph assumes the value of the investment in our common stock and
each index was $100.00 on November 30, 2015 and assumes reinvestment of any dividends. The stock price
performance below is not necessarily indicative of future stock price performance.

Comparison of Cumulative Total Return

e
u
l
a
V
x
e
d
n
I

200

150

100

1 1/3 0/1 5

1 2/3 1/1 5

0 3/3 1/1 6

0 6/3 0/1 6

0 9/3 0/1 6

1 2/3 0/1 6

0 3/3 1/1 7

0 6/3 0/1 7

0 9/2 9/1 7

1 2/2 9/1 7

0 3/3 1/1 8

0 6/3 0/1 8

0 9/3 0/1 8

1 2/3 1/1 8

0 3/3 1/1 9

0 6/3 0/1 9

0 9/3 0/1 9

1 2/3 1/1 9

0 3/3 1/2 0

0 6/3 0/2 0

0 9/3 0/2 0

1 2/3 1/2 0

S&P 500

Hostess Brands, Inc.

S&P 1500 Packaged Food & Meats

Period Ending

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
our consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K/A. This
discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those
identified below and those discussed in Item 1A “Risk Factors” of this Annual Report on Form 10-K/A.

Overview

We are a leading packaged food company focused on developing, manufacturing, marketing, selling and distributing snack
products in North America, providing a wide range of snack cakes, donuts, sweet rolls, breakfast pastries, cookies, snack pies
and related products. As of December 31, 2020, we operate five baking facilities and utilize distribution centers and third-party
warehouses to distribute our products. Our DTW product distribution system allows us to deliver to our customers’ warehouses.
Our customers in turn distribute to their retail stores and/or distributors.

The Company has one reportable segment: Snacking (formerly referred to as Sweet Baked Goods, or “SBG”). The Snacking
segment consists of sweet baked goods, cookies, bread and buns and frozen retail products that are sold under the Hostess®,
Dolly Madison®, Cloverhill®, Big Texas®, and Voortman® brands. Through August 30, 2019, we operated in two reportable
segments: SBG and In-Store Bakery (“ISB”). The In-Store Bakery segment consisted of Superior on Main® and private label
products sold through the in-store bakery section of grocery and club stores. The Company divested its In-Store Bakery
segment's operations on August 30, 2019.

Hostess® is the second leading brand by market share within the Sweet Baked Goods ("SBG") category, according to Nielsen
U.S. total universe. For the 52-week period ended December 26, 2020 our branded SBG products (which include Hostess®,
Dolly Madison®, Cloverhill®, and Big Texas®) market share was 19.5% per Nielsen’s U.S. SBG category data. Our
Voortman® branded products include the #1 creme wafer and sugar-free cookie products within the larger cookie category.

Principal Components of Operating Results

Net Revenue

We generate revenue through selling packaged snacks under the Hostess® group of brands, which includes iconic products
such as CupCakes, Twinkies®, Donettes®, Ding Dongs®, Zingers®, Danishes, Honey Buns and Coffee Cakes, as well as
cookies, wafers and sugar-free products under the Voortman® brand. We also sell products under the Dolly Madison®,
Cloverhill® and Big Texas® brands along with private label products. Our product assortment is sold to customers’ warehouses
and distribution centers by the case or in display-ready corrugate units. Retailers display and sell our products to the end
consumer in single-serve, multi-pack or club-pack formats. We sell our products primarily to supermarket chains, national mass
merchandisers and convenience and dollar stores, along with a smaller portion of our product sales going to club stores,
vending, drug, and other retail outlets.

Our revenues are driven by average net price and total volume of products sold. Factors that impact unit pricing and sales
volume include product mix, the cost of ingredients, promotional activities, industry capacity, new product initiatives and
quality and consumer preferences. We do not keep a significant backlog of finished goods inventory, as our baked products are
promptly shipped to our distribution centers after being produced and then distributed to customers.

Cost of Goods Sold

Cost of goods sold consists of ingredients, packaging, labor, energy, other production costs, warehousing and transportation
costs including in-bound freight, inter-plant transportation and distribution of our products to customers. The cost of ingredients
and packaging represent the majority of our total costs of goods sold. All costs that are incurred at the bakeries, including the
depreciation of bakery facilities and equipment, are included in cost of goods sold. We do not allocate any corporate functions
into cost of goods sold.

Our cost of ingredients consists principally of flour, sweeteners, edible oils and compound coating, which are subject to
substantial price fluctuations, as is the cost of paper, corrugate, films and plastics used to package our products. The prices for
raw materials are influenced by a number of factors, including the weather, crop production, transportation and processing
costs, government regulation and policies and worldwide market supply and demand. We also rely on fuel products, such as
natural gas, diesel, propane and electricity, to operate our bakeries and produce our products. Fluctuations in the prices of the

raw materials or fuel products used in the production, packaging or transportation of our products affect the cost of products
sold and our product pricing strategy. We utilize forward buying strategies through short-term and long-term advance purchase
contracts to lock in prices for certain high-volume raw materials, packaged components and certain fuel inputs. Through these
initiatives, we believe we are able to obtain competitive pricing.

Advertising and Marketing

Our advertising and marketing expenses relate to wire racks and corrugate displays delivered to customers to display our
products off shelf, field marketing and merchandising services to reset and check our store inventory on a regular basis. We also
invest in advertising campaigns, which include social media, print, online advertising, local promotional events, monthly
agency fees and payroll costs.

Selling Expense

Selling expenses primarily include sales management, employment, travel, and related expenses, as well as broker fees. We
utilize brokers for sales support, including managing promotional activities and order processing.

General and Administrative

General and administrative expenses primarily include employee and related expenses for the accounting, planning, customer
service, legal, human resources, corporate operations, research and development, purchasing, logistics and executive functions.
Also included are professional service fees related to audit and tax, legal, outsourced information technology functions,
transportation planning, headquarters and other office sites and insurance costs, as well as the depreciation and amortization of
corporate assets.

Other Expenses

Other expenses primarily include interest paid on our Term loan as well as the change in fair value of our liability-classified
public and private placement warrants.

Non-Controlling Interest

During the years ended December 31, 2020 and 2019, Mr. Metropoulos and the Metropoulos Entities held equity investment in
us primarily through Class B limited partnership units in the Company’s subsidiary, Hostess Holdings (“Class B Units”), and an
equal number of shares of the Company’s Class B common stock (“Class B Stock”). Our Class B Stock had voting, but no
economic rights, while Hostess Holdings’ Class B Units had economic, but no voting rights. Each Class B Unit, together with a
share of Class B Stock held by the Metropoulos Entities, was exchangeable for a share of the Company’s Class A common
stock (or at the option of the Company, the cash equivalent thereof). The Company holds 100% of the general partnership
interest in Hostess Holdings and, since the final exchange described below, all of the limited partnership interests and
consolidates Hostess Holdings in the Company’s consolidated financial statements. The interest of the Metropoulos Entities in
Hostess Holdings’ Class B Units prior to the final exchange is reflected in our consolidated financial statements as a non-
controlling interest. The Metropoulos Entities have eliminated their ownership through a series of exchanges of shares of Class
B Stock and Class B Units for an equal number of Class A shares. As part of the final exchange, we repurchased 0.4 million
shares of Class A common stock from the Metropoulos Entities. The remaining shares were purchased by third parties. At
December 31, 2020, there were no outstanding shares of Class B common stock.

Factors Impacting Recent Results

COVID-19

The acute and far-reaching impact of the COVID-19 pandemic and actions taken by governments to contain the spread of the
virus have impacted our operations during the year ended December 31, 2020. As consumers prepared for extended stays at
home, we experienced an increase in consumption during the first and second quarters, particularly in our multi-pack products
sold through grocery and mass retailer channels. Conversely, we experienced lower consumption of single-serve products, often
consumed away from home. This trend has moderated during the remainder of the year; however, we cannot predict if these
trends will sustain or reverse in future periods.

We have established a COVID-19 task force to monitor the rapidly evolving situation and recommend risk mitigation actions as
deemed necessary. To date, we have experienced minimal disruption to our supply chain or distribution network, including the
supply of our ingredients, and packaging or other sourced materials, though it is possible that more significant disruptions could
occur if the COVID-19 pandemic continues to impact markets around the world. We are also working closely with all of our
contract manufacturers, distributors and other external business partners. As a food producer, we are an essential service and
our production and distribution facilities continue to operate. To protect our employees and ensure continuity of operations, we
have implemented additional safety and sanitation measures in all of our facilities. We are monitoring our employees’ health
and providing additional resources and protocols to enable effective social distancing and adherence to our stringent internal

food safety guidelines, industry best practices and evolving CDC and other governmental guidelines. Although our corporate
headquarters and other offices have remained open with additional safety and sanitation protocols, many non-production and
warehouse team members, including sales, marketing and corporate employees, are adhering to social distancing guidelines by
working from home and reducing person-to-person contact while supporting our ability to bring products to consumers.

We have adequate liquidity to pay for the costs associated with these additional measures while servicing our on-going
operating and capital needs. However, we continue to actively monitor and will take action, as necessary, to preserve adequate
liquidity and ensure that our business can continue to operate in this dynamic environment.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES
Act provided a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic,
including tax relief and government loans, grants and investments. Under the provisions of this act, we were able to defer the
payment of $5.6 million of 2020 employer payroll taxes until 2021. Apart from this deferral and their impact on the general
economy, including the labor market and consumer demand, neither the CARES Act nor any other government program
intended to address COVID-19 had any material impact on our consolidated financial statements for the year ended December
31, 2020. We continue to monitor any effects that may result from the CARES Act and other stimulus programs.

Acquisition

On January 3, 2020, we completed the acquisition of all of the shares of the parent company of Voortman Cookies Limited
(“Voortman”), a manufacturer of premium, branded wafers and cookies as well as sugar-free products. By adding the
Voortman® brand, we believe we have greater growth opportunities provided by a more diverse portfolio of brands and
products. Our consolidated statement of operations includes the operation of these assets from January 3, 2020 through
December 31, 2020. In December 2020, we asserted claims for indemnification against the sellers under the terms of the Share
Purchase Agreement pursuant to which we acquired Voortman for an aggregate of approximately $90 million Canadian Dollar
(“CAD”) in damages arising out of alleged breaches by the sellers of certain representations, warranties and covenants
contained in such agreement relating to periods prior to the closing of the acquisition. We have also submitted claims relating to
these alleged breaches under the representation and warranty insurance policy we purchased in connection with the acquisition.
Such insurance policy has a coverage limit of $42.5 million CAD. Although we strongly believe that our claims are meritorious,
no assurance can be given as to whether we will recover all, or any part, of the amounts for which we have made such claims.
No gains or receivables have been recognized related to these claims as of December 31, 2020.

Disposition

On August 30, 2019, we sold the In-Store Bakery operations, including relevant trademarks and licensing agreements, to an
unrelated party. The In-Store Bakery operations provided products that were primarily sold in the in-store bakery section of the
U.S. retail channels under the Superior on Main® brand or store-branded. We divested the operations to focus more on future
investment in areas of our business that better leverage our core competencies.

Change in Fair Value of Warrant Liabilities

During the years ended December 31, 2020, 2019 and 2018, there were fluctuations in the market price of our publicly traded
warrants. These fluctuations created significant gains and losses on the remeasurement of certain warrants which are recognized
as liabilities measured at fair value on our consolidated balance sheet. These remeasurements are recognized as “change in fair
value of warrant liabilities” within other expenses on our consolidated statement of operations.

Results of Operations

(In thousands, except per share data)

(As Restated)

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Net revenue....................................................................................................................... $ 1,016,609
355,639
Gross profit.......................................................................................................................

As a % of net revenue....................................................................................................
Operating costs and expenses........................................................................................... $
Operating income ............................................................................................................
Other (income) expense....................................................................................................
Income tax expense .........................................................................................................
Net income .......................................................................................................................
Net income attributable to Class A shareholders..............................................................

35.0 %

220,329
135,310
6,608
20,405
108,297
104,676

907,675
299,834

33.0 %

163,738
136,096
100,455
16,892
18,749
4,299

850,389
267,277

31.4 %

145,719
121,558
(51,978)
12,954
160,582
142,051

Earnings per Class A share:
Basic.................................................................................................................................
Diluted..............................................................................................................................

0.84
0.51

0.04
0.04

1.42
0.61

Results for the Year Ended December 31, 2020 Compared to Results for the Year Ended December 31, 2019

Net Revenue

Net revenue for the year ended December 31, 2020 increased $108.9 million, or 12.0%, compared to the year ended
December 31, 2019. Excluding In-Store Bakery, net revenue increased $137.6 million or 15.7%. The acquisition of Voortman
contributed $96.2 million of net revenue. The remaining increase was attributed to higher volume of Hostess® branded multi-
pack and bagged-donut products due to strong demand partially offset by lower sales of private label and non-Hostess®
branded products. From a sales channel perspective, strong growth in the grocery, convenience and dollar channels was offset
by lower sales in the mass channel.

Gross Profit

Gross profit was 35.0% of net revenue for the year ended December 31, 2020, an increase of 195 basis points from a gross
margin of 33.0% for the year ended December 31, 2019. The increase resulted primarily from the accretion from Voortman and
efficiencies from higher sales volume as well as lower promotional activity. These benefits were partially offset by higher
operating costs due to COVID-19.

Operating Costs and Expenses

Operating costs and expenses for the year ended December 31, 2020 increased by 34.6% from the year ended December 31,
2019. These costs increased primarily due to transition costs incurred to shift Voortman from a direct-to-store delivery
operating model to a direct-to-warehouse model including contract termination costs for the independent distributors and
severance costs, as well as normal costs of Voortman's continuing operations. 2020 operating costs also increased due to higher
employee incentive compensation and an impairment charge related to the planned disposition of production equipment. 2019
operating costs reflect a $7.1 million gain on the valuation of a foreign currency contract originated to hedge the January 2020
purchase of Voortman in Canadian dollars.

Operating Income

Operating income for the year ended December 31, 2020 was $135.3 million compared to $136.1 million for the year ended
December 31, 2019. The additional profits from Voortman's operations and higher Hostess® branded sales volume were offset
by transition costs to shift Voortman to a warehouse model and lapping the prior year gain on remeasurement of the foreign
currency contract.

Other Expense

For the years ended December 31, 2020 and 2019, interest expense related to our term loan was $41.8 million and $43.3
million, respectively. Also during the years ended December 31, 2020 and 2019 we recognized a $39.9 million gain and a $58.8
million loss, respectively, on the fair value remeasurement of our liability-classified public and private placement warrants.
During the year ended December 31, 2020 we also recognized unrealized losses related to the remeasurement of certain CAD
denominated liabilities.

Income Taxes

Our effective tax rate was 15.9% for the year ended December 31, 2020 compared to 47.4% for the year ended December 31,
2019. The decrease in the effective tax rate was due to the remeasurement of fair value of warrants, which significantly impacts
our pre-tax net income, but is not taxed as the warrants are considered equity for tax purposes. Excluding the impact of the
warrant remeasurement for both the years ended December 31, 2020 and 2019, our effective tax rates were 23.0% and 17.9%,
respectively. The increase in the effective tax rate (excluding the warrant remeasurements) was primarily due to the Class B for
Class A share exchanges during 2019 and 2020. Subsequent to these exchanges, more income from Hostess Holdings, L.P was
allocated to Hostess Brands, Inc. This increase was partially offset by state tax credits generated in 2020.

Net Income

For the year ended December 31, 2020, net income was $108.3 million compared to $18.7 million for the year ended
December 31, 2019. Excluding the $39.9 million gain and $58.8 million loss on remeasurement of warrant liabilities for the
years ended December 31, 2020 and 2019, respectively, net income increased as a result of higher gross margin due to the
accretion of Voortman and the benefit of higher Hostess® branded sales volume partially offset by costs incurred to transition
Voortman DSD to warehouse distribution. In 2020, we also lapped the $7.1 million foreign currency contract remeasurement
gain in 2019.

Earnings Per Share

Our earnings per Class A share was $0.84 (basic) and $0.51 (dilutive) for the year ended December 31, 2020, compared to
$0.04 (basic) and $0.04 (dilutive) for the year ended December 31, 2019. The increase in basic and diluted earnings per share
was due to the net income impacts noted above.

Results for the Year Ended December 31, 2019 Compared to Results for the Year Ended December 31, 2018

Net Revenue

Net revenue for the year ended December 31, 2019 increased $57.3 million, or 6.7%, compared to the year ended December 31,
2018. Excluding the impact of the In-Store Bakery disposition in 2019, net revenue increased $72.0 million, or 8.6%. The
increase in net revenue was attributed to volume growth in our core products across multiple customer channels, the
introduction of our breakfast innovation products, including Danishes and Cinnamon Rolls, and the impact of pricing actions
implemented in the fourth quarter of 2018.

Gross Profit

Gross profit was 33.0% of net revenue for the year ended December 31, 2019, an increase of 160 basis points from a gross
margin of 31.4% for the year ended December 31, 2018. Gross profit in 2019 benefited from pricing actions, higher sales
volume and bakery savings initiatives executed across all bakeries, particularly in our Chicago bakery. These benefits were
partially offset by higher input costs.

Operating Costs and Expenses

Operating costs and expenses for the year ended December 31, 2019 increased by 12.4% from the year ended December 31,
2018. During 2019, we recognized a $7.1 million gain on the valuation of a foreign currency contract originated to hedge the
January 2020 purchase of Voortman in Canadian dollars. During 2018, we recognized a $3.3 million impairment charge related
to our In-Store Bakery assets, which were sold in August 2019. Excluding these costs, operating costs and expenses increased
due to additional expense related to incentive and stock compensation, additional payroll to execute strategic corporate
initiatives, transaction costs related the sale of In-Store Bakery and the acquisition of Voortman, and facility transition costs to
relocate our primary distribution center as well an increase from the remeasurement of the Tax Receivable Agreement.

Operating Income

Operating income for the year ended December 31, 2019 was $136.1 million compared to $121.6 million for the year ended
December 31, 2018. The increase in operating income was attributed to higher sales volume, the impact of pricing actions and
bakery operating efficiencies as well as the gain on the foreign currency contract. These increases to operating income were
partially offset by higher incentive and stock compensation, transaction and facility transition costs as well an increase from the
remeasurement of the Tax Receivable Agreement.

Other Expense

For the years ended December 31, 2019 and 2018, interest expense related to our term loan was $43.3 million and $41.3
million, respectively. During the year ended December 31, 2019, we recognized a loss of $0.5 million related to the refinancing
of our term loan. Also during the year ended December 31, 2018, we recognized a $12.4 million gain related to the buyout of
the Tax Receivable Agreement. Additionally, during the years ended December 31, 2019 and 2018 we recognized a $58.8
million loss and a $79.2 million gain, respectively, on the remeasurement of our liability-classified public and private placement
warrants.

Income Taxes

Our effective tax rate was 47.4% for the year ended December 31, 2019 compared to 7.5% for the year ended December 31,
2018. The increase in the effective tax rate was primarily due to the change in fair value of warrants, which significantly
impacts our pre-tax net income, but is not taxed. Excluding the impact of the warrant remeasurement for both the years ended
December 31, 2019 and 2018, our effective tax rates were 17.9% and 13.7%, respectively. The increase in the effective tax rate
(excluding the warrant remeasurement) was primarily due to the Class B for Class A share exchanges during 2019. Subsequent
to these exchanges, more income from Hostess Holdings, L.P. was allocated to Hostess Brands, Inc. The effective tax rate for
the year ended December 31, 2018 reflects the tax impact of the gain on the buyout of the Tax Receivable Agreement and the
tax benefit related to revaluing our deferred tax liabilities due to a change in our estimated state tax rate.

Net Income

For the year ended December 31, 2019, net income was $18.7 million compared to $160.6 million for the year ended
December 31, 2018. Excluding the $58.8 million loss and $79.2 million gain on remeasurement of warrant liabilities for the
years ended December 31, 2019 and 2018, respectively, the decrease in net income was primarily attributed to the buyout of the
tax receivable agreement in 2018, partially offset by higher operating income in 2019.

Earnings Per Share

Our earnings per class A share was $0.04 (basic) and $0.04 (dilutive) for the year ended December 31, 2019, compared to $1.42
(basic) and $0.61 (dilutive) for the year ended December 31, 2018. The decrease in basic and diluted earnings per share was due
to the net income impacts noted above.

Segments

We have one reportable segment: Snacking (formerly referred to as Sweet Baked Goods, or “SBG”). The Snacking segment
consists of sweet baked goods, cookies, bread and buns retail products that are sold under the Hostess®, Dolly Madison®,
Cloverhill®, Big Texas®, and Voortman® brands. Through August 30, 2019, we operated in two reportable segments: SBG
and In-Store Bakery. The In-Store Bakery segment consisted of Superior on Main® and private label products sold through the
in-store bakery section of grocery and club stores. The Company divested its In-Store Bakery segment's operations on August
30, 2019.

We evaluate performance and allocate resources based on net revenue and gross profit. Information regarding the operations of
these reportable segments is as follows:

(In thousands)

Net revenue:

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Snacking...................................................................................................................... $
In-Store Bakery...........................................................................................................
Net revenue................................................................................................................. $

1,016,609
—
1,016,609

Gross profit:

Snacking...................................................................................................................... $
In-Store Bakery...........................................................................................................
Gross profit................................................................................................................. $

355,639
—
355,639

Capital expenditures (1):

Snacking...................................................................................................................... $
In-Store Bakery...........................................................................................................
Capital expenditures.................................................................................................... $

58,953
—
58,953

878,973
28,702
907,675

293,648
6,186
299,834

35,354
182
35,536

808,355
42,034
850,389

258,995
8,282
267,277

53,394
354
53,748

(1) For all periods presented, capital expenditures consists of purchases of property and equipment and acquisition and

development of software assets paid in cash or acquired through accounts payable.

Snacking net revenue for the year ended December 31, 2019 increased $70.6 million, or 8.7%, from the year ended December
31, 2018. The increase in net revenue was attributed to sales growth in our core products across multiple customer channels, the
introduction of our breakfast innovation products, including Danishes and Cinnamon Rolls, and the impact of pricing actions
implemented in the fourth quarter of 2018.

Snacking gross profit for the year ended December 31, 2019 was 33.4% of net revenue, compared to 32.0% of net revenue, for
the year ended December 31, 2018. Gross profit in 2019 benefited from pricing actions, higher sales volume and bakery savings
initiatives executed across all bakeries, particularly in our Chicago bakery. These benefits were partially offset by a shift in
product mix.

In-Store Bakery net revenue for the year ended December 31, 2019 decreased 31.7% from the year ended ended December 31,
2018 as a result of the sale of the In-Store Bakery operations in August of 2019. In-Store Bakery gross profit for the year ended
December 31, 2019 was 21.6% of net revenue compared to 19.7% for the year ended December 31, 2018.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Adjusted net revenue, adjusted gross profit, adjusted operating income, adjusted net income, adjusted Class A net income,
adjusted EBITDA, adjusted diluted shares outstanding and adjusted EPS collectively referred to as “Non-GAAP Financial
Measures,” are commonly used in our industry and should not be construed as an alternative to net revenue, gross profit,
operating income, net income, net income attributed to Class A stockholders, diluted shares outstanding or earnings per share as
indicators of operating performance (as determined in accordance with GAAP). These Non-GAAP Financial Measures may not
be comparable to similarly titled measures reported by other companies. We included these Non-GAAP Financial Measures
because we believe the measures provide management and investors with additional information to measure the Company's
performance, estimate the Company's value and evaluate the Company's ability to service debt.

Non-GAAP Financial Measures are adjusted to exclude certain items that affect comparability. The adjustments are itemized in
the tables below. You are encouraged to evaluate these adjustments and the reason we consider them appropriate for
supplemental analysis. In evaluating adjustments, 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 presentation of Non-GAAP Financial Measures
should not be construed as an inference that future results will be unaffected by unusual or recurring items.

For example, we define adjusted EBITDA as net income adjusted to exclude (i) interest expense, net, (ii) depreciation and
amortization (iii) income taxes and (iv) share-based compensation, as further adjusted to eliminate the impact of certain items
that the Company does not consider indicative of its ongoing operating performance. Adjusted EBITDA has 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 expense, or the cash requirements necessary to service interest or principal
payments, on the Company's debt; 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.

($ and shares in thousands)

Net
Revenue

Gross
Profit

Operating
Income

Net
Income

Class A
Net
Income

Diluted
Shares

Diluted
EPS

GAAP Results (as restated)......................... $1,016,609

$ 355,639

135,310

$ 108,297

$ 104,676

127,723

0.51

Year Ended December 31, 2020

Non-GAAP adjustments:

Foreign currency impacts.......................

—

2,065

1,966

Acquisition, disposal and integration
related costs (1)......................................

6,821

Facility transition costs (2).....................

Impairment of property and equipment..

Tax Receivable Agreement
remeasurement.......................................

COVID-19 costs (3)...............................

Change in fair value of warrant
liabilities.................................................

Other.......................................................

Remeasurement of tax liabilities............

Tax impact of adjustments.....................

—

7,963

3,681

—

2,082

—

29,166

27,569

5,710

3,009

760

2,388

—

100

—

5,710

3,009

760

2,388

5,396

2,909

760

2,257

(39,941)

1,766

(455)

1,681

(455)

(10,961)

—

0.02

0.22

0.04

0.02

—

0.02

—

0.01

—

(0.09)

Adjusted Non-GAAP results....................... $1,023,430

$ 369,365

176,443

$ 101,804

$ 95,857

127,723

0.75

Income tax..............................................

Interest expense......................................

Depreciation and amortization...............

Share-based compensation.....................

Adjusted EBITDA.......................................

31,821

42,826

54,940

8,671

$ 240,062

(1) Adjustments to net revenue represent initial slotting fees paid to to customers to obtain space in customer warehouses for the Voortman transition.
Adjustments to operating costs included $8.0 million of selling expense, $8.9 million of general and administrative expenses and $4.3 million of business
combination transaction costs on the consolidated statement of operations.

(2) Facility transition operating costs are included in general and administrative expenses on the consolidated statement of operations.

(3) COVID-19 operating costs are included in general and administrative expenses on the consolidated statement of operations. Total COVID-19 non-GAAP
adjustments primarily consist of costs of incremental cleaning and sanitation, personal protective equipment and employee bonuses in the first half of 2020.

($ and shares in thousands)

Year Ended December 31, 2019

Net
Revenue

Gross
Profit

Operating
Income

Net
Income

Class A
Net
Income

Diluted
Shares

Diluted
EPS

GAAP Results (as restated)............................. $ 907,675

$ 299,834

$ 136,096

$ 18,749

4,299

111,006

0.04

Non-GAAP adjustments:

Foreign currency impacts...........................

Acquisition, disposal and integration
related costs................................................

Special employee incentive compensation
(1)...............................................................

Facility transition costs (2).........................

Tax Receivable Agreement
remeasurement...........................................

Impairment of property and equipment,
intangible assets and goodwill....................

Loss on debt refinancing............................

Remeasurement of tax liabilities................

Change in fair value of warrant liabilities..

Other...........................................................

Tax impact of adjustments.........................

—

(7,127)

(6,721)

1,563

5,484

5,172

9,381

1,910

12,080

1,910

12,080

1,801

11,392

—

186

1,976

1,487

1,976

2,023

1,863

1,908

—

(4,564)

58,816

1,233

58,816

1,163

(3,918)

—

3,694

—

(0.07)

0.05

0.02

0.10

—

0.02

(0.05)

0.51

0.01

(0.04)

Adjusted Non-GAAP results........................... $ 907,675

$ 310,811

$ 152,092

$ 86,848

$ 71,397

114,700

0.61

Income tax..................................................

Interest expense..........................................

Depreciation and amortization...................

Share-based compensation.........................

Adjusted EBITDA...........................................

25,374

39,870

43,334

9,231

$ 204,657

(1) Special employee incentive compensation is included in general and administrative expenses on the consolidated statement of operations.

(2) Facility transition costs are included in general and administrative expenses on the consolidated statement of operations.

($ and shares in thousands)

Year Ended December 31, 2018

Net
Revenue

Gross
Profit

Operating
Income

Net
Income

Class A
Net
Income

Diluted
Shares

Diluted
EPS

GAAP Results (as restated)............................. $ 850,389

$ 267,277

$ 121,558

160,582

$ 142,051

103,098

0.61

Non-GAAP adjustments:

Acquisition, disposal and integration
related costs................................................

Special employee incentive compensation.
Tax Receivable Agreement
remeasurement...........................................
Impairment of property and equipment,
intangible assets and goodwill....................

Remeasurement of tax liabilities................

Change in fair value of warrant liabilities..

Other...........................................................

Tax impact of adjustments.........................

—

10,137

1,965

10,434

3,444

10,434

3,444

8,869

2,927

—

(1,865)

(14,237)

4,970

—

624

—

4,970

(5,375)

4,225

(5,375)

(79,156)

770

655

(2,027)

—

0.08

0.02

(0.14)

0.04

(0.05)

—

(0.02)

Adjusted Non-GAAP results........................... $ 850,389

$ 279,379

$ 139,165

79,405

57,932

103,098

0.54

Income tax..................................................

Interest expense..........................................

Depreciation and amortization...................

Share-based compensation.........................

Adjusted EBITDA...........................................

Adjusted EBITDA

20,356

39,404

41,411

5,600

$ 186,176

Adjusted EBITDA was $240.1 million for the year ended December 31, 2020, compared to $204.7 million for the year ended
December 31, 2019. The improvement in adjusted EBITDA was driven by the contribution of Voortman and higher volume of
Hostess® branded products.

Adjusted EPS

Adjusted EPS was $0.75 for the year ended December 31, 2020, compared to $0.61 for the year ended December 31, 2019. The
improvement in adjusted EPS was driven by Voortman profitability and strong demand for Hostess® branded products.

Liquidity and Capital Resources

Our primary sources of liquidity are from the cash and cash equivalents on the balance sheet, future cash flow generated from
operations, and availability under our revolving credit agreement (“Revolver”). We believe that cash flows from operations and
the current cash and cash equivalents on the balance sheet will be sufficient to satisfy the anticipated cash requirements
associated with our existing operations for at least the next 12 months. Our future cash requirements include the purchase
commitments for certain raw materials and packaging used in our production process, scheduled rent on leased facilities,
scheduled debt service payments on our term loan and settlements on related interest rate swap contracts, payments on our Tax
Receivable Agreement, settlements on our outstanding foreign currency contracts and outstanding purchase orders on capital
projects.

Our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to
general economic, political, financial, competitive and other factors beyond our control. In addition, our future capital
expenditures and other cash requirements could be higher than we currently expect as a result of various factors, including any
expansion of our business that we undertake, including acquisitions. We consider all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.

We had working capital, excluding cash and warrant liabilities, as of December 31, 2020 and 2019 of $7.0 million and $8.1
million, respectively. We have the ability to borrow under our Revolver to meet obligations as they come due. As of
December 31, 2020, we had approximately $94.5 million available for borrowing, net of letters of credit, under our Revolver.

Cash Flows from Operating Activities

Cash flows provided by operating activities for the years ended December 31, 2020 and 2019 were $159.2 million and $144.0
million, respectively. The increase in operating cash flows was driven by an increase in net income after adjusting for non-cash
items such as the current year increase in depreciation and amortization, prior year gain on the remeasurement of foreign
currency contracts and change in fair value of warrant liabilities in both periods. Our operating cash flow also benefited from
the deferral of certain employer payroll taxes allowed under the CARES Act.

Cash Flows provided by and used in Investing Activities

Investing activities used $374.3 million of cash for the year ended December 31, 2020 compared to providing $22.9 million of
cash for the year ended December 31, 2019. During 2020, we funded $316.0 million of the net cash required to purchase
Voortman from cash on hand and the proceeds from an incremental term loan on our existing credit facility. During 2019, we
received proceeds of $63.3 million from the sale of our In-Store Bakery business. Cash used for the purchase of property and
equipment reflects planned investments in our bakeries, including Voortman, and our centralized distribution center.

Cash Flows provided by and used in Financing Activities

Financing activities provided $103.2 million of cash for the year ended December 31, 2020 compared to using $28.1 million of
cash for the year ended December 31, 2019. During 2020, cash proceeds of $140.0 million from the incremental term loan used
to finance the purchase of Voortman were partially offset by related charges of $3.1 million. This incremental term loan
increased the amount of principal repayments during 2020. Also during 2020, we paid $8.0 million to repurchase 2.0 million
warrants and 0.4 million shares from the Metropoulos Entities as part of the exchange of their last remaining Class B units in
Hostess Holdings, LP. In 2019, we incurred costs to refinance our First Lien Term Loan. Payments on the Tax Receivable
Agreement increased in 2020 due to additional taxable basis created by Metropoulos Entity exchanges in 2019, which were
monetized in 2020. These same exchanges decreased the amount of distributions to the non-controlling interest to cover tax
liabilities related to net income allocated to Class B units.

For a discussion of our cash flows for the year ended December 31, 2019 compared to our results for the year ended December
31, 2018, please see Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on
February 26, 2020.

Long-Term Debt

As of December 31, 2020, $1,102.8 million aggregate principal amount of our term loan and $5.5 million aggregate principal
amount of letters of credit, reducing the amount available under the Revolver, were outstanding. See Note 16. Commitments
and Contingencies to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K/A for
information regarding the letters of credit. We had no outstanding borrowings under our Revolver as of December 31, 2020. As
of December 31, 2020, we were in compliance with all covenants under our term loan and the Revolver. The Revolver contains
certain restrictive financial covenants. Based on our current and projected financial performance, we believe that we will
comply with these covenants for the foreseeable future.

Critical Accounting Policies

The preparation of financial statements in accordance with generally accepted accounting principles in the United States
requires the use of judgment, estimates and assumptions. We make such subjective determinations after careful consideration
of our historical performance, management’s experience, current economic trends and events and information from outside
sources. Inherent in this process is the possibility that actual results could differ from these estimates and assumptions for any
particular period.

Our significant accounting policies are detailed in Note 1 to our consolidated financial statements within Item 8. The following
areas are the most important and require the most difficult, subjective judgments.

Trade and consumer promotion programs

in-store display incentives,
We offer various sales incentive programs to customers, such as feature price discounts,
cooperative advertising programs and new product introduction fees. The mix between promotional programs, which are
classified as reductions in revenue in the statements of operations, and advertising or other marketing activities, which are
classified as marketing and selling expenses in the consolidated statements of operations, fluctuates between periods based on
our overall marketing plans, and such fluctuations have an impact on revenues. These trade programs also require management
to make estimates about the expected total cost of the programs and related allocations amongst participants (who might have
different levels of incentives based on various program requirements). These estimates are inherently uncertain and are
generally based on historical experience, adjusted for any new facts or circumstances that might impact the ultimate cost
estimate for a particular program or programs.

Goodwill and Indefinite-lived trade names

When evaluating goodwill and indefinite-lived intangible assets for impairment under U.S. GAAP, we may first perform an
assessment of qualitative factors to determine if the fair value of the reporting unit or the intangible asset is more-likely-than-
not greater than the carrying amount. Such qualitative factors include, but are not limited to, macro-economic conditions,
market and industry conditions, cost considerations, competitive environment, share price fluctuations, overall financial
performance and results of past impairment tests. Based on a review of the qualitative factors, if we determine it is not more-
likely-than-not that the fair value is less than the carrying value, we may bypass the quantitative impairment test. We also may
elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment test. For
our 2020 and 2019 annual impairment testing, we elected to perform qualitative assessments for our reporting units. No
indicators of impairment were noted.

If a quantitative test were to be utilized for any reporting unit, it would estimate the fair value of the reporting units and
compared it to its carrying value. To the extent the fair value was in excess of the carrying value, no impairment would be
recognized. Otherwise, an impairment loss would be recognized for the amount that the carrying value of a reporting unit,
including goodwill, exceeded its fair value. In performing the quantitative test of goodwill, fair value would be determined
based on a calculation which would give consideration to an income approach utilizing the discounted cash flow method and
the market approach using the market comparable and market transaction methods.

During the year ended December 31, 2019, we recognized an impairment charge to the In-Store Bakery reporting segment
goodwill of $1.0 million reflecting a change in certain market assumptions (level 1 inputs).

Our indefinite-lived intangible assets consist of trademarks and trade names. The $1,538.6 million and $1,408.6 million
balances at December 31, 2020 and 2019, respectively, were recognized as part of the Hostess Business Combination and the
Voortman and Cloverhill acquisitions. The trademarks and trade names are integral to the Company’s identity and are expected
to contribute indefinitely to our corporate cash flows. Fair value for trademarks and trade names was determined using the
income approach. The application of the income approach was premised on a royalty savings method, whereby the trademark
and trade names are valued by reference to the amount of royalty income they could generate if they were licensed, in an arm’s-
length transaction, to a third party. These assets have been assigned an indefinite life and therefore are not amortized but rather
evaluated for impairment annually using the qualitative or quantitative methods similar to goodwill. For 2020 and 2019, we
performed a qualitative test. No indicators of impairment were noted.

Changes in certain significant assumptions could have a significant impact on the estimated fair value, and therefore, a future
impairment or additional impairments could result for a portion of goodwill, long-lived assets or intangible assets.

Business Combinations

We account for business acquisitions using the purchase method of accounting. Assets acquired, liabilities assumed, and non-
controlling interests are recorded at their estimated fair values at the acquisition date. The excess of purchase price over fair
value of the net assets acquired, including the amount assigned to identifiable intangible assets, is recorded as goodwill. Given
the time it takes to obtain pertinent information to finalize the acquired company’s balance sheet, it may be multiple quarters
before we are able to finalize those initial fair value estimates. Accordingly, it is not uncommon for the initial estimates to be
subsequently revised.

Tax Receivable Agreement

We recognize a liability on the consolidated balance sheet based on the undiscounted estimated future payments under the Tax
Receivable Agreement. See Note 10. Tax Receivable Agreement to the consolidated financial statements in Part II, Item 8 of
this Annual Report on Form 10-K/A for information on the Tax Receivable Agreement. The most significant estimates utilized
by management to calculate the corresponding liability is the Company’s increase in tax basis related to exchanges, future cash
tax savings rates, which are projected based on current tax laws and the Company’s historical and future tax profile, and the
allocation of the liability between short-term and long-term based on when the Company realizes certain tax attributes.

New Accounting Pronouncements

Refer to Note 1. Summary of Significant Accounting Policies of the notes to the consolidated financial statements included in
Part II, Item 8 of this Annual Report on Form 10-K/A for further information regarding recently issued accounting standards.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks related to interest rates and foreign currency exchange rates.

Market risk on variable-rate financial instruments

Our term loan and Revolver each bear interest on outstanding borrowings thereunder at variable interest rates. The rate in effect
at December 31, 2020 for the outstanding term loan was a LIBOR-based rate of 3% per annum. At December 31, 2020, we had
an aggregate principal balance of $1,102.8 million outstanding under the term loan and $94.5 million available for borrowing,
net of letters of credit of $5.5 million, under the Revolver. Increases in market interest rates would cause interest expense to
increase and earnings before income taxes to decrease.

To manage the risk related to our variable rate debt, we have entered into interest rate swap contracts with counter parties to
make payments based on fixed interest rates ranging from 1.11% to 1.78% and receive payments based on the greater of
LIBOR or 0.75%. At December 31, 2020, a notional amount of $700.0 million remained outstanding on the swap contracts.
This notional amount will decrease $100.0 million each year until a notional amount of $500.0 million remains outstanding
through the maturity of our term loan in August 2025.

The change in interest expense and earnings before income taxes resulting from a change in market interest rates would be
dependent upon the weighted average outstanding borrowings and the portion of those borrowings that are hedged by our swap
contract during the reporting period following an increase in market interest rates. An increase in applicable interest rates of 1%
for the year ended December 31, 2020 would result in an increase in interest expense of approximately $11 million, or
approximately $4 million after accounting for the impact of our swap contracts.

Foreign Currency Risk

We are exposed to fluctuations of the Canadian Dollar (“CAD”) relative to the US Dollar (“USD”) due to the operations of our
Burlington, Ontario facility and sales to customers denominated in CAD. Revenue generated from Canadian customers, offset
by the related selling expense and the operations of this facility, including certain raw materials, production labor and overhead,
creates a net exposure to CAD denominated expenses. In December of 2020, we entered into a series of contracts to purchase a
total of $14.6 million Canadian dollars at fixed exchange rates and varying dates from January 2021 through December 2021.
At December 31, 2020, a 10% change in the USD to CAD exchange rate would change the aggregate fair value of these
contracts by approximately $1 million.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and
2018

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and
2018

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Hostess Brands, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Hostess Brands, Inc. and subsidiaries (the Company) as of
December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 24, 2021, except for the restatement as to the effectiveness of internal control over
financial reporting for the material weakness related to the classification and measurement of warrant liabilities, as to which the
date is May 17, 2021, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial
reporting.

Correction of a Misstatement

As discussed in Note 2 to the consolidated financial statements, the 2020, 2019, and 2018 financial statements have been
restated to correct a misstatement.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of customer trade allowances

As discussed in Note 1 to the consolidated financial statements, the Company has recorded a provision for customer
trade allowances, consisting primarily of pricing allowances and merchandising programs associated with sales to

customers. The liability recorded for the estimated cost of these programs is dependent on factors such as the ultimate
purchase volume activity, participation levels of customers, and the related settlement rates for these programs. The
Company’s liability for customer trade allowances as of December 31, 2020 was $46.8 million.

We have identified the evaluation of the customer trade allowance as a critical audit matter because of the higher
degree of auditor judgment required to evaluate the Company’s estimates. This is due to uncertainty around the
amount of settlements, which typically occur in a period subsequent to the related sales transactions, and in particular,
the estimate of purchase volumes made by retailers from distributors.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls related to the Company’s trade process at
disaggregated levels. This included controls related to the Company’s trade spend trending and lookback analyses
based on final settlement. We analyzed the liability by trade allowance type to identify unusual trends. We assessed the
Company’s historical ability to accurately estimate its customer trade allowances by comparing historical estimates to
final settlements. We compared a sample of settlements subsequent to period end to the amount previously recognized
by the Company.

Acquisition-date fair value of acquired trade name

As discussed in Note 3 to the consolidated financial statements, on January 3, 2020, the Company acquired Voortman
Cookies, Limited (Voortman), including the associated trade name. The acquisition-date fair value of the Voortman
trade name was $130.0 million.

We have identified the evaluation of the acquisition-date fair value of the trade name acquired in the Voortman
acquisition as a critical audit matter. A high degree of subjective auditor judgment was involved in evaluating discrete
period revenue growth rates and royalty rate assumptions used in the relief from royalty method to estimate the
acquisition-date fair value of the trade name.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date valuation
process. This included controls over the assumptions listed above used to estimate the acquisition-date fair value of the
trade name. We evaluated the reasonableness of the discrete period revenue growth rates by comparing the Company’s
estimates of forecasted revenue growth to historical actual results and current period performance. We involved
valuation professionals with specialized skills and knowledge, who assisted in evaluating the reasonableness of:

•
data for comparable companies
•
comparable transactions.

the discrete period revenue growth rates by comparing the forecasted amounts to publicly available market

the royalty rate by comparing the rate determined by management against publicly available market data for

/s/ KPMG LLP

We have served as the Company’s auditor since 2013.

Kansas City, Missouri
February 24, 2021, except for Notes 1, 2, 12, 13, 14, and 15, and for the restatement as to the effectiveness of internal control
over financial reporting for a material weakness related to the classification and measurement of warrant liabilities, as to which
the date is May 17, 2021

HOSTESS BRANDS, INC.
CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except shares)

(As Restated)

December 31,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents................................................................................................................. $

173,034

Accounts receivable, net....................................................................................................................

Inventories.........................................................................................................................................

Prepaids and other current assets.......................................................................................................

Total current assets...............................................................................................................................

Property and equipment, net.................................................................................................................

125,550

49,348

21,614

369,546

303,959

Intangible assets, net.............................................................................................................................

1,967,903

Goodwill...............................................................................................................................................

Other assets, net....................................................................................................................................

706,615

17,446

285,087

104,892

47,608

15,569

453,156

242,384

1,853,315

535,853

12,993

Total assets........................................................................................................................................... $

3,365,469

3,097,701

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Long-term debt and lease obligations payable within one year........................................................ $

13,811

Tax receivable agreement obligations payable within one year........................................................

Accounts payable...............................................................................................................................

Customer trade allowances................................................................................................................

Warrant liabilities..............................................................................................................................

Accrued expenses and other current liabilities..................................................................................

Total current liabilities..........................................................................................................................

11,800

61,428

46,779

861

55,715

190,394

Long-term debt and lease obligations...................................................................................................

1,113,037

Tax receivable agreement obligations..................................................................................................

Deferred tax liability.............................................................................................................................

Other long-term liabilities....................................................................................................................

144,744

295,009

1,560

11,883

12,100

68,566

45,715

111,305

21,661

271,230

975,405

126,096

256,051

—

Total liabilities......................................................................................................................................

1,744,744

1,628,782

Commitments and Contingencies (Note 16)

Class A common stock, $0.0001 par value, 200,000,000 shares authorized, 130,347,464 and
122,108,086 issued and outstanding at December 31, 2020 and 2019, respectively...........................

Class B common stock, $0.0001 par value, 50,000,000 shares authorized, none issued or
outstanding at December 31, 2020, 8,409,834 issued and outstanding at December 31, 2019..........

—

Additional paid in capital.....................................................................................................................

1,281,018

1,123,805

Accumulated other comprehensive loss...............................................................................................

Retained earnings.................................................................................................................................

Treasury stock.......................................................................................................................................

(10,407)

356,101

(6,000)

Stockholders’ equity.............................................................................................................................

1,620,725

Non-controlling interest........................................................................................................................

—

(756)

251,425

—

1,374,487

94,432

Total liabilities, stockholders’ equity and non-controlling interest...................................................... $

3,365,469

3,097,701

See accompanying notes to the consolidated financial statements.

HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except shares and per share data)

(As Restated)

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Net revenue........................................................................................................................... $

1,016,609

907,675

Cost of goods sold.................................................................................................................

Gross profit...........................................................................................................................

660,970

355,639

607,841

299,834

Operating costs and expenses:

Advertising and marketing...............................................................................................

Selling expense................................................................................................................

General and administrative..............................................................................................

Amortization of customer relationships...........................................................................

Business combination transaction costs ..........................................................................

Tax receivable agreement liability remeasurement.........................................................

Gain on foreign currency contract...................................................................................

Other operating expense..................................................................................................

Total operating costs and expenses.......................................................................................

Operating income .................................................................................................................

Other (income) expense:

Interest expense, net.........................................................................................................

Gain on buyout of tax receivable agreement...................................................................

45,724

46,729

92,860

26,510

4,282

760

—

3,464

220,329

135,310

42,826

—

Change in fair value of warrant liabilities........................................................................

(39,941)

Other expense ..................................................................................................................

Total other (income) expense................................................................................................

Income before income taxes.................................................................................................

Income tax expense...............................................................................................................

Net income ...........................................................................................................................

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

3,723

6,608

128,702

20,405

108,297

3,621

39,775

30,719

69,423

23,377

1,914

186

(7,128)

5,472

163,738

136,096

39,870

—

58,816

1,769

100,455

35,641

16,892

18,749

14,450

850,389

583,112

267,277

35,069

30,071

52,760

24,057

297

(1,866)

—

5,331

145,719

121,558

39,404

(12,372)

(79,156)

146

(51,978)

173,536

12,954

160,582

18,531

Net income attributable to Class A stockholders.................................................................. $

104,676

4,299

142,051

Earnings per Class A share:

Basic................................................................................................................................... $

Diluted................................................................................................................................ $

0.84

0.51

0.04

1.42

0.61

Weighted-average shares outstanding:

Basic...................................................................................................................................

124,927,535

110,540,264

99,957,049

Diluted................................................................................................................................

127,723,488

111,005,689

103,098,394

See accompanying notes to the consolidated financial statements.

HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

Year Ended
December 31,
2020

(As Restated)

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Net income ............................................................................................... $

108,297

18,749

160,582

Other comprehensive income:..................................................................

Unrealized gain (loss) on interest rate swap designated as a cash
flow hedge............................................................................................

Reclassification into net income...........................................................

Income tax benefit (expense)................................................................

Comprehensive income ...........................................................................

Less: Comprehensive income attributed to non-controlling interest....

(16,870)

3,886

3,421

98,734

2,749

(4,063)

(1,705)

1,222

14,203

13,292

2,962

(775)

(470)

162,299

19,050

Comprehensive income attributed to Class A stockholders..................... $

95,985

911

143,249

See accompanying notes to the consolidated financial statements.

HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Amounts in thousands)

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Income
(Losses)

Class A Voting
Common Stock

Class B Voting
Common Stock

Retained
Earnings

Treasury Stock

Total
Stockholders’
Equity

Non-
controlling
Interest

Balance - December 31, 2017 (as
previously reported).......................

99,791

30,320

$ 920,723

1,318

208,279

— $ — $

1,130,333

$ 342,240

Amount

Shares Amount

Restatement adjustment (Note 2)..

—

99,791

30,320

(28,250)

—

(103,395)

892,473

1,318

104,884

Balance–December 31, 2017 (as
restated)...........................................

Adoption of new accounting
standards net of income taxes of
$83....................................................

Comprehensive income....................

Share-based compensation, net of
income taxes of $505.......................

Exchanges........................................

Distributions.....................................

Payment of taxes for employee
stock awards.....................................

Tax receivable agreement arising
from exchanges, net of income
taxes of $33......................................

—

191

—

Balance–December 31, 2018 (as
restated)...........................................

100,046

Comprehensive income....................

Share-based compensation, net of
income taxes of $1,354....................

—

209

Exchanges........................................

21,845

Distributions.....................................

Exercise of employee stock options.

Payment of taxes for employee
stock awards.....................................

Tax receivable agreement arising
from exchanges, net of income
taxes of $28,817...............................

—

Balance–December 31, 2019 (as
restated)...........................................

122,107

Comprehensive income....................

Share-based compensation,
including income taxes of $2,167....

—

223

Exchanges........................................

8,411

Distributions.....................................

Exercise of employee stock options
and warrants.....................................

Payment of taxes for employee
stock awards.....................................

Reclassification of public warrants..

—

Repurchase of common stock..........

(444)

Tax receivable agreement arising
from exchanges, net of income
taxes of $11,818...............................

—

Balance-December 31, 2020 (as
restated)...........................................

130,347

—

(64)

—

30,256

—

(21,845)

—

8,411

—

(8,411)

—

(2)

—

(1)

—

5,095

1,370

—

(1,025)

(261)

897,652

—

7,877

262,547

—

(1,431)

(42,863)

1,123,805

—

10,838

94,719

—

690

(1,440)

68,503

—

191

1,198

142,051

—

2,523

(3,388)

247,126

4,299

—

109

—

(756)

(8,691)

—

(960)

—

251,425

104,676

—

444

(6,000)

(131,645)

—

998,688

342,240

198

143,249

19,050

5,095

1,370

—

(1,025)

(261)

—

(1,370)

(9,551)

—

1,147,314

350,454

911

13,292

7,877

—

262,656

(262,656)

—

(1,431)

(42,863)

1,374,487

95,985

10,838

93,759

—

690

(1,440)

68,503

(6,000)

(6,658)

—

94,432

2,749

—

(93,759)

(3,422)

—

(16,097)

—

(16,097)

— $ — $1,281,018

(10,407) $

356,101

444

$ (6,000) $

1,620,725

See accompanying notes to the consolidated financial statements.

HOSTESS BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

Year Ended
December 31,
2020

(As Restated)

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Operating activities

Net income.............................................................................................................................. $

108,297

18,749

Depreciation and amortization................................................................................................

Impairment and loss on sale of assets.....................................................................................

Non-cash loss on debt modification........................................................................................

Debt discount (premium) amortization...................................................................................

Tax receivable agreement remeasurement and gain on buyout...............................................

54,940

3,329

—

1,289

760

Change in fair value of warrant liabilities...............................................................................

(39,941)

Non-cash fees on sale of business...........................................................................................

Unrealized loss (gain) on foreign currency ............................................................................

Non-cash lease expense...........................................................................................................

Share-based compensation......................................................................................................

Deferred taxes..........................................................................................................................

Change in operating assets and liabilities, net of acquisitions and dispositions:

Accounts receivable..............................................................................................................

Inventories.............................................................................................................................

Prepaids and other current assets..........................................................................................

Accounts payable and accrued expenses...............................................................................

Customer trade allowances...................................................................................................

—

2,061

571

8,671

16,806

4,434

5,824

(5,301)

1,900

(4,397)

Net cash provided by operating activities...................................................................................

159,243

Investing activities

Purchases of property and equipment.....................................................................................

Acquisition of business, net of cash........................................................................................

Proceeds from sale of business, net of cash............................................................................

Proceeds from sale of assets....................................................................................................

Acquisition and development of software assets.....................................................................

Net cash provided by (used in) investing activities....................................................................

Financing activities

Repayments of long-term debt and financing lease obligations..............................................

Proceeds from long-term debt origination, net of fees paid....................................................

Debt refinancing costs.............................................................................................................

Distributions to non-controlling interest.................................................................................

Repurchase of warrants...........................................................................................................

Repurchase of common stock..................................................................................................

Payment of taxes related to the net issuance of employee stock awards.................................

Payments on tax receivable agreement...................................................................................

Proceeds from the exercise of warrants...................................................................................

Net cash provided by (used in) financing activities....................................................................

Effect of exchange rate changes on cash and cash equivalents..................................................

Net increase (decrease) in cash and cash equivalents.................................................................

Cash and cash equivalents at beginning of period......................................................................

Cash and cash equivalents at end of period........................................................................... $
Supplemental Disclosures of Cash Flow Information

Interest paid............................................................................................................................. $

Taxes paid................................................................................................................................ $

Supplemental disclosure of non-cash investing

(51,983)

(316,013)

—

(6,269)

(374,265)

(11,168)

136,888

—

(3,422)

(2,000)

(6,000)

(1,440)

(10,327)

690

103,221

(252)

(112,053)

285,087

173,034

41,776

5,825

Accrued capital expenditures.................................................................................................. $

4,718

See accompanying notes to the consolidated financial statements.

43,334

1,976

531

(747)

185

58,816

1,414

(7,128)

—

9,231

14,121

(2,570)

(12,477)

265

14,072

4,202

143,974

(34,875)

—

63,345

—

(5,609)

22,861

(9,894)

—

(7,433)

(6,658)

—

(1,431)

(2,732)

(28,125)

—

138,710

146,377

285,087

43,986

1,840

2,910

160,582

41,411

4,970

—

(1,079)

(14,237)

(79,156)

—

5,600

10,255

(3,667)

3,569

(510)

14,418

1,499

143,655

(44,585)

(23,160)

—

639

(3,839)

(70,945)

(10,105)

—

(9,551)

—

(1,025)

(41,353)

—

(62,034)

—

10,676

135,701

146,377

37,617

3,422

7,858

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business

Hostess Brands, Inc. is a Delaware corporation headquartered in Lenexa, Kansas. The consolidated financial
statements include the accounts of Hostess Brands, Inc. and its subsidiaries (collectively, the “Company”). The
Company is a leading packaged food company focused on developing, manufacturing, marketing, selling and
distributing snack products, including sweet baked goods, cookies and wafers in North America. The Hostess®
brand dates back to 1919 when Hostess® CupCake was introduced to the public, followed by Twinkies® in 1930.

Basis of Presentation

The Company’s operations are conducted through operating subsidiaries that are wholly-owned by the Company.
The 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 accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned, majority-owned or controlled subsidiaries, collectively referred to as the
Company. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period
amounts have been reclassified to conform with current period presentation. As discussed in Note 2. Restatement of
Previously Issued Financial Statements, the consolidated financial statements have been restated to reflect certain
warrants as liabilities rather than equity.

Prior to the final exchange of Class B stock (as described below), the Company's operating subsidiaries were
wholly-owned by Hostess Holdings, a direct subsidiary of Hostess Brands, Inc. Hostess Brands, Inc. held 100% of
the general partnership interest in Hostess Holdings and a majority of the limited partnership interests therein and
consolidated Hostess Holdings in the Company’s consolidated financial statements. The remaining limited
partnership interests in Hostess Holdings were held by the holders of Class B stock.

C. Dean Metropoulos and entities under his control (the “Metropoulos Entities”) held their equity investment in the
Company primarily through Class B limited partnership units (“Class B Units”) in Hostess Holdings LP (“Hostess
Holdings”) and an equal number of shares of the Company’s Class B common stock (“Class B Stock”). Each Class
B Unit, together with a share of Class B Stock held by the Metropoulos Entities, was exchangeable for a share of the
Company’s Class A common stock. The interest of the Class B Units was reflected in the consolidated financial
statements as a non-controlling interest. During the year ended December 31, 2020, the Metropoulos Entities
exchanged all of their remaining Class B Units and Class B Stock for Class A common stock. At December 31,
2020, there are no outstanding Class B Units or Class B stock and there is no non-controlling interest reported on the
December 31, 2020 consolidated balance sheet.

Subsequent to the Metropoulos Entities' final exchange of Class B Units, all subsidiaries including, Hostess
Holdings, are wholly owned by the Company.

Prior to the final exchange of Class B Units, the Company determined that Hostess Holdings, a limited partnership,
was a variable interest entity (“VIE”) and that the Company was the primary beneficiary of the VIE. The Company
determined that, due to its ownership of Hostess Holdings’ general partnership units, the Company had the power to
direct all of the activities of Hostess Holdings, with no substantive kick-out rights or participating rights by the
limited partners individually or as a group. Hostess Holdings constituted the majority of the assets of the Company.

The Company has one reportable segment: Snacking (formerly known as Sweet Baked Goods). For the year ended
December 31, 2019, the Company had two reportable segments: Sweet Baked Goods and In-Store Bakery. The
Company sold its In-Store Bakery operations on August 30, 2019.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned
or controlled subsidiaries (including those for which the Company was the primary beneficiary of a VIE),
collectively referred to as the Company. All intercompany balances and transactions have been eliminated in
consolidation.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Adoption of New Accounting Standards

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”), 2016-13 Financial Instruments-
Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”). This ASU requires entities to
measure the impairment of certain financial instruments, including trade receivables, based on expected losses rather
than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption
permitted for financial statement periods beginning after December 15, 2018. The adoption of this standard did not
have a material impact on the consolidated financial statements.

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases, along with the related ASUs 2018-01,
2018-10 and 2018-11 (collectively, “Topic 842”). Topic 842 requires a lessee to record on the balance sheet the
assets and liabilities for the rights and obligations created by lease terms of more than 12 months. To adopt this
standard, the Company utilized a modified retrospective transition method. Under this approach, the results for
reporting periods beginning January 1, 2019 are presented under Topic 842. Prior period amounts are not adjusted
and continue to be reported in accordance with the historic accounting standards. There was no cumulative effect of
applying Topic 842 to the opening balance of retained earnings. The Company has elected to apply the practical
expedients under Topic 842 which allow entities to not reassess the lease classification for expired or existing leases
and to not reassess if expired or existing contracts contain leases under the Topic 842 definition. The Company has
also elected to use hindsight when determining the lease term of existing leases. As a result of the adoption, on
January 1, 2019, the Company recognized right of use assets of $8.2 million, offset by associated accumulated
amortization of $5.2 million and corresponding lease liabilities of $3.0 million. The recognition of leases subsequent
to the adoption of Topic 842 is further described in Note 16. Commitments and Contingencies.

Use of Estimates

The preparation of 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, inputs used to
calculate the Tax Receivable Agreement liability including increases in tax basis related to exchanges, future cash
tax savings rate, and the allocation of the liability between short-term and long-term based on when the Company
realizes certain tax attributes and reserves for trade and promotional allowances. Actual results could differ from
these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less
when purchased as cash equivalents and are recorded at cost. Under the Company’s cash management system,
checks that have been issued and are out of the control of the Company, but which have not cleared the bank by the
balance sheet date, are reported as a reduction of cash.

Accounts Receivable

Accounts receivable represents amounts invoiced to customers for which the Company’s obligation to the customer
has been satisfied. As of December 31, 2020 and 2019, the Company’s accounts receivable were $125.6 million and
$104.9 million, respectively, which have been reduced by allowances for damages occurring during shipment,
quality claims and doubtful accounts in the amount of $3.5 million and $2.7 million, respectively.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories

Inventories are stated at the lower of cost or market 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)
Ingredients and packaging................................................................................................. $
Finished goods...................................................................................................................
Inventory in transit to customers........................................................................................

December 31,
2020

December 31,
2019

22,965
23,583
2,800
49,348

21,439
22,513
3,656
47,608

Property and Equipment

Property and equipment acquired in business combinations were assigned useful lives for purposes of depreciation
that the Company believes to be the remaining useful life of such assets. Additions to property and equipment are
recorded at cost and depreciated straight line over estimated useful lives of 15 to 50 years for buildings and land
improvements and 3 to 20 years for machinery and equipment. In order to maximize the efficiency of the
Company’s operations and to operate the acquired equipment, occasionally the Company will remove and relocate
equipment between bakeries. Such removal and relocation costs are expensed as incurred. Reinstallation costs are
capitalized if the useful life is extended or the equipment is significantly improved. Otherwise, reinstallation costs
are expensed as incurred. Expenditures for repairs and maintenance are charged to expense when incurred.
Expenditures for major renewals and betterments, which extend the useful lives of existing property and equipment,
are capitalized and depreciated. Upon retirement or disposition of property and equipment, the capitalized cost and
related accumulated depreciation are removed from the balance sheet and any resulting gain or loss is recognized in
the consolidated statements of operations.

The Company assesses property, plant and equipment for impairment when circumstances arise which could change
its use or expected life. For the years ended December 31, 2020, 2019 and 2018 the Company recorded impairment
losses of $2.9 million, $0.5 million and $1.4 million, respectively, in the Snacking segment (formerly referred to as
Sweet Baked Goods, or “SBG”).

Software Costs

Costs associated with computer software projects during the preliminary project stage are expensed as incurred.
Once management authorizes and commits to funding a project, appropriate application development stage costs are
capitalized. Capitalization ceases when the project is substantially complete and the software is ready for its intended
use. Upgrades and enhancements to software are capitalized when such enhancements are determined to provide
additional functionality. Training and maintenance costs associated with software applications are expensed as
incurred.

Included in the caption “Other assets” in the consolidated balance sheets is capitalized software in the amount of
approximately $14.7 million and $11.9 million at December 31, 2020 and 2019, respectively. Capitalized software
costs are amortized over their estimated useful life of up to five years commencing when such assets are ready for
their intended use. Software amortization expense included in general and administrative expense in the
consolidated statements of operations was $5.3 million for the year ended December 31, 2020, and $2.7 million for
both years ended December 31, 2019 and 2018.

Goodwill and Intangible Assets

At December 31, 2020 and 2019, the goodwill balances of $706.6 million and $535.9 million, respectively, represent
the excess of the amount the Company paid for the acquisition of Hostess Holdings from the Metropoulos Entities
and other former equity holders in a 2016 transaction over the fair value of the assets acquired and liabilities
assumed. The December 31, 2020 goodwill balance also reflects the excess of the amount the Company paid for the
acquisition of Voortman over the fair value of the assets acquired and liabilities assumed. The resulting goodwill
was allocated to the Snacking reporting segment.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill by reporting segment is tested for impairment annually by either performing a qualitative evaluation or a
quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than
not that the fair value of a reporting segment is less than its carrying amount, including goodwill. The Company may
elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment
test. For the 2020 and 2019 annual impairment tests, the Company elected to perform the qualitative test. No
indicators of impairment were noted.

The Company’s indefinite-lived intangible assets consist of trademarks and trade names. The $1,538.6 million and
$1,408.6 million balances at December 31, 2020 and 2019, respectively, were recognized as part of the 2016
acquisition of Hostess Holdings and the 2018 acquisition of the Cloverhill Business. The December 31, 2020
balance also includes trademarks and trade names from the acquisition of Voortman. The trademarks and trade
names are integral to the Company’s identity and are expected to contribute indefinitely to its corporate cash flows.
Fair value for trademarks and trade names was determined using the income approach, which is considered to be
Level 3 within the fair value hierarchy. The application of the income approach was premised on a royalty savings
method, whereby the trademark and trade names are valued by reference to the amount of royalty income they could
generate if they were licensed, in an arm’s-length transaction, to a third party. These assets have been assigned an
indefinite life and therefore are not amortized but rather evaluated for impairment annually using the qualitative or
quantitative methods similar to goodwill. For the quantitative assessment, the valuation of trademarks and trade
names are determined using the relief of royalty method. Significant assumptions used in this method include future
trends in sales, a royalty rate and a discount rate to be applied to the forecasted revenue stream.

During the year ended December 31, 2019, the Company recognized an impairment charge of $1.0 million to the In-
Store Bakery goodwill and intangibles. See Note 8. Goodwill and Intangible Assets for more information on
impairment charges.

Also, the Company has finite-lived intangible assets, net of accumulated amortization of $429.3 million and $444.7
million on December 31, 2020 and 2019 respectively, that consist of customer relationships that were recognized as
part of the Hostess Holdings, Voortman and Cloverhill acquisitions. For customer relationships, the application of
the income approach (Level 3) was premised on an excess earnings method, whereby the customer relationships are
valued by the earnings expected to be generated from those customers after other capital charges. Definite-lived
intangible assets are being amortized on a straight-line basis over the estimated remaining useful lives of the assets.

Reserves for Self-Insurance Benefits

The Company’s employee health plan is self-insured by the Company up to a stop-loss amount of $0.3 million for
each participant per plan year. In addition, the Company maintains insurance programs covering its exposure to
workers’ compensation. Such programs include the retention of certain levels of risks and costs through high
deductibles and other risk retention strategies. Included in the accrued expenses in the consolidated balance sheets is
a reserve for healthcare claims in the amount of approximately $2.2 million and $2.0 million at December 31, 2020
and 2019, respectively, and a reserve for workers’ compensation claims of $2.9 million and $2.7 million at
December 31, 2020 and 2019, respectively.

Leases

Subsequent to its adoption of Topic 842 on January 1, 2019, the Company recognizes a right of use asset and
corresponding lease liability on the consolidated balance sheet for all lease transactions with terms of more than 12
months. Agreements are determined to contain a lease if they convey the use and control of an underlying physical
asset. Based on the nature of the lease transaction, leases are either classified as financing or operating. Under both
classifications, the right of use asset and liability are initially valued based on the present value of the future
minimum lease payments using an effective borrowing rate at the inception of the lease. The Company determined
the effective borrowing rate based on its expected incremental borrowing rate on collateralized debt. At
December 31, 2020, 3.6% was the weighted average effective borrowing rates for outstanding operating leases.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under a financing lease, interest expense related to the lease liability is recognized over the lease term using an
effective interest rate method and right of use assets are amortized straight-line over the term of the lease. Under an
operating lease, minimum lease payments are expensed straight-line over the lease term. Lease liabilities are
amortized using an effective interest rate method and right of use assets are reduced based on the excess of the sum
of the straight-line lease expense and the reduction of the lease liability over the actual lease payments. At
December 31, 2020, the weighted average remaining terms on operating leases were approximately eight years.

Variable lease payments, such as taxes and insurance, are expensed as incurred. Expenses related to leases with
original terms less than 12 months (short-term leases) are expensed as incurred. For all leases related to distribution,
bakery and corporate facilities,
to separate non-lease components from lease
components.

the Company has elected not

At December 31, 2020, right of use assets related to operating leases are included in property and equipment, net on
the consolidated balance sheet (see Note 6. Property and Equipment). Lease liabilities for operating leases are
included in the current and non-current portions of long-term debt and lease obligations on the consolidated balance
sheet (see Note 11. Debt).

Revenue Recognition

Net revenue consists primarily of sales of packaged food products. The Company recognizes revenue when the
obligations under the terms of its agreements with customers have been satisfied. The Company’s obligation is
satisfied when control of the product is transferred to its customers along with the title, risk of loss and rewards of
ownership. Depending on the arrangement with the customer, these criteria are met either at the time the product is
shipped or when the product is received by such customer.

Customers are invoiced at the time of shipment or customer pickup based on credit terms established in accordance
with industry practice. Invoices generally require payment within 30 days. Net revenue is recognized in an amount
that reflects the consideration the Company expects to be entitled to in exchange for that product. Amounts billed to
customers related to shipping and handling are classified as net revenue. A provision for payment discounts and
other allowances is estimated based on the Company’s historical performance or specific terms with the customer.
The Company generally does not accept product returns and provides these allowances for anticipated expired or
damaged products.

Trade promotions, consisting primarily of customer pricing allowances and merchandising funds are offered through
various programs to customers. A provision for estimated trade promotions is recorded as a reduction of revenue in
the same period when the sale is recognized.

The Company also offers rebates based on purchase levels, product placement locations in retail stores and
advertising placed by customers. The ultimate cost of these programs is dependent on certain factors such as actual
purchase volumes or customer activities and is the subject of significant management estimates. The Company
accounts for these programs as variable consideration and recognizes a reduction in revenue in the same period as
the underlying program.

For product produced by third parties, management evaluates whether the Company is the principal (i.e., report
revenue on a gross basis) or agent (i.e., report revenue on a net basis). Management has determined that it is the
principal in all cases, since it establishes its own pricing for such product, generally assumes the credit risk for
amounts billed to its customers, and often takes physical control of the product before it is shipped to customers.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables disaggregate revenue by geographical market and category:

(In thousands)

Sweet Baked
Goods

United States.................................................. $

920,388

Canada............................................................

—

(In thousands)

920,388

Sweet Baked
Goods

United States................................................... $

878,973

Canada............................................................

—

878,973

Year Ended December 31, 2020

In-Store Bakery

Total

— $

—

— $

77,692

18,529

96,221

998,080

18,529

1,016,609

Year Ended December 31, 2019

In-Store Bakery

Total

28,702

—

28,702

— $

907,675

—

— $

907,675

The Company has one customer that accounted for 10% or more of the Company’s total net revenue. The percentage
of total net revenues for this customer is presented below by segment:

Snacking.................................................................................

In-Store Bakery.......................................................................

Total........................................................................................

20.2 %

0.0 %

20.2 %

23.3 %

0.3 %

23.6 %

20.4 %

0.6 %

21.0 %

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Foreign Currency Remeasurement

Certain Voortman sales and production related costs are denominated in the Canadian dollar (“CAD”). CAD
transactions have been remeasured into U.S. dollars (“USD”) on the 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 consolidated balance sheet using the exchange rate at the end of the period. During the year ended
December 31, 2020, the Company recognized losses on remeasurement of $1.8 million, reported within other
expense on the consolidated statement of operations.

Equity Compensation

The grant date fair values of stock options are valued using the Black-Scholes option-pricing model, including a
simplified method to estimate the number of periods to exercise date (i.e., the expected option term). Management
has determined that the equity plan has not been in place for a sufficient amount of time to estimate the post vesting
exercise behavior. Therefore, it will continue to use this simplified method until such time as it has sufficient history
to provide a reasonable basis to estimate the expected term. Forfeitures are recognized as a reduction of expense as
incurred.

For awards which have market conditions, compensation expense is calculated based on the number of shares
expected to vest after assessing the probability that the performance or market criteria will be met. For market-based
awards, probability is not reassessed and compensation expense is not remeasured subsequent to the initial
assessment on the grant date.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Collective Bargaining Agreements

As of December 31, 2020, approximately 41%, of the Company’s employees are covered by collective bargaining
agreements. None of these agreements expire before December 31, 2021.

Employee Benefit Plans

The Company provides several benefit plans for employees depending upon employee eligibility. The Company has
a health care plan, a defined contribution retirement plan (401(k)), company-sponsored life insurance, and other
benefit plans. The Company’s contributions to the defined contribution retirement plan were $2.0 million, $1.8
million and $1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company offers an annual incentive plan based upon annual operating targets. Final payout is approved by the
board of directors or a committee thereof. As of December 31, 2020 and 2019 there was $14.2 million and
$6.8 million accrued for this plan, respectively.

Income Taxes

The Company is subject to U.S. federal, state and local income taxes as well as Canadian income tax on certain
subsidiaries.

Prior to the final exchange of Class B units, Hostess Brands, Inc. owned a controlling interest in Hostess Holdings,
which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a
partnership, Hostess Holdings was not directly subject to U.S. federal and certain state and local income taxes. Any
taxable income or loss generated by Hostess Holdings was passed through to and included in the taxable income or
loss of its partners, including the Company.

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax
liabilities and assets are determined based on the difference between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse.
Additionally, the impact of changes in the enacted tax rates and laws on deferred taxes, if any, is reflected in the
financial statements in the period of enactment.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be
sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of
being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment
occurs (see Note 15. Income Taxes).

Derivatives

The Company has outstanding public and private placement warrants which were originated in the 2015 initial
public offering of a special purpose acquisition company (“SPAC”), which subsequently acquired Hostess Holdings
in 2016 in a transaction that resulted in the Company becoming the parent company of Hostess Holdings. Due to
certain provisions in the warrant agreement, the Company concluded that certain warrants do not meet the criteria to
be classified in stockholders’ equity. In periods in which the public and private warrants meet the definition of a
liability-classified derivative under Accounting Standards Codification (“ASC”) 815, the Company recognized these
warrants within current liabilities on the consolidated balance sheet at fair value, with subsequent changes in fair
value recognized in the consolidated statement of operations at each reporting date.

The Company has entered into interest rate swap contracts to mitigate its exposure to changes in the variable interest
rate on its long-term debt. The Company has also entered into Canadian Dollar (CAD) purchase contracts to mitigate
its exposure to foreign currency exchanges rates on its CAD denominated production costs. Both interest rate swap
contracts and CAD purchase contracts are designated as cash flow hedges. Changes in the fair value of these
instruments are recognized in accumulated other comprehensive income in the consolidated balance sheets and
reclassified into earnings in the period in which the hedged transaction affects earnings. Hedging ineffectiveness, if
any, is recognized as a component of interest expense for interest rate swap contracts and costs of goods sold for
CAD purchase contracts in the consolidated statements of operations. Payments made under the interest rate swap
contracts are included in the supplemental disclosure of interest paid in the consolidated statements of cash flows.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company also used a CAD purchase contract to mitigate the impact of foreign currency exchange rates on its
January 2020 purchase of Voortman. This contract was settled during the year ended December 31, 2020 and did not
qualify as a cash flow hedge.

Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the best extent possible. The Company determines fair value based on assumptions that
market participants would use in pricing an asset or liability in the principal or most advantageous market. When
the following fair value hierarchy
considering market participant assumptions in fair value measurements,
distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

•

Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the
reporting entity at the measurement date.

Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at measurement date.

New Accounting Pronouncements

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. These amendments are not applicable
to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. ASU
No. 2020-04 is effective as of March 12, 2020 through December 31, 2022 and may be applied to contract
modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to
March 12, 2020. The Company is evaluating the impact the new standard will have on the consolidated financial
statements and related disclosures but do not anticipate a material impact.

In December 2019, ASU 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes (Topic 740)” was
issued. 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 is still assessing
the impact of this update.

2. Restatement of Previously Issued Financial Statements

On April 12, 2021,
the SEC issued a statement (the “SEC Statement”) on the accounting and reporting
considerations for warrants issued by SPACs. The SEC Statement discussed certain features of warrants issued in
SPAC transactions that may be common across many entities. The SEC Statement indicated that when one or more
of such features is included in a warrant, the warrant should be classified as a liability at fair value, with changes in
fair value each period reported in earnings.

Following consideration of the guidance in the SEC Statement, the Company concluded that certain of its warrants
should have been classified as liabilities, rather than equity, and should be measured at fair value in the affected
financial statements, with changes in fair value each period reported in earnings. As such, the Company is restating
its financial statements for the affected periods included in this Annual Report.

The impact of the restatement on the balance sheets as of December 31, 2020 and 2019 and statements of operations
for the years ended December 31, 2020, 2019 and 2018 are presented below. The impact of the restatement on the
December 31, 2017 stockholders' equity balances is presented on the consolidated statement of stockholders' equity.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, see Note 17. Unaudited Quarterly Financial Data (As Restated) for the restatement impacts to the
quarterly periods during the year ended December 31, 2020. Regarding the statement of cash flows, the adjustments
below to net income were offset by adjustments to non-cash operating activities within cash flow provided by
operations. The restatement had no impact on total net cash flows from operating, investing or financing activities.

(In thousands)

Balance Sheet

As of December 31, 2020

As Previously
Reported

Restatement
Adjustment

As Restated

Total assets................................................................................................ $

3,365,469

— $

3,365,469

Warrant liabilities......................................................................................

Total current liabilities..............................................................................

Total liabilities..........................................................................................

Additional paid in capital..........................................................................

Retained earnings......................................................................................

—

189,533

1,743,883

1,238,765

399,215

861

42,253

(43,114)

861

190,394

1,744,744

1,281,018

356,101

Stockholder's equity..................................................................................

1,621,586

(861)

1,620,725

Total liabilities, stockholder's equity and non-controlling interest........... $

3,365,469

— $

3,365,469

(In thousands, except shares and per share data)

For the Year Ended December 31, 2020

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

135,310

— $

Change in fair value of warrant liabilities.................................................

Total other (income) expense....................................................................

Income before income taxes.....................................................................

Net income................................................................................................

—

46,549

88,761

68,356

(39,941)

39,941

Net income attributable to Class A stockholders...................................... $

64,735

39,941

135,310

(39,941)

6,608

128,702

108,297

104,676

Earnings per Class A share:......................................................................

Basic ......................................................................................................... $

Diluted....................................................................................................... $

0.52

0.51

0.32

— $

0.84

0.51

Weighted-average shares outstanding:.....................................................

Basic .........................................................................................................

124,927,535

Diluted.......................................................................................................

127,723,488

—

124,927,535

127,723,488

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

Balance Sheet

As of December 31, 2019

As Previously
Reported

Restatement
Adjustment

As Restated

Total assets................................................................................................ $

3,097,701

— $

3,097,701

Liabilities and stockholder's equity

Warrant liabilities......................................................................................

Total current liabilities..............................................................................

Total liabilities..........................................................................................

Additional paid in capital..........................................................................

Retained earnings......................................................................................

Stockholder's equity..................................................................................

—

159,925

1,517,477

1,152,055

334,480

1,485,792

111,305

(28,250)

(83,055)

(111,305)

111,305

271,230

1,628,782

1,123,805

251,425

1,374,487

Total liabilities, stockholder's equity and non-controlling interest........... $

3,097,701

— $

3,097,701

(In thousands, except shares and per share data)

For the Year Ended December 31, 2019

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

136,096

— $

Change in fair value of warrant liabilities.................................................

Total other expense...................................................................................

Income before income taxes.....................................................................

Net income................................................................................................

—

41,639

94,457

77,565

58,816

(58,816)

Net income attributable to Class A stockholders...................................... $

63,115

(58,816) $

Earnings per Class A share:

Basic.......................................................................................................... $

Diluted....................................................................................................... $

0.57

0.55

(0.53) $

(0.51) $

Weighted-average shares outstanding:

136,096

58,816

100,455

35,641

18,749

4,299

0.04

Basic..........................................................................................................

110,540,264

—

110,540,264

Diluted.......................................................................................................

114,699,447

(3,693,758)

111,005,689

(In thousands, except shares and per share data)

For the Year Ended December 31, 2018

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

121,558

— $

Change in fair value of warrant liabilities.................................................

Total other (income) expense....................................................................

Income before income taxes.....................................................................

Net income................................................................................................

—

27,178

94,380

81,426

(79,156)

79,156

Net income attributable to Class A stockholders...................................... $

62,895

79,156

121,558

(79,156)

(51,978)

173,536

160,582

142,051

Earnings per Class A share:

Basic.......................................................................................................... $

Diluted....................................................................................................... $

0.63

0.61

0.79

— $

1.42

0.61

Weighted-average shares outstanding:

Basic..........................................................................................................

99,957,049

Diluted.......................................................................................................

103,098,394

—

99,957,049

103,098,394

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Business Combinations and Divestitures

Voortman Acquisition

On January 3, 2020, the Company completed the acquisition of all of the shares of the parent company of Voortman,
a manufacturer of premium, branded wafers as well as sugar-free and specialty cookies for approximately
$328.7 million ($427.0 million CAD), reflecting final working capital and other closing statement adjustments.

Net cash outflow related to the purchase price during the year ended December 31, 2020 was $316.0 million. This
net cash outflow reflects a non-cash gain on a related foreign currency contract of $6.9 million, cash acquired of
$1.6 million and a liability outstanding as of December 31, 2020 for certain purchase price adjustments of
$4.2 million.

The acquisition of Voortman diversifies and expands the Company’s product offerings and manufacturing
capabilities in the adjacent cookie category. The acquisition also leverages the Company’s customer reach and lean
and agile business model. The combined Company expects to realize additional benefits of scale via sharing
established, efficient infrastructure and strengthening collaborative retail partnerships in the United States and
Canada.

During the year ended December 31, 2020, working capital and other adjustments of $4.7 million were made to
goodwill. Included in other non-current liabilities in the table below is a $1.3 million liability for pre-acquisition
uncertain tax positions. It is offset by a non-current receivable balance of $1.3 million representing expected
recovery through indemnifications.

As of December 31, 2020, the Company has finalized the following purchase price allocation:

(In thousands)

Cash............................................................................................................................................................ $

Accounts receivable...................................................................................................................................

Inventory....................................................................................................................................................

Income tax receivable.................................................................................................................................

Other current assets....................................................................................................................................

Property and equipment.............................................................................................................................

Customer relationships (1).........................................................................................................................

Trade names (2)..........................................................................................................................................

Goodwill (3)...............................................................................................................................................

Other non-current assets.............................................................................................................................

Accounts payable and accrued expenses....................................................................................................

Customer trade allowances.........................................................................................................................

Lease liabilities...........................................................................................................................................

Deferred taxes............................................................................................................................................

Other non-current liabilities.......................................................................................................................

Assets acquired and liabilities assumed..................................................................................................... $

1,639

24,848

7,564

7,522

420

32,028

11,100

130,000

170,762

1,320

(6,172)

(5,428)

(6,420)

(39,149)

(1,320)

328,714

(1) Customer relationships were valued through application of the income approach (Level 3). Under this approach, revenue, operating
expenses and other costs associated with existing customers were estimated in order to derive cash flows attributable to the existing
customer relationships. The resulting cash flows were then discounted to present value to arrive at the fair value of existing customer
relationships as of the valuation date. The estimated useful lives by operating segment ranging from one to eight years represent the
approximate point in the projection period in which a majority of the assets’ cash flows are expected to be realized based on assumed
attrition rates.

(2) The trade names were valued through application of the income approach (level 3), involving the estimation of likely future sales and
an appropriate royalty rate. The trade name and trademarks are estimated to have indefinite useful lives as the Company expects a
market participant would use the trade name and trademarks in perpetuity based on their historical strength and consumer
recognition.

(3) Goodwill represents the excess of the consideration transferred over the fair values of the assets acquired and liabilities assumed. It is

primarily attributable to synergies and intangible assets such as assembled workforce which are not separately recognizable.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2020 and 2019, the Company incurred $4.3 million and $1.9 million,
respectively, of expenses related to this acquisition. These expenses are classified as business combination
transaction costs on the consolidated statement of operations.

The following unaudited pro forma combined financial information presents the Company’s results as though the
acquisition of Voortman had occurred at January 1, 2019. The unaudited pro forma consolidated financial
information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP:

(In thousands)

(As restated)

Twelve Months Ended

December 31,
2020

December 31,
2019

(unaudited, pro forma)

Net revenue........................................................................................................................... $

1,016,609

1,007,140

Net income............................................................................................................................

108,297

11,612

In-Store Bakery Divestiture

On August 30, 2019, the Company sold its In-Store Bakery operations, including relevant trademarks and licensing
agreements, to an unrelated party. The operations included products that were primarily sold in the in-store bakery
section of U.S. retail channels. The Company divested the operations to provide more focus on future investment in
areas of its business that better leverage its core competencies.

The Company received proceeds from the divestiture of $65.0 million prior to transaction expenses and subject to
certain post-closing adjustments. In connection with the sale, during the year ended December 31, 2019, the
Company recognized transaction expenses of $2.1 million and a loss on disposal of $0.3 million within other
operating expenses on the consolidated statements of operations.

4. Exit Costs

Subsequent to the Company’s acquisition of Voortman, activities were initiated to transition Voortman’s distribution
model
to the Company’s direct-to-warehouse distribution model. The Company has incurred costs to exit
Voortman’s direct-store-delivery model, including severance and contract termination costs related to third-party
distributor and leasing relationships. Total costs were $12.9 million through completion of the transition in 2020.
During the year ended December 31, 2020, contract termination costs of $8.3 million were recognized in selling
expense on the consolidated statement of operations. During the year ended December 31, 2020, severance costs of
$4.6 million, were recognized within general and administrative expenses on the consolidated statement of
operations.

Reserves for these activities are reported within accrued expenses on the consolidated balance sheet and had the
following activity during the year ended December 31, 2020:

(In thousands)

Severance

Contract
Termination

Total

Charges recorded.......................................................................

Payments made..........................................................................

Impact of change in exchange rates on CAD denominated
liability.......................................................................................

Reserve balance as of December 31, 2020................................

4,632

(4,063)

(33)

536

8,278

(7,913)

(365)

— $

12,910

(11,976)

(398)

536

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Stock-Based Compensation

Hostess Brands, Inc. 2016 Equity Incentive Plan

The Hostess Brands, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) provides for the granting of various equity-
based incentive awards to members of the Board of Directors of the Company, employees and service providers to
the Company. The types of equity-based awards that may be granted under the 2016 Plan include: stock options,
stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), and other stock-based awards. There
are 7,150,000 registered shares of Class A common stock reserved for issuance under the 2016 Plan. All awards
issued under the 2016 Plan may only be settled in shares of Class A common stock. As of December 31, 2020,
2,770,885 shares remained available for issuance under the 2016 Plan.

Share-based compensation expense totaled approximately $8.7 million, $9.2 million and $5.6 million for the years
ended December 31, 2020, 2019 and 2018, respectively.

Restricted Stock Units (“RSUs”)

The fair value of RSU awards is calculated based on the closing market price of the Company’s Class A Common
Stock on the date of grant. Compensation expense is recognized straight-line over the requisite service period of the
awards, ranging from one to three years.

The vesting of certain RSU awards is contingent upon the Company’s Class A Common Stock achieving a certain
total stockholder return (“TSR”) in relation to a group of its peers, measured over a three year period. Depending on
the actual performance over the measurement period, an award recipient has the opportunity to receive up to 200%
of the granted awards. At December 31, 2020 and 2019 there were 0.4 million and 0.3 million RSU awards with
TSR performance conditions outstanding, respectively.

Upon an employee’s termination, certain RSU awards provide that unvested awards will be forfeited and the shares
of common stock underlying such award will become available for issuance under the 2016 Plan. Other RSU awards
provide for accelerated vesting upon an employee's termination under certain circumstances.

The following table summarizes the activity of the Company’s unvested RSUs:

Restricted Stock
Units

Weighted
Average
Grant Date
Fair Value

Unvested as of December 31, 2018.................................................................................

895,784

Total Granted...............................................................................................................

Forfeited......................................................................................................................

Vested(1).....................................................................................................................

Unvested as of December 31, 2019.................................................................................

Total Granted ............................................................................................................

Forfeited.....................................................................................................................

Vested(2)....................................................................................................................

721,985

(298,601)

(415,033)

904,135

628,801

(285,991)

(198,677)

Unvested as of December 31, 2020.................................................................................

1,048,268

14.46

12.76

14.96

14.26

12.99

14.54

12.17

13.95

(1)
(2)

Includes 108,012 shares withheld to satisfy $1.4 million of employee tax obligations upon vesting.
Includes 78,728 shares withheld to satisfy $1.1 million of employee tax obligations upon vesting.

As of December 31, 2020 there was $8.1 million of total unrecognized compensation cost, related to non-vested
RSUs granted under the 2016 Plan; that cost is expected to be recognized over a weighted average remaining period
of approximately 1.7 years. As of December 31, 2020 there were no awards outstanding for which it was not
probable that the performance conditions would be met.

For the years ended December 31, 2020 and 2019, $6.3 million and $7.2 million, respectively, of compensation
expense related to the RSUs was recognized within general and administrative expenses on the consolidated
statements of operations.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

The following table includes the significant inputs used to determine the fair value of options issued under the 2016
plan.

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Expected volatility (1).................................................................................................................

26.34%

Expected dividend yield (2).........................................................................................................

—%

26.66%

—%

Expected option term (3).............................................................................................................

6.00 years

Risk-free rate (4)..........................................................................................................................

1.6%

1.8%

(1) The expected volatility assumption was calculated based on a peer group analysis of stock price volatility with a look back period

based on the expected term and ending on the grant date.

(2) From its inception through December 31, 2020, the Company has not paid any dividends on its common stock. As of the stock option
grant date, the Company does not anticipate paying any dividends on common stock over the term of the stock options. Option holders
have no right to dividends prior to the exercise of the options.

(3) The Company utilized the simplified method to determine the expected term of the stock options since the Company does not have

sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

(4) The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant which corresponds to the expected

term of the stock options.

The stock options vest in equal annual installments on varying dates through 2022. The maximum term under the
grant agreement is ten years. As of December 31, 2020, there was $3.2 million of total unrecognized compensation
cost related to non-vested stock options outstanding under the 2016 Plan; that cost is expected to be recognized over
the vesting periods. For the years ended December 31, 2020 and 2019, there was $2.4 million and $2.0 million,
respectively, of expense related to the stock options recognized within general and administrative costs on the
consolidated statements of operations. The weighted average grant-date fair value of options granted in years ended
December 31, 2020, 2019 and 2018 was $4.04, $3.76, and $5.04, respectively.

The following table summarizes the activity of the Company’s unvested stock options:

Outstanding as of December 31, 2018....................................................

Granted................................................................................................

Exercised.............................................................................................

Forfeited..............................................................................................

Outstanding as of December 31, 2019....................................................

Exercisable as of December 31, 2019.....................................................

Granted................................................................................................

Exercised.............................................................................................

Forfeited..............................................................................................

Outstanding as of December 31, 2020....................................................

Exercisable as of December 31, 2020.....................................................

Weighted
Average
Remaining
Contractual
Life
(years)

Weighted
Average
Exercise Price

5.54

—

8.35

7.35

—

7.95

7.01

13.54

11.59

13.11

12.42

13.35

15.43

13.69

11.35

13.93

13.43

14.20

Number
of
Options

943,939

905,421

(7,463)

(124,226)

1,717,671

486,663

703,329

(44,257)

(305,628)

2,071,115

787,671

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Property and Equipment

Property and equipment consists of the following:

(In thousands)

December 31,
2020

December 31,
2019

Land and buildings........................................................................................................ $

59,774

Right of use assets - operating.......................................................................................

Machinery and equipment.............................................................................................

Construction in progress................................................................................................

Less accumulated depreciation................................................................................

31,354

255,821

25,041

371,990

(68,031)

303,959

53,683

23,771

209,382

5,878

292,714

(50,330)

242,384

Depreciation expense was $23.1 million, $17.2 million and $14.6 million for the years ended December 31, 2020,
2019, 2018, respectively.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Segment Reporting

The Company has one reportable segment: Snacking (formally known as Sweet Baked Goods). For the years ended
December 31, 2019 and 2018, the Company had two reportable segments: Sweet Baked Goods and In-Store Bakery.
As of January 3, 2020, the Company added the newly acquired Voortman operations into the reportable segment
previously known as Sweet Baked Goods and renamed the segment as “Snacking”. The Company’s Snacking
segment consists of sweet baked goods, cookies, wafers and bread products that are sold under the Hostess®, Dolly
Madison®, Cloverhill®, Big Texas® and Voortman® brands. The In-Store Bakery segment consisted primarily of
Superior on Main® branded and private label products sold through the in-store bakery section of grocery and club
stores. The Company divested its In-Store Bakery operations on August 30, 2019. Subsequent to the sale, Snacking
is the Company's single reportable segment.

The Company evaluates performance and allocates resources based on net revenue and gross profit. Information
regarding the operations of these reportable segments is as follows:

(In thousands)

Net revenue:

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Snacking........................................................................... $

1,016,609

In-Store Bakery.................................................................

—

Net revenue....................................................................... $

1,016,609

Depreciation and amortization (1):

Snacking........................................................................... $

54,940

In-Store Bakery.................................................................

—

Depreciation and amortization ......................................... $

54,940

Gross profit:

Snacking........................................................................... $

355,639

In-Store Bakery.................................................................

—

Gross profit....................................................................... $

355,639

Capital expenditures (2):

Snacking........................................................................... $

58,953

In-Store Bakery.................................................................

—

Capital expenditures......................................................... $

58,953

878,973

28,702

907,675

41,732

1,602

43,334

293,648

6,186

299,834

35,354

182

35,536

808,355

42,034

850,389

38,607

2,804

41,411

258,995

8,282

267,277

53,394

354

53,748

(1) Depreciation and amortization include charges to net income classified as costs of goods sold and general and administrative

expenses on the consolidated statements of operations.

(2) Capital expenditures consists of purchases of property and equipment and acquisition and development of software assets paid in

cash or acquired through accounts payable.

For the years ended December 31, 2020 and 2019, total assets on the consolidated balance sheet are entirely
attributed to the Snacking segment.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Goodwill and Intangible Assets

The Company recognized goodwill in January of 2020 related to its acquisition of Voortman based on a valuation
performed to determine the fair value of the acquired assets. During the year ended December 31, 2020, the
preliminary valuation was adjusted, resulting in an increase to goodwill of $4.7 million. The valuation was finalized
in the fourth quarter of 2020. The Voortman goodwill was incorporated into the Company's Snacking reporting
segment. Goodwill and intangible assets as of December 31, 2020 and 2019 were recognized as part of the Hostess
Business Combination and the Voortman and Cloverhill Business acquisitions.

During the year ended December 31, 2019, the Company recognized an impairment charge of $1.0 million related to
its In-Store Bakery reporting unit, within other operating expense on the consolidated statements of operations.
During the year ended December 31, 2019, the Company divested its In-Store Bakery segment (see Note 3. Business
Combinations and Divestitures). Goodwill activity is presented below by reportable segment:

(In thousands)

Snacking

In-Store Bakery

Total

Balance as of December 31, 2018................................................ $

535,853

39,792

Impairment...................................................................................

Divestiture....................................................................................

Balance as of December 31, 2019................................................

Acquisition of Voortman.............................................................

—

535,853

170,762

Balance as of December 31, 2020................................................ $

706,615

(1,000)

(38,792)

—

— $

575,645

(1,000)

(38,792)

535,853

170,762

706,615

Intangible assets consist of the following:

(In thousands)

December 31,
2020

December 31,
2019

Intangible assets with indefinite lives (Trademarks and Trade Names)........................ $

1,538,631

1,408,630

Intangible assets with definite lives (Customer Relationships).....................................

Less accumulated amortization (Customer Relationships).........................................

526,813

(97,541)

515,713

(71,028)

Intangible assets, net...................................................................................................... $

1,967,903

1,853,315

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized additional trade names and customer relationships intangible assets during the year ended
December 31, 2020 related to the acquisition of Voortman. See Note 3. Business Combinations and Divestitures for
additional details.

During the year ended December 31, 2019, the Company divested of its In-Store Bakery segment, resulting in a
reduction of intangible assets, net of $24.5 million. Amortization expense was $26.5 million, $23.4 million and
$24.1 million for the years ended December 31, 2020, 2019 and 2018 respectively. The unamortized portion of
customer relationships will be expensed over their remaining useful life, from 4 to 19 years. The weighted-average
amortization period as of December 31, 2020 for customer relationships was 18.7 years.

Future expected amortization expense is as follows:

(In thousands)

2021.................................................................................................................................................................... $

2022....................................................................................................................................................................

2023....................................................................................................................................................................

2024....................................................................................................................................................................

2025....................................................................................................................................................................

23,512

22,752

2026 and thereafter.............................................................................................................................................

312,472

9. Accrued Expenses

Included in accrued expenses are the following:

(In thousands)

December 31,
2020

December 31,
2019

Incentive compensation................................................................................................. $

16,199

Interest rate and foreign currency contracts..................................................................

Payroll, vacation and other compensation.....................................................................

Accrued interest.............................................................................................................

Other..............................................................................................................................

13,694

9,886

4,815

11,121

6,840

704

3,389

4,870

5,858

55,715

21,661

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Tax Receivable Agreement

The Tax Receivable Agreement generally provides for the payment by the Company to the legacy Hostess Equity
Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income taxes that the Company
realizes (or is deemed to realize in certain circumstances) in periods after the closing of the 2016 acquisition (which
periods may extend, unless the Tax Receivable Agreement is terminated early in accordance with its terms, for more
than 15 years following any exchange of Class B Units of Hostess Holdings for shares of the Company’s Class A
common stock or the cash equivalent thereof) as a result of (i) certain increases in tax basis resulting from the 2016
acquisition; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the 2016 acquisition
and prior to subsequent exchanges of Class B Units; (iii) certain increases in tax basis resulting from exchanges of
Class B Units; (iv) imputed interest deemed to be paid by the Company as a result of payments it makes under the
Tax Receivable Agreement; and (v) certain increases in tax basis resulting from payments the Company makes
under the Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash
savings. Certain payments under the Tax Receivable Agreement will be made to the Metropoulos Entities in
accordance with specified percentages, regardless of the source of the applicable tax attribute. The Company
recognizes a liability on the consolidated balance sheet based on the undiscounted estimated future payments under
the Tax Receivable Agreement. Significant inputs used to estimate the future expected payments include a 26.5%
cash tax savings rate.

The following table summarizes activity related to the Tax Receivable Agreement obligations:

(In thousands)

Balance December 31, 2018 ...............................................................................................................

Exchange of Class B units for Class A shares..................................................................................

Remeasurement due to disposal of In-Store Bakery operations.......................................................

Remeasurement due to change in estimated state tax rate................................................................

Payments...........................................................................................................................................

Balance December 31, 2019................................................................................................................

Exchange of Class B units for Class A shares..................................................................................

Remeasurement due to tax law change.............................................................................................

Remeasurement due to change in estimated state tax rate................................................................

Payments...........................................................................................................................................

Balance December 31, 2020................................................................................................................

69,063

71,679

1,779

(1,593)

(2,732)

138,196

27,915

610

150

(10,327)

156,544

During the year ended December 31, 2020, the Tax Receivable Agreement obligations increased $27.9 million due
to additional tax basis realized from the exchange of Class B Units and $0.8 million for tax law and rate
remeasurements.

During the year ended December 31, 2019, the Company remeasured the Tax Receivable Agreement obligations due
to changes in state tax rates resulting in a $1.6 million benefit as the Company decreased its estimated cash tax
savings rate from 26.9% to 26.4%. Additionally, the disposition of the In-Store Bakery operations resulted in a
$1.8 million expense recognized on the consolidated statement of operations.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020 the future expected payments under the Tax Receivable Agreement are as follows:

(In thousands)

2021.................................................................................................................................................................... $

11,800

2022....................................................................................................................................................................

2023....................................................................................................................................................................

2024....................................................................................................................................................................

2025....................................................................................................................................................................

9,000

9,700

9,900

9,800

Thereafter...........................................................................................................................................................

106,344

11. Debt

On January 3, 2020, the Company originated a $140.0 million incremental term loan through an amendment to its
existing credit agreement. The Company received proceeds of $136.9 million, net of fees incurred of $3.1 million.
The proceeds, together with cash on hand, financed the purchase of Voortman (see Note 3. Business Combinations
and Divestitures). The terms, conditions and covenants applicable to the incremental term loan are the same as the
terms, conditions and covenants applicable to the Fourth Term Loan. The term loan requires quarterly payments of
interest at a rate of the greater of the applicable LIBOR or 0.75% per annum plus a margin of 2.25% per annum and
principal payments at a rate of 0.25% of the aggregate principal balance per quarter with the remaining principal
amount due upon maturity on August 3, 2025.

A term loan was originated on October 1, 2019 through an amendment to an existing credit agreement held by the
Company’s subsidiary, Hostess Brands, LLC (referred to below as the “Fourth Term Loan”). It requires quarterly
payments of interest at a rate of the greater of the applicable LIBOR or 0.75% per annum (“New LIBOR Floor”)
plus a margin of 2.25% per annum and principal at a rate of 0.25% of the aggregate principal balance with the
remaining principal amount due upon maturity on August 3, 2025. The Fourth Term Loan is secured by substantially
all of Hostess Brands, LLC’s present and future assets.

The Fourth Term Loan refinanced the remaining balance of $976.4 million on the Third New First Lien Term Loan
(“Third Term Loan”) through a non-cash refinancing transaction. The Third Term Loan was originated through an
amendment to an existing credit agreement held by Hostess Brands, LLC on November 20, 2017 and required
quarterly payments of interest at a rate equal to the New LIBOR Floor plus a margin of 2.50% per annum and
principal at a rate of 0.25% of the aggregate principal balance with the remaining principal amount due upon
maturity on August 3, 2022.

A summary of the carrying value of the debt and the lease obligations is as follows:

(In thousands)

Term Loan (3.0% as of December 31, 2020)

December 31,
2020

December 31,
2019

Principal.................................................................................................................... $

1,102,763

Unamortized debt premiums, discounts and issuance costs......................................

Lease obligations...........................................................................................................

Total debt and lease obligations................................................................................

Less: Amounts due within one year..........................................................................

(4,917)

1,097,846

29,002

1,126,848

(13,811)

Long-term portion......................................................................................................... $

1,113,037

973,930

(3,094)

970,836

16,452

987,288

(11,883)

975,405

At December 31, 2020 and 2019, the approximate fair value of the Company's aggregate term loan balance was
$1,109.3 million and $977.6 million, respectively. The fair value is calculated using current interest rates and pricing
from financial institutions (Level 2 inputs).

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2020, minimum debt repayments under the Fourth Term Loan are due as follows:

(In thousands)

2021.................................................................................................................................................................... $

2022....................................................................................................................................................................

2023....................................................................................................................................................................

2024....................................................................................................................................................................

11,167

2025....................................................................................................................................................................

1,058,095

Revolving Credit Facility

On October 1, 2019, Hostess Brands, LLC amended its Revolving Credit Agreement (the “Revolver”), providing for
borrowings up to $100.0 million, a stated maturity date of August 3, 2024 and secured by liens on substantially all of
Hostess Brands, LLC’s present and future assets, including accounts receivable and inventories, as defined in the
Revolver. The Revolver is ranked equally with the Fourth Term Loan in regards to secured liens. The Revolver has
an annual commitment fee on the unused portion of between 0.375% and 0.50% annually based upon the unused
percentage. Interest on borrowings under the Revolver is, at Hostess Brands, LLC’s option, either the applicable
LIBOR plus a margin of 2.25% per annum or the base rate plus a margin of 1.25% per annum.

Prior to the amendment the Revolver originated on August 3, 2015 had a stated maturity date of August 3, 2020 and
an annual commitment fee on the unused portion of between 0.375% and 0.50% annually based upon the unused
percentage. Interest on borrowings under the Revolver was, at Hostess Brands, LLC’s option, either the applicable
LIBOR plus a margin of between 3.00% and 3.50% per annum or the base rate plus a margin of 2.00% to 2.50% per
annum. All other significant terms and provisions were unchanged by the amendment.

The Company had no outstanding borrowings under the Revolver as of December 31, 2020 or 2019. See Note 16.
Commitments and Contingencies for information regarding the letters of credit, which reduce the amount available
for borrowing under the Revolver. The Revolver contains certain restrictive financial covenants. As of December 31,
2020, the Company was in compliance with these covenants.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Derivative Instruments

Warrants

As of December 31, 2020 and 2019, there were 53,936,776 and 48,453,154 public warrants, and 541,658 and
8,046,636 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 to
the public has been registered with the SEC. When sold to the public, the private placement warrants will become
public warrants.

The warrant agreement contains a tender offer provision that when paired with a two-class equity structure causes all
warrants to be precluded from equity classification. Subsequent to the collapse of the two-class structure in
November 2020 when all remaining Class B shares were exchanged for Class A shares, the tender offer provision no
longer precludes the public warrants from being equity-classified. As a result, the $68.5 million liability related to
the public warrants was reclassified to equity in November 2020. There are provisions specific to the private
warrants which cause them to continue to be liability classified subsequent to the exchange. As of December 31,
2020, the outstanding private warrants remain liability classified and subject to fair value measurement. The fair
value of the warrants is measured on a recurring basis by comparison to available market information. The value of
the each public warrant up until they were no longer classified as liabilities was based on the public trading price of
the warrant (Level 1 fair value measurement). The fair value of each private warrant was evaluated and determined
to be substantially the same as that of a public warrant and therefore considered to be a Level 2 fair value
measurement. Gains and losses related to the warrants are reflected in the change in fair value of warrant liabilities
in the consolidated statement of operations.

Interest Rate Swaps

To reduce the effect of interest rate fluctuations, the Company entered into an interest rate swap contract with a
counter party to make a series of payments based on a fixed interest rate of 1.78% and receive a series of payments
based on the greater of LIBOR or 0.75%. Both the fixed and floating payment streams are based on a notional
amount of $500 million at the inception of the contract and are reduced by $100 million each year of the five-year
contract. As of December 31, 2020, the notional amount was $200 million. The Company entered into this
transaction to reduce its exposure to changes in cash flows associated with its variable rate debt and has designated
this derivative as a cash flow hedge. At December 31, 2020, the effective fixed interest rate on the long-term debt
hedged by this contract was 4.03%.

In February 2020, the Company entered into additional five-year interest rate swap contracts to further reduce the
effect of interest rate fluctuations on its variable-rate debt. The notional value of these contracts was $500 million.
Under the terms of the contracts, the Company makes quarterly payments based on fixed interest rates ranging from
1.11% to 1.64% and receives quarterly payments based on the greater of LIBOR or 0.75%. The Company has
designated these contracts as cash flow hedges. At December 31, 2020, the effective interest rate on the long-term
debt hedged by these contracts was 3.76%.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Contracts

To reduce the effect of fluctuations in CAD denominated expenses relative to their US dollar equivalents originating
from its Canadian operations, the Company entered into CAD purchase contracts during the year ended December
31, 2020. The contracts provide for the Company to sell a total of $11.5 million USD for $14.6 million of CAD at
varying defined settlement dates through the end of 2021. The Company has designated these contracts as cash flow
hedges.

In connection with the agreement to purchase Voortman as described in Note 3. Business Combinations and
Divestitures, the Company entered into a deal-contingent foreign currency contract to hedge the $440 million CAD
forecasted purchase price and a portion of the subsequent expected conversion costs. The contract was settled in
cash following the completion of the purchase on January 3, 2020.

A summary of the fair value of foreign currency and interest rate contracts is as follows:

(In thousands)

Asset derivatives

Location

December 31,
2020

December 31,
2019

Foreign currency contracts (1)

Other current assets....................... $

— $

7,128

Liability derivatives

Location

Interest rate swap contracts (2)

Accrued expenses.......................... $

Foreign currency contracts (1)

Accrued expenses..........................

13,688

13,694

704

—

704

(1) The fair values of foreign currency contracts are measured on a recurring basis by comparison to available market information on

similar contracts (Level 2)

(2) The fair values of these contracts are measured on a recurring basis by netting the discounted future fixed cash payments and the
discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates
(forward curves) derived from observed market interest rate curves (Level 2).

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the gains and losses related to foreign currency and interest rate contracts in the consolidated
statement of operations is as follows:

(In thousands)

Gain (loss) on derivative contracts
designated as cash flow hedges

Location

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Interest rate swap contracts

Interest expense, net...................... $

(3,886) $

1,705

775

Gain (loss) on other derivative
contracts

Location

Foreign currency contracts

Gain on foreign currency contract.

Foreign currency contracts

Other expense................................

—

(274)

7,128

—

(274) $

7,128

—

For interest rate swap contracts, unrealized expense recognized in accumulated other comprehensive income as of
December 31, 2020 of $4.7 million is expected to be reclassified into interest expense through December 31, 2021.

For foreign currency contracts, unrealized expense recognized in accumulated other comprehensive income as of
December 31, 2020 of less than $0.1 million is expected to be reclassified into cost of goods sold through December
31, 2021.

13. Equity

The Company’s authorized common stock consists of three classes: 200,000,000 shares of Class A common stock,
50,000,000 shares of Class B Stock, and 10,000,000 shares of Class F common stock (none of which were issued
and outstanding at December 31, 2020 or 2019). As of December 31, 2020 and 2019, there were 130,347,464 and
122,108,086 shares of Class A common stock issued and outstanding, respectively. As of December 31, 2020 there
were no shares of Class B common stock issued and outstanding. At December 31, 2019, there were 8,409,834
shares of Class B common stock issued and outstanding.

Shares of Class A common stock and Class B Stock have identical voting rights. However, shares of Class B Stock
do not participate in earnings or dividends of the Company. Ownership of shares of Class B Stock is restricted to
owners of Class B Units in Hostess Holdings. Class B units in Hostess Holdings may be exchanged (together with
the cancellation of an equivalent number of shares of Class B Stock) by the holders thereof for, at the election of the
Company, shares of Class A common stock or the cash equivalent of such shares. During the year ended December
31, 2020, all remaining outstanding Class B units were exchanged for Class A Common Stock.

During the year ended December 31, 2020, the Company's Board of Directors approved a securities repurchase
program of up to $100 million of the Company's outstanding securities. As of December 31, 2020, $8.0 million has
been used under this authorization to repurchase 444,444 Class A shares at $13.50 per share and 2,000,000 private
placement warrants at $1 each. The repurchased Class A shares are included in treasury stock on the consolidated
balance sheet.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to the Company’s Class A stockholders for
the period by the weighted average number of Class A common shares outstanding for the period excluding non-
vested restricted stock awards. In computing dilutive earnings per share, basic earnings per share is adjusted for the
assumed issuance of all applicable potentially dilutive share-based awards, including: public and private placement
warrants, RSUs, restricted stock awards, and stock options.

Below are basic and diluted earnings per share:

Year Ended
December 31,
2020

(As Restated)
Year Ended
December 31,
2019

Year Ended
December 31,
2018

Numerator: (in thousands)

Net income attributable to Class A stockholders - basic......................... $

104,676

4,299

142,051

Impact of change in fair value of warrant liabilities................................

(39,941)

—

Numerator for diluted earnings per share

64,735

4,299

(79,156)

62,895

Denominator:

Weighted-average Class A shares outstanding - basic (excluding non-
vested restricted stock awards)................................................................

124,927,535

110,540,264

99,957,049

Dilutive effect of warrants.......................................................................

Dilutive effect of RSUs...........................................................................

2,525,863

270,090

—

465,425

3,021,239

120,106

Weighted-average shares outstanding - diluted.......................................

127,723,488

111,005,689

103,098,394

Earnings per Class A share - basic.......................................................... $

Earnings per Class A share - dilutive...................................................... $

0.84

0.51

0.04

1.42

0.61

For warrants that are liability-classified, during periods when the impact is dilutive, the Company assumes share
settlement of the instruments as of the beginning of the reporting period and adjusts the numerator to remove the
change in fair value of the warrant liability and adjusts the denominator to include the dilutive shares calculated
using the treasury stock method.

For all years presented, the dilutive effect of stock options were excluded from the computation of diluted earnings
per share because the assumed proceeds from the awards’ exercise were greater than the average market price of the
common shares.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Income Taxes
The income tax expense (benefit) consisted of the following:

(In thousands)

Current tax expense

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

Federal..........................................................................................................

2,120 $

1,724 $

State and local...............................................................................................

Foreign .........................................................................................................

Total Current...................................................................................................

Deferred tax expense (benefit)

Federal..........................................................................................................

State and local...............................................................................................

Foreign..........................................................................................................

Total Deferred.................................................................................................

1,479

—

3,599

17,204

3,750

(4,148)

16,806

1,047

—

2,771

14,859

(738)

—

14,121

Income tax expense, net..................................................................................

20,405 $

16,892 $

Income (loss) before income taxes consists of the following:

622

2,077

—

2,699

14,476

(4,221)

—

10,255

12,954

(In thousands)

Earnings before income taxes

(As Restated)

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

United States................................................................................................. $

144,075 $

35,641 $

173,536

Foreign..........................................................................................................

(15,373)

—

Income before income taxes.........................................................................

128,702 $

35,641 $

173,536

For the years ended December 31, 2020, 2019, and 2018, the effective income tax rate differs from the federal
statutory income tax rate as explained below:

(As Restated)

Year Ended
December 31,
2020

Year Ended
December 31,
2019

Year Ended
December 31,
2018

U.S. federal statutory income tax rate.........................................................

21.0 %

Change in fair value of warrant liabilities...................................................

State and local income taxes, net of federal benefit....................................

Income attributable to non-controlling interest...........................................

Foreign rate differential...............................................................................

Change in state tax rate...............................................................................

Tax law change............................................................................................

Gain on TRA buyout...................................................................................

Other............................................................................................................

(6.5)

2.8

(0.6)

0.6

(0.8)

—

34.7

12.3

(8.5)

—

(12.8)

—

0.7

(9.6)

2.4

(2.2)

—

(3.3)

—

(0.8)

—

Effective income tax rate.............................................................................

15.9 %

47.4 %

7.5 %

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the accompanying consolidated balance sheets. These temporary differences
result in taxable or deductible amounts in future years.

Details of the Company’s deferred tax assets and liabilities are summarized as follows:

(In thousands)

Deferred tax assets

As of
December 31,
2020

As of
December 31,
2019

Imputed interest.......................................................................................................................... $

6,744

Tax credits..................................................................................................................................

Derivative instruments...............................................................................................................

Net operating loss carryforwards...............................................................................................

Accrued liabilities .....................................................................................................................

Stock-based compensation.........................................................................................................

Other...........................................................................................................................................

4,582

3,495

2,601

4,870

3,449

4,443

Total deferred tax assets.............................................................................................................

30,184

6,198

2,599

—

249

—

1,343

10,389

Deferred tax liabilities..............................................................................................................

Investment in partnership...........................................................................................................

—

(266,440)

Goodwill and intangible assets...................................................................................................

Property and equipment.............................................................................................................

Other...........................................................................................................................................

(277,563)

(46,732)

(898)

—

Total deferred tax liabilities.......................................................................................................

(325,193)

(266,440)

Total Deferred tax assets and liabilities ................................................................................

(295,009) $

(256,051)

The recognition of deferred tax assets is based on management’s belief that it is more likely than not that the tax
benefits associated with temporary differences, net operating loss carryforwards and tax credits will be utilized. The
Company assesses the recoverability of the deferred tax assets on an ongoing basis. In making this assessment, the
Company considers all positive and negative evidence, and all potential sources of taxable income including
scheduled reversals of deferred tax liabilities, tax-planning strategies, projected future taxable income and recent
financial performance.

At December 31, 2020 and 2019 the Company had $12.3 million and $2.6 million, respectively, of current income
taxes receivable included in prepaids and other current assets on the consolidated balance sheet.

The global intangible low-taxed income (“GILTI”) provisions require the Company to include in its U.S. income tax
return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The
Company is electing to account for GILTI tax in the period in which it is incurred.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes in the consolidated financial statements the benefit of a tax position only if the impact is
more likely than not of being sustained on audit based on the technical merits of the position. As of December 31,
2020, the Company had $1.6 million of gross unrecognized tax benefits, which would have a net $1.6 million impact
on the effective tax rate, if recognized. The change for 2020 primarily relates to additional gross unrecognized
benefits for acquired tax positions. The following is a reconciliation of the beginning and ending amount of
unrecognized tax benefits:

Year Ended
December 31,
2020

Balance at January 1...............................................................................................................................................

Additions for tax positions acquired....................................................................................................................

Additions for tax positions of current year..........................................................................................................

Total current...........................................................................................................................................................

—

1,320

240

1,560

Interest and penalties related to income tax liabilities, if incurred, are included in income tax expense in the
consolidated statements

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local
jurisdictions, and certain subsidiaries in Canada. For federal and state tax purposes, the Company and its subsidiaries
are generally subject to examination for three years after the income tax returns are filed. As such, U.S. federal and
state income tax returns filed for periods since 2017 remain open for examination by tax authorities. In Canada, tax
returns are subject to examination for four years after the notice of assessment is issued. Canadian tax returns filed
for periods since 2016 remain open for examination.

The Company generated $3.0 million of Kansas High Performance Incentive Program (“HPIP”) Credits during 2020
which is included within the current year state and local income taxes, net of federal benefit. The HPIP credits
provide a 10% investment tax credit for qualified business facilities located in Kansas. The Company has gross state
credits of $5.8 million as of December 31, 2020 which will expire from 2027 to 2036 if unutilized.

At December 31, 2020,
the Company and its foreign subsidiaries have gross state net operating losses of
approximately $4.2 million and Canadian net operating losses of $8.7 million. Unless utilized, the state net operating
losses carryforwards expire from 2030 to 2036 and the Canadian net operating losses expire in 2040.

The Company believes that
invest any undistributed earnings
indefinitely, or the earnings will be remitted in a tax-neutral transaction, and, therefore, does not provide deferred
taxes on the cumulative undistributed earnings of our foreign subsidiaries.

its foreign subsidiaries have invested or will

16. Commitments and Contingencies

Accruals and the Potential Effect of Litigation

From time to time, the Company is subject to various legal actions, lawsuits, claims and proceedings related to
products, employment, environmental regulations, and other matters incidental to its businesses. Based upon
information presently known, the Company does not believe that the ultimate resolution of such matters will have a
material effect on the Company’s financial position, although the final resolution of such matters could have a
material effect on its results of operations or cash flows in the period of resolution.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Liabilities related to legal proceedings are recorded when it is probable that a liability has been incurred and the
associated amount can be reasonably estimated. Where the estimated amount of loss is within a range of amounts
and no amount within the range is a better estimate than any other amount, the low end of the range is accrued. As
additional information becomes available, the potential liabilities related to these matters are reassessed and the
to change in the future based on new
estimates revised,
developments in each matter, or changes in circumstances, which could have a material effect on the Company’s
financial condition and results of operations.

if necessary. These accrued liabilities are subject

Lease Commitments

Operating Leases

As of December 31, 2020 the Company has leases outstanding for its commercial office, Burlington Ontario bakery
and primary distribution center under noncancellable operating lease arrangements. The future minimum lease
payments under these agreements as of December 31, 2020 are shown below.

(In thousands)

2021............................................................................................................................................................. $

2022.............................................................................................................................................................

2023.............................................................................................................................................................

2024.............................................................................................................................................................

2025.............................................................................................................................................................

Thereafter.....................................................................................................................................................

3,998

4,421

4,366

5,099

5,254

9,614

Financing Leases

The Company entered into a bond-lease agreement with the Development Authority of Columbus, Georgia on
December 1, 2013, which was amended in December, 2016. The bond-lease transaction required the Company to
exchange its property to the taxing jurisdiction for tax-exempt bonds issued in the name of the Company not to
exceed $18 million. As the issuer and holder of the bonds, the Company is not required to make lease payments. On
December 16, 2013, the Company received an ad valorem tax agreement from the Columbus, Georgia Board of Tax
Assessors granting tax abatement for the real and personal property located at the Company’s Columbus, Georgia
bakery through 2023. The Company has elected to use the right of offset under ASC 210-20 to net the asset and the
liability.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below shows the composition of lease expenses for the period subsequent to the adoption of Topic 842:

(In thousands)

Reduction of right of use asset, financing lease................................................ $

Interest, financing lease....................................................................................

Operating lease expense....................................................................................

Short-term lease expense..................................................................................

Variable lease expense......................................................................................

Year Ended
December 31,
2020

Year Ended
December 31,
2019

— $

—

5,722

2,633

1,763

10,118 $

133

3,070

968

1,076

5,263

For short-term leases, Hostess records rent expense in its consolidated statements of operations on a straight-line
basis over the lease term. Variable lease payments, which primarily include taxes, insurance and common area
maintenance, are expensed as incurred. During the year ended December 31, 2020, the Company amended the
existing lease for its Burlington Ontario production facility. The amendment extended the lease term through
October 2030 and provided for two five-year extensions, at the Company's option. During the year ended December
31, 2019, the Company entered into a lease agreement for its new distribution center in Edgerton, Kansas. The
agreement has a base term of six and a half years with two five year extensions. The right of use of use asset and
lease liability were calculated using the six and a half year term.

Contractual Commitments

The Company is a party to various long-term arrangements through advance purchase contracts to lock in prices for
certain high-volume raw materials and packaging components for normal product production requirements. These
advance purchase arrangements are contractual agreements and can only be canceled with a termination penalty that
is based upon the current market price of the commodity at the time of cancellation. These agreements qualify for
the “normal purchase” exception under accounting standards; and the purchases under these contracts are included
as a component of cost of goods sold.

Contractual commitments were as follows:

(In thousands)

Total
Committed

Commitments
within 1 year

Commitments
beyond 1 year

Ingredients..................................................................................................... $

127,775 $

115,628 $

12,147

Packaging......................................................................................................

71,715

—

Letters of Credit

The Company is a party to Letter of Credit arrangements to provide for the issuance of standby letters of credit in
the amount of $5.5 million and $4.2 million for the years ended 2020 and 2019, respectively. The arrangements
support the collateral requirements for insurance. The Letters of Credit are 100% secured through our Revolver.

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Unaudited Quarterly Financial Data (As Restated)

Below is summarized quarterly financial data for 2020 reflecting adjustments made in connection with the
restatement as described in Note 2. Restatement of Previously Issued Financial Statements:

(In thousands, except shares and per share data)

For the Three Months Ended December 31, 2020

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

44,232

— $

Change in fair value of warrant liabilities.................................................

Net income (loss)......................................................................................

—

24,373

25,037

(25,037)

Net income (loss) attributable to Class A stockholders............................ $

23,612

(25,037) $

Earnings (loss) per Class A share:...........................................................

Basic.......................................................................................................... $

Diluted....................................................................................................... $

0.18

(0.19) $

44,232

25,037

(664)

(1,425)

(0.01)

Weighted-average shares outstanding:.....................................................

Basic..........................................................................................................

127,959,039

—

127,959,039

Diluted.......................................................................................................

132,402,533

(4,049,574)

128,352,959

(In thousands)

Balance Sheet

As of September 30, 2020

As Previously
Reported

Restatement
Adjustment

As Restated

Total assets................................................................................................ $

3,339,843

— $

3,339,843

Warrant liabilities......................................................................................

Total current liabilities..............................................................................

Total liabilities..........................................................................................

Additional paid in capital..........................................................................

Retained earnings......................................................................................

—

196,372

1,730,828

1,185,003

375,603

Stockholder's equity..................................................................................

1,549,615

46,327

(28,250)

(18,077)

(46,327)

46,327

242,699

1,777,155

1,156,753

357,526

1,503,288

Total liabilities, stockholder's equity and non-controlling interest........... $

3,339,843

— $

3,339,843

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except shares and per share data)

For the Three Months Ended September 30, 2020

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

41,337

— $

Change in fair value of warrant liabilities.................................................

Net income................................................................................................

—

23,973

(2,260)

2,260

Net income attributable to Class A stockholders...................................... $

22,605

2,260

Earnings per Class A share:......................................................................

Basic.......................................................................................................... $

Diluted....................................................................................................... $

0.18

0.02

— $

41,337

(2,260)

26,233

24,865

0.20

0.18

Weighted-average shares outstanding:.....................................................

Basic..........................................................................................................

124,905,538

Diluted.......................................................................................................

127,586,881

—

124,905,538

127,586,881

(In thousands)

Balance Sheet

As of June 30, 2020

As Previously
Reported

Restatement
Adjustment

As Restated

Total assets................................................................................................ $

3,319,623

— $

3,319,623

Warrant liabilities......................................................................................

Total current liabilities..............................................................................

Total liabilities..........................................................................................

Additional paid in capital..........................................................................

Retained earnings......................................................................................

—

203,033

1,733,196

1,176,815

352,998

Stockholder's equity..................................................................................

1,518,792

48,587

(28,250)

(20,337)

(48,587)

48,587

251,620

1,781,783

1,148,565

332,661

1,470,205

Total liabilities, stockholder's equity and non-controlling interest........... $

3,319,623

— $

3,319,623

(In thousands, except shares and per share data)

For the Three Months Ended June 30, 2020

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

34,575

— $

Change in fair value of warrant liabilities.................................................

Net income................................................................................................

—

17,370

16,382

(16,382)

Net income (loss) attributable to Class A stockholders............................ $

16,170

(16,382) $

Earnings per Class A share:......................................................................

Basic.......................................................................................................... $

Diluted....................................................................................................... $

0.13

(0.13) $

34,575

16,382

988

(212)

—

Weighted-average shares outstanding:.....................................................

Basic..........................................................................................................

123,123,656

—

123,123,656

Diluted.......................................................................................................

124,576,409

(758,005)

123,818,404

HOSTESS BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands)

Balance Sheet

As of March 31, 2020

As Previously
Reported

Restatement
Adjustment

As Restated

Total assets................................................................................................ $

3,289,577

— $

3,289,577

Warrant liabilities......................................................................................

Total current liabilities..............................................................................

Total liabilities..........................................................................................

Additional paid in capital..........................................................................

Retained earnings......................................................................................

—

185,026

1,718,476

1,163,263

336,828

Stockholder's equity..................................................................................

1,490,541

32,205

(28,250)

(3,955)

(32,205)

32,205

217,231

1,750,681

1,135,013

332,873

1,458,336

Total liabilities, stockholder's equity and non-controlling interest........... $

3,289,577

— $

3,289,577

(In thousands, except shares and per share data)

For the Three Months Ended March 31, 2020

Statement of Operations

As Previously
Reported

Restatement
Adjustment

As Restated

Operating income...................................................................................... $

15,166

— $

Change in fair value of warrant liabilities.................................................

Net income................................................................................................

—

2,640

(79,100)

79,100

Net income attributable to Class A stockholders...................................... $

2,348

79,100

15,166

(79,100)

81,740

81,448

Earnings per Class A share:......................................................................

Basic.......................................................................................................... $

Diluted....................................................................................................... $

0.02

0.64

— $

0.66

0.02

Weighted-average shares outstanding:.....................................................

Basic..........................................................................................................

123,123,656

Diluted.......................................................................................................

126,075,126

—

123,123,656

126,075,126

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a)

Evaluation Of Disclosure Controls And Procedures

We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable
assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission, and that
information relating to the Company is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.

Our management, with the participation of our President and Chief Executive Officer and our Chief Financial
Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31,
2020 (the end of the period covered by this Annual Report on Form 10-K/A). Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not
effective as of December 31, 2020, because of a material weakness in internal control over financial reporting
described below.

Notwithstanding the identified material weakness, management has concluded that the consolidated financial
statements included in this annual report on Form 10-K/A present fairly, in all material respects, the Company's
financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally
accepted accounting principles (U.S. GAAP).

(b)

Management’s Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on criteria established in Internal Control - Integrated
Framework (2013) by the Committee of Sponsoring Organization of the Treadway Commission.

Subsequent to the filing of our annual report filed on February 24, 2021, management identified a material weakness
in our internal control over financial reporting related to the accounting for and classification of our warrant
agreements, due to the lack of an effectively designed control over the evaluation of the underlying clauses of the
warrant agreement, and an insufficient understanding of the warrant agreement and accounting literature to reach a
correct conclusion. As a result, we have concluded that our internal control over financial reporting was not effective
as of December 31, 2020.

KPMG LLP, an independent registered public accounting firm, has audited the Company’s consolidated financial
statements and has issued an adverse report on the effectiveness of internal control over financial reporting, which is
included herein, as a result of the material weakness identified.

(c)

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recent calendar quarter
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(d)

Remediation Plan

We are improving these processes to ensure that the nuances of such significant or unusual transactions are
effectively evaluated in the context of the increasingly complex accounting standards. This material weakness
resulted in adjustments to liability, equity and changes in fair value related to warrants.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Hostess Brands, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Hostess Brands, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the
material weakness, described below, on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related
consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the
years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated
financial statements), and our report dated February 24, 2021, except for Notes 1, 2, 12, 13, 14, and 15, and for the
restatement as to the effectiveness of internal control over financial reporting for a material weakness related to
classification and measurement of warrant liabilities as to which the date is May 17, 2021, expressed an unqualified
opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. A material weakness related to the accounting for and
classification of the Company’s warrant agreements due to the lack of an effectively designed control over the
evaluation of the underlying clauses of the warrant agreement, and an insufficient understanding of the warrant
agreement and accounting literature to reach a conclusion, has been identified and included in management’s
assessment. The material weakness was considered in determining the nature, timing, and extent of audit tests
applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report on those
consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

/s/ KPMG LLP

Kansas City, Missouri

February 24, 2021, except for the restatement as to the effectiveness of internal control over financial reporting for
the material weakness related to the classification and measurement of warrant liabilities, as to which the date is
May 17, 2021.

Item 9B. Other Information

None.

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is contained in our definitive proxy statement, which was filed with the SEC
on April 30, 2021, and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item is contained in our definitive proxy statement, which was filed with the SEC
on April 30, 2021, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The information required by this item is contained in our definitive proxy statement, which was filed with the SEC
on April 30, 2021, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained in our definitive proxy statement, which was filed with the SEC
on April 30, 2021, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item is contained in our definitive proxy statement, which was filed with the SEC
on April 30, 2021, and is incorporated herein by reference.

Part IV.

Item 15. Exhibits, Financial Statement Schedules

Financial Statements and Financial Statement Schedules

See “Index to consolidated financial statements” in Part II, Item 8 of this Annual Report on Form 10-K/A. Financial
statement schedules have been omitted because they are not required or are not applicable or because the
information required in those schedules either is not material or is included in the consolidated financial statements
or the accompanying notes.

[THIS PAGE INTENTIONALLY LEFT BLANK]

FORWARD-LOOKING STATEMENTS

This Annual Report contains statements reflecting out views about our future performance that consititute “forward-looking
statements” that involve substantial risks and uncertainties. All forward-looking statements included herein are made only as of
the date hereof. These statements inherently involve risks and uncertainties, including the risks set forth under “Risk Factors”
in our Form 10-K/A included in this Annual Report, that could cause actual results to differ materially from those anticipated in
such forward-looking statements. 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 are cautioned not to place undue reliance on any such forward-looking statements. We understake no obligation to
update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Inside Front

Inside Back

Inside Cover

BOARD OF DIRECTORS
Jerry D. Kaminski
BOARD OF DIRECTORS
Independent Director and Chairman
Jerry D. Kaminski
Executive Vice President and Chief Operating Officer
Independent Director and Chairman
of Land O’Lakes Inc.
Executive Vice President and Chief Operating Officer
of Land O’Lakes Inc.

Andrew P. Callahan
Director
President and Chief Executive Officer

LETTER FROM OUR PRESIDENT & CEO

DEAR FELLOW STOCKHOLDERS,

2020 proved to be one of the most challenging and rewarding years for Hostess Brands! Our agility

and nimbleness to react to ever-changing consumer behaviors, manufacturing requirements and

2020 proved to be one of the most challenging and rewarding years for Hostess Brands! Our agility

safety needs of our employees and communities was tested like never before. Thanks to the

and nimbleness to react to ever-changing consumer behaviors, manufacturing requirements and

extraordinary daily efforts of our team members and retail partners we were able to achieve record

safety needs of our employees and communities was tested like never before. Thanks to the

financial results while navigating through these unprecedented challenges. The resiliency of the

extraordinary daily efforts of our team members and retail partners we were able to achieve record

Hostess Brands team and our retail and supply-chain partners is inspiring, and we will continue to

financial results while navigating through these unprecedented challenges. The resiliency of the

prioritize their health and well-being as we look forward to another successful year of profitable growth

Hostess Brands team and our retail and supply-chain partners is inspiring, and we will continue to

and delivering increased stockholder value.

prioritize their health and well-being as we look forward to another successful year of profitable growth

and delivering increased stockholder value.

Our key accomplishments in 2020 include:

Net revenue growth of 15.7%* and adjusted EBITDA growth of 20.1%*;

Our key accomplishments in 2020 include:



Adjusted gross profit increased 21.2%* and adjusted gross margin expanded by 140 basis

Net revenue growth of 15.7%* and adjusted EBITDA growth of 20.1%*;



points*;

Adjusted gross profit increased 21.2%* and adjusted gross margin expanded by 140 basis

Generated operating cash flows of $159 million and on track to achieve leverage of approximately

points*;

3x by the end of 2021;

Generated operating cash flows of $159 million and on track to achieve leverage of approximately

Seamlessly executed the Voortman acquisition and integrated the business, including transition to

3x by the end of 2021;

the warehouse model, ahead of schedule and under budget, establishing a profitable platform for

Seamlessly executed the Voortman acquisition and integrated the business, including transition to



innovation and market opportunities and serving as yet more proof that we have a platform

the warehouse model, ahead of schedule and under budget, establishing a profitable platform for



well-suited for complementary acquisitions;

innovation and market opportunities and serving as yet more proof that we have a platform

Drove strong market share gains in convenience and other key channels with growth in repeat

well-suited for complementary acquisitions;



consumers, particularly in younger demographic groups, supporting our strong foundation for

Drove strong market share gains in convenience and other key channels with growth in repeat



long-term growth;

consumers, particularly in younger demographic groups, supporting our strong foundation for

Achieved a 5.8% increase in our rolling 3-year innovation revenue contribution driven by strong

long-term growth;



performance of our 2020 innovation and a 39% increase in our innovation velocities; and

Achieved a 5.8% increase in our rolling 3-year innovation revenue contribution driven by strong



Exchanged all remaining shares of Class B common stock for Class A common stock, which

performance of our 2020 innovation and a 39% increase in our innovation velocities; and



eliminated the non-controlling interest reported on the consolidated statement of operations and

Exchanged all remaining shares of Class B common stock for Class A common stock, which



simplified the capital structure.

eliminated the non-controlling interest reported on the consolidated statement of operations and

simplified the capital structure.

Rooted in our core values, our team rose to the occasion and delivered in an uncertain and changing

environment brought on by COVID-19. Over the course of the year, we made strategic decisions to

Rooted in our core values, our team rose to the occasion and delivered in an uncertain and changing

enhance our portfolio and focus on higher margin growth opportunities. Such actions are paying off as

environment brought on by COVID-19. Over the course of the year, we made strategic decisions to

shown by an overall expansion of our margins. We achieved this through the execution of the

enhance our portfolio and focus on higher margin growth opportunities. Such actions are paying off as

margin-accretive Voortman acquisition, strong growth of our Hostess® brand and an invigorated focus

shown by an overall expansion of our margins. We achieved this through the execution of the

margin-accretive Voortman acquisition, strong growth of our Hostess® brand and an invigorated focus

on the development of key ESG initiatives.

Our development in high growth sub-segments of snacking where we have leading market positions

consistently drives growth ahead of the category and gives us the confidence that we can achieve

Our development in high growth sub-segments of snacking where we have leading market positions

significant growth in innovation revenue as we bring differentiated ideas to market. We are pleased that

consistently drives growth ahead of the category and gives us the confidence that we can achieve

we delivered for our consumers, customers and investors and are well positioned to continue this

significant growth in innovation revenue as we bring differentiated ideas to market. We are pleased that

we delivered for our consumers, customers and investors and are well positioned to continue this

strong momentum and performance.

As we turn to fiscal year 2021, we are confident we will continue our sustainable, profitable growth

momentum and stockholder value creation over the long term behind our strong execution, high

penetration in growing consumer segments, expansion of Voortman and ability to deleverage with our

strong cash flow, while continuing to focus on key operational and ESG initiatives.

Andrew P. Callahan

President & Chief Executive Officer

$1 Billion

2020 Annual

$1 Billion

2020 Annual

Net Revenue

$240

Million

2020 Annual

Adjusted EBITDA

$159 Million

2020 Annual

Operating Cash

Flow

Olu Beck
Independent Director
Olu Beck
Chief Executive Officer of the Beck Group NJ LLC
Independent Director
Chief Executive Officer of the Beck Group NJ LLC

Laurence Bodner
Laurence Bodner
Independent Director
Independent Director
Chief Executive Officer of Bulletproof 360, Inc.
Chief Executive Officer of Bulletproof 360, Inc.

Gretchen R. Crist
Gretchen R. Crist
Independent Director
Independent Director
Managing Director, Consumer Goods and Services,
Managing Director, Consumer Goods and Services,
for RSR Partners, Inc.
for RSR Partners, Inc.

Rachel P. Cullen
Rachel P. Cullen
Independent Director
Independent Director
Former President and Chief Executive Officer of Ruiz
Former President and Chief Executive Officer of Ruiz
Food Products Inc.
Food Products Inc.

Hugh G. Dineen
Hugh G. Dineen
Independent Director
Independent Director
Former Senior Vice President and Chief Marketing
Former Senior Vice President and Chief Marketing
Officer of MetLife US and MetLife Global Investment
Officer of MetLife US and MetLife Global Investment
Management
Management

Ioannis Skoufalos
Independent Director
Former Global Product Supply Officer of The Procter
& Gamble Co.

Craig D. Steeneck
Independent Director
Former Executive Vice President and Chief Financial
Officer of Pinnacle Foods Inc.

INDEPENDENT REGISTERED PUBLIC
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
ACCOUNTING FIRM
KPMG LLP
KPMG LLP
1000 Walnut
1000 Walnut
Suite 1100
Suite 1100
Kansas City, MO 64106
Kansas City, MO 64106

Note: Adjusted measures above are non-GAAP ﬁnancial measures that exclude certain items which aﬀect comparability. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and

Results of Operation in our Form 10-K/A included in this Annual Report for a reconciliation of non-GAAP ﬁnancial measures to their respective comparable GAAP measures.

WEBSITE
WEBSITE
www.hostessbrands.com
www.hostessbrands.com

EXECUTIVE OFFICERS
Andrew P. Callahan
Director, President and Chief Executive Officer

Brian T. Purcell
Chief Financial Officer
Brian T. Purcell
Chief Financial Officer

Michael J. Cramer
Chief Administrative Officer
Michael J. Cramer
Chief Administrative Officer

Andrew W. Jacobs
Chief Customer & Experience Officer

John L. Kalal
Chief Supply Chain Officer

Dan O’Leary
Dan O’Leary
Chief Growth Officer
Chief Growth Officer

Darryl P. Riley
Senior Vice President of Quality, Food Safety and R&D

Jolyn J. Sebree
General Counsel

Robert C. Weber
Chief People Officer

INVESTOR RELATIONS
Amit Sharma
asharma@hostessbrands.com
(917) 922-0211

NASDAQ LISTING
Our Class A Common Stock is listed on the NASDAQ
Capital Market under the ticker symbol: TWNK.
Warrants to purchase shares of our Class A Common
Stock are listed on the NASDAQ Capital Market under
the ticker symbol: TWNKW.

REGISTRAR AND TRANSFER AGENT
REGISTRAR AND TRANSFER AGENT
If you have a question about your account or would
If you have a question about your account or would
like to report a change in your name or address,
like to report a change in your name or address,
please contact:
please contact:

Continental Stock Transfer & Trust Company
Continental Stock Transfer & Trust Company
1 State Street
1 State Street
New York, NY 10004
New York, NY 10004
(212) 509-4000
(212) 509-4000
cstmail@continentalstock.com
cstmail@continentalstock.com

ANNUAL MEETING
ANNUAL MEETING
June 28, 2021 at 9:00 a.m. CT
June 28, 2021 at 9:00 a.m. CT
Live Online Meeting
Live Online Meeting
https://www.cstproxy.com/hostessbrands/2021
https://www.cstproxy.com/hostessbrands/2021

Outside Cover

Outside Back

Outside Front

Hostessbrands.com

Annual Report

2020