SEC Is Investigating Hain Celestial-Could Hain Celestial Be The Next HealthSouth?

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Summary

Hain Celestial Drops a Bomb in Final Minutes of After Hours Session.

Discloses Formal SEC Inquiry.

Faces Breach of Financial Covenants.

Shares of Hain Celestial dropped $1.93 to $36.60 in a thin after hours session late Friday.

The company discloses a formal SEC inquiry in a 10-Q filed in the final minutes of Fridays after hours session.

HAIN will not make the February 9, 2017, deadline for producing audited financials.

The Hain Celestial Group, Inc. (the “Company”) is unable to file, without unreasonable effort or expense, its Quarterly Report on Form 10-Q for the quarter ended December 31, 2016 (the “Form 10-Q”) by February 9, 2017, the original due date for such filing.

Separately, the Company voluntarily contacted the Securities and Exchange Commission (the “SEC”) in August to advise it of the Company’s delay in the filing of its periodic reports and the performance of the independent review conducted by the Audit Committee. The Company has continued to provide information to the SEC on an ongoing basis, including, among other things, the results of the independent review conducted by the Audit Committee as well as information regarding the matters described above. The SEC has issued a formal order of investigation and, pursuant to such order, the SEC issued a subpoena to the Company seeking relevant documents. The Company is in the process of responding to the SEC’s requests for information and intends to cooperate fully with the SEC.

That is a big problem for investors hoping for a buyout. Now we could be looking at survival of the company instead of a takeover.

All bets are off that the problems were contained to “certain distributors” as the company framed the problem in August in this authors opinion.

The company is now facing a default with lenders if financial statements & other related documents are not delivered by February 27, 2017. Here is an excerpt from 8K filed 12-20-2016:

The Waiver provides that the Required Lenders waive compliance with the affirmative covenants set forth in the Credit Agreement regarding timely delivery of the Company’s financial statements, projections and other related documentation (collectively, the ” Financial Deliverables “) to the Administrative Agent, until February 27, 2017. Failure by the Company to deliver the Financial Deliverables to the Administrative Agent on or prior to February 27, 2017, shall constitute an immediate event of default under the Credit Agreement.

But, but, but the bulls say the company came out and said the board completed their audit and was pleased to move forward. Does pleased mean “Oh snap this happened on our watch” and “move forward” mean find me a plane ticket to Aruba? Notice the wording from the 8K filed 11-16-16 below.

Lake Success, NY, November 16, 2016 – The Hain Celestial Group, Inc. (NASDAQ: ), a leading organic and natural products company with operations in North America, Europe and India providing consumers with A Healthier Way of Life™, announced today that the Audit Committee of the Company’s Board of Directors has concluded its independent review with external counsel into concessions with respect to certain distributors in the United States. Hain Celestial had previously announced on August 15, 2016, that during the fourth quarter of the fiscal year 2016 it had identified concessions that were granted to certain distributors in the United States and that the Audit Committee had retained independent counsel to assist in its independent review of such matter. The review, which was extensive, found no evidence of intentional wrongdoing in connection with the Company’s financial statements. Hain Celestial has begun to implement a remediation plan to strengthen its internal controls and organization.

“The Audit Committee is pleased to conclude our thorough review with independent counsel,” said Andrew R. Heyer, Chairman of the Audit Committee of Hain Celestial. “The Board of Directors believes this is an important step toward releasing the Company’s financial results.”

“Hain Celestial is committed to transparency of our financial reporting, and we are taking concrete measures to remediate as well as strengthen our internal controls. We are extremely pleased that the Company can now move forward with its reporting process as we put these challenges behind us,” said Irwin D. Simon, Founder, President and Chief Executive Officer of Hain Celestial. “Our business is uniquely aligned with consumer habits and lifestyles, and we are excited about the fiscal year 2017 launch of our five new core platforms for growth.”

Seems they would rather talk about the new platforms for growth than giving shareholders any real revelations of what is going on behind the curtain.

Why is the company just now disclosing the SEC investigation?

They have issued press releases about every 2 weeks on random things but couldn’t let this one out until late Friday evening? Chocolate yogurt is a big deal, don’t get me wrong. But something tells me the bulls in Hain Celestial would rather this bomb had dropped back in August. Saving us all the Twitter ranting about who was buying the company at a huge premium. Dreamers then, possible class action lawsuit participants now.

Anyone who has been around an earnings delay knows to not drink the gluten-free Kool-Aid, with all natural buyout flavored sweetener. Drinking that stuff is great for weight loss (and bank account loss).

As written before the bad news never comes out all at once (see original article here).

In a few days, if not already the company will have breached the financial covenants with lenders. Not a good thing. That’s when a company can go from bad to toxic as the credit ratings get slammed.

Remember HealthSouth shares dropping below .15 cents? The quarterly numbers became harder and harder to meet. Quarter after quarter it kept building pressure until it finally exploded. They just couldn’t keep the jig up. Richard Scrushy went to prison.

Is Hain doing the same? Time will tell.

See why on Monday (2-6-17) we bought the Feb 17 $34 & $33 puts.

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