Heinz stops saying never…

June 20, 2008

Annual report season is long gone, but 10-Ks still dribble in now and then, courtesy of companies with oddball fiscal years. One of these stragglers is H.J. Heinz (HNZ), which filed its 10-K yesterday.

In what’s probably a sign of the times, a comparison with last year’s 10-K reveals that Heinz has tightened up its disclosure about customer credit risk.

Last year Heinz said:

We closely monitor the credit risk associated with our customers and to date have never experienced significant losses.

This year, instead of saying they “have never experienced significant losses,” Heinz made the more cautious statement that they “have not experienced material losses.”

This might sound like angels dancing on the lid of a ketchup bottle, but I’d guess there’s more to it than that. The revised wording provides Heinz more leeway if some of its customers start to get (or indeed have already gotten) in financial trouble. Let’s say an important buyer of Heinz products – perhaps battered by high fuel prices, liquidity problems, or some other feature of this year’s economic summertime blues – goes belly up. The trick of the new disclosure is that this kind of event is unlikely to be legally “material” to a company like Heinz unless the numbers get pretty big.

Also, as you can see, Heinz removed the word “never” from the sentence. A word, of course, that one should never say, especially when all sorts of things are happening that were never supposed to happen — like, for instance, 500-year floods, oil at $130 dollars a barrel, and the Lakers losing an NBA final by 39 points.

And Heinz added something else to this section of the 10-K. Last year they told us a single customer was responsible for over 10% of their sales, but didn’t identify this mystery shopper. This year it revealed the name, which turns out to be…drum roll…Wal-Mart! What a surprise.

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