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The Hillshire Brands Company (NYSE: HSH) saw its trading halted today and it did not appear to be due to the trading issues affecting so many NYSE-listed shares.  This is not the sort of news that investors want to see in a relatively new company name after a reorganization and name change.

The company issued a press release saying that it has responded to D.E MASTER BLENDERS 1753 N.V.’s announcement today that it has identified accounting irregularities and other adjustments within its Brazilian operations. D.E MASTER BLENDERS and its Brazilian operations were previously part of Sara Lee Corporation, the predecessor company to Hillshire Brands, and were spun off from Sara Lee before the end of fiscal year 2012.  The announcement stated that the required adjustments are expected to reduce its shareholders’ equity by approximately €85-95 million and result in a charge to its fiscal 2012 net results of approximately €45-55 million.  This might not sound like much for a company with a $3 billion market cap, but this is not likely what investors wanted to hear as D.E MASTER BLENDERS informed Hillshire Brands that it is conducting a comprehensive investigation related to these accounting irregularities.

Hillshire shares were down 0.4% at $25.51 at the time of the halt against a 52-week range of $21.55 to $30.76.

The additional press release comments are as follows:

As a result of the spin-off, Hillshire Brands has classified the historical results of its pre-spin international coffee and tea operations, including the affected Brazilian operations, as discontinued operations. The accounting irregularities cited are expected to impact Hillshire Brands’ historical financial statements for fiscal years 2009 through 2011 and for the first three quarters of fiscal year 2012. Hillshire Brands expects the restatement related to the Brazilian operations to impact primarily discontinued operations. The restatement is not expected to impact Hillshire Brands’ results in fiscal year 2013.

Based on the results of the D.E MASTER BLENDERS investigation to date and in accordance with the rules of the SEC, previously issued financial statements for Sara Lee Corporation’s fiscal 2009 through the third quarter of fiscal 2012 should no longer be relied upon. Hillshire Brands currently intends to file its Annual Report on Form 10-K for the 2012 fiscal year ended June 30 by the end of August, pending the conclusion by D.E MASTER BLENDERS of its investigation. Hillshire Brands currently intends to release its fourth quarter and year-end earnings on August 9, 2012, as previously announced. In light of the ongoing investigation by D.E MASTER BLENDERS, Hillshire Brands will limit its August 9th release to financial information through operating segment income.

On the surface this does not sound like a total disaster. Still, it is not at all want investors want to see.

JON C. OGG