v3.8.0.1

Tax Receivable Agreement | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Tax Receivable Agreement | Tax Receivable Agreement The tax receivable agreement was entered into by the Company in connection with the Business Combination (the “Tax Receivable Agreement”) and generally provides for the payment by the Company to the Legacy Hostess Equityholders 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 Business Combination (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 Business Combination; (ii) certain tax attributes of Hostess Holdings and its subsidiaries existing prior to the Business Combination 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 Legacy Hostess Equityholders in accordance with specified percentages, regardless of the source of the applicable tax attribute. Significant inputs used to estimate the future expected payments include a cash tax savings expressed as a rate of approximately 27.5%. The following table summarizes activity related to the tax receivable agreement for the year ended December 31, 2017:
(In thousands) |  |
Balance December 31, 2016 (Successor) |  | $ | 165,384 |
Measurement period adjustments |  | (3,017 | )
Exchanges of Class B units for Class A shares |  | 12,215 |
Remeasurement due to change in state tax rate |  | 1,589 |
Remeasurement due to Tax Cuts and Jobs Act |  | (51,811 | )
Balance December 31, 2017 (Successor) |  | $ | 124,360 |
During the year ended December 31, 2017, the Company remeasured the Tax Receivable Agreement due to changes in federal and state law. The Company remeasured the Tax Receivable Agreement due to a change in state tax rate that resulted in approximately $1.6 million of expense on the consolidated statement of operations. The Company remeasured the Tax Receivable Agreement due to the Tax Reform. Tax Reform decreased the Company’s estimated cash tax savings rate from approximately 37.4% to 27.5%, primarily due to a permanent Federal tax rate reduction. This resulted in $51.8 million of benefit on the consolidated statement of operations which was reported as a component of operating income. As of December 31, 2017 the future expected payments under the Tax Receivable Agreement are as follows:
(In thousands) |
2018 | $ | 14,200 |
2019 | 7,600 |
2020 | 7,400 |
2021 | 7,200 |
2022 | 7,200 |
Thereafter | 80,760 |

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