v3.23.3

Debt and Lease Obligations | 9 Months Ended
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Sep. 30, 2023
Debt Disclosure [Abstract] |
Debt and Lease Obligations | Debt and Lease Obligations On June 30, 2023 (the “Closing Date”), through Hostess Brands, LLC, a wholly-owned subsidiary, the Company entered into a senior secured first lien credit agreement (the “Credit Agreement”), which included a $985 million term loan (the “Term Loan”). The Term Loan bears interest, at the Company’s option, at a variable rate per annum equal to either (x) the Term Secured Overnight Financing Rate (“Term SOFR”) (as defined in the Credit Agreement) plus an applicable margin of 2.50% or (y) an alternative base rate (“ABR”) plus an applicable margin of 1.50%. The Credit Agreement is secured on a first priority basis on substantially all of the Company’s assets and is guaranteed by certain of its subsidiaries. It is prepayable without premium or penalty at any time, except for prepayment from the proceeds of a similar term loan within six months after the Closing Date, which requires a 1% premium. The principal shall be paid at 1% of the aggregate principal amount ($9.85 million) per year, with the balance due at maturity on June 30, 2030. The proceeds from the Term Loan were used to repay, in full, the $983.2 million principal balance on the prior term loan and fund a portion of the loan fees. The Term Loan consists of a syndicate of lenders which for accounting purposes are evaluated as individual lenders. For certain lenders, a portion of the refinancing was considered a modification of the prior term loan and related fees paid to third parties of $6.8 million were expensed as costs of the modification. The total loss on the modification and extinguishment of debt was $7.5 million, which includes $0.7 million of unamortized debt premium and issuance costs. Fees of $10.8 million associated with the new borrowings were capitalized. Of the total $985.0 million Term Loan, there was $336.7 million of cash proceeds attributed to new syndicate members or existing members increasing their positions. Of the total $983.2 million prior term loan, $334.9 million of cash payments were attributed to exiting syndicate members or members decreasing their positions. A summary of the carrying value of the debt and lease obligations are as follows:
(In thousands) | September 30, 2023 |  | December 31, 2022
Term loan (7.9% as of September 30, 2023) |  |  |
2023 Term Loan principal | $ | 982,538 |  |  | $ | — |
2020 Term Loan principal | — |  |  | 983,221 |
Unamortized debt premium and issuance costs | (10,841) |  |  | (2,563) |
| 971,697 |  |  | 980,658 |
Lease obligations | 19,706 |  |  | 22,348 |
Total debt and lease obligations | 991,403 |  |  | 1,003,006 |
Less: Current portion of long term debt and lease obligations | (12,866) |  |  | (3,917) |
Long-term portion | $ | 978,537 |  |  | $ | 999,089 |
At September 30, 2023, minimum term loan repayments under the senior secured first lien credit agreement are due as follows:
(In thousands) |
2023 | $2,463 |
2024 | 9,850 |
2025 | 9,850 |
2026 | 9,850 |
2027 | 9,850 |
Thereafter | 940,675 |
Including the impact of the interest rate swap contracts, at September 30, 2023, the Company's aggregate term loans had an effective interest rate of 5.0%. Also included in the Credit Agreement is a $200 million revolving credit facility (the “Revolving Credit Facility”), which replaced the $100 million revolving credit facility previously outstanding. Interest on the Revolving Credit Facility accrues at Term SOFR plus 2.25% on the outstanding balance, with all principal due in June 2028. At September 30, 2023, there was no amount drawn on the Revolving Credit Facility. The Revolving Credit Facility contains certain restrictive financial covenants. As of September 30, 2023, the Company was in compliance with all such covenants. Leases The Company has entered into operating leases for certain properties that expire at various times through 2030. The Company determines if an arrangement is a lease at inception. At September 30, 2023 and December 31, 2022, right of use assets related to operating leases are included in property and equipment, net on the condensed consolidated balance sheets (see Note 3. Property and Equipment). As of September 30, 2023 and December 31, 2022, the Company had no outstanding financing leases. Lease liabilities for operating leases are included in the current and non-current portions of long-term debt and lease obligations on the condensed consolidated balance sheets. The table below shows the composition of lease expense:
| Three Months Ended |  | Nine Months Ended
(In thousands) | September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
Operating lease expense | $ | 1,581 |  |  | $ | 1,623 |  |  | $ | 4,837 |  |  | $ | 4,811 |
Short-term lease expense | 798 |  |  | 645 |  |  | 1,914 |  |  | 1,479 |
Variable lease expense | 404 |  |  | 403 |  |  | 1,193 |  |  | 1,176 |
| $ | 2,783 |  |  | $ | 2,671 |  |  | $ | 7,944 |  |  | $ | 7,466 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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