KANSAS CITY — Reflecting the successful execution of its strategy to build outs its distribution opportunities and expand through innovation and new product launches, Hostess Brands, Inc. posted strong sales and earnings for its subsidiary Hostess Holdings, L.P.
Net income attributable to Hostess Holdings in the third quarter ended Sept. 30 totaled $31,184,000, which compared with a loss of $3,860,000 in the same period a year ago. Last year’s results included a loss on extinguishment of a term loan of $18.1 million.
Net revenues in the third quarter were $196,197,000, up 24% from $158,213,000 in the same period a year ago. Hostess said the increase primarily was due to an increase in the number of cases sold as a result of increased distribution in convenience and drug channels and expanded product offerings. Hostess said Superior Cake Products, Inc., which was acquired on May 10, contributed $9.7 million in net revenues during the third quarter.
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| William D. Toler, president and c.e.o. of Hostess |
“We are very pleased with Hostess’s third-quarter financial results, which are evidence of the successful execution of our strategy to continue to build out our white space distribution opportunities and enhance our product assortment through innovation and new product development,” said William D. Toler, president and chief executive officer. “The completion of our merger with the Gores team marks an exciting milestone in Hostess’s history as we take another meaningful step forward in our business evolution. We believe Hostess has significant potential to leverage our well-established sweet baked goods brand portfolio to drive continued sales growth, profitability and value for our shareholders.”
Hostess Holdings is divided into two reportable business segments: Sweet Baked Goods, which consists of sweet baked goods sold under the Hostess and Dolly Madison brands, and Other, which consists of branded bread, buns and in-store bakery products, including Superior Cake Products.
Sweet Baked Goods revenues in the third quarter increased 13% to $173,997,000, up from $154,529,000, while Other segment revenues jumped sharply to $22,200,000 from $3,684,000.
Gross profit in the third quarter totaled $86,579,000, up 45% from $59,622,000 in the same period a year ago. After excluding a $4 million credit to recall costs related to flour and $2.6 million of incentive compensation, third-quarter gross profit was $85.2 million. Hostess said ingredient costs were higher as a percentage of net revenues for the third quarter of 2015, primarily due to the reduced available egg supplies, which pushed egg ingredient prices to record highs.
Sweet Baked Goods gross profit in the third quarter increased 36% to $79,697,000, up from $58,420,000, while Other segment profit jumped sharply to $6,882,000 from $1,202,000.
Selling, general and administrative expenses totaled $29.1 million during the quarter, up 23% from $23.7 million a year ago. Hostess said the increase primarily reflected increases in field marketing, increases in annual incentive compensation related to gains in operating performance, professional fees and the addition of Superior Cake Products.
For the nine months ended Sept. 30, net income attributable to Hostess Holdings was $77,413,000, which compared with $68,027,000 in the same period a year ago. Net revenues totaled $548,758,000, up from $473,789,000.
