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04 Annual Report >> Glossary

Glossary     Annualize: Take a measurement covering a period of less than one year, and extrapolate it to cover a full year. Bolt-On: An acquisition, usually fairly small, that is quite similar to existing operations, and can therefore easily be integrated into (or “bolted on” to) an existing business unit. Most of Leggett’s acquisitions are “bolt-ons”. Book Value per share: Another term for per share shareholder equity, or net worth. The company’s total assets minus total liabilities, divided by the number of shares of stock. Business Group or Unit: An organizational subset of Leggett’s operations; there are currently 10 business groups and 29 business units. Capital Expenditure: Funds used to purchase physical assets including property, plant, and equipment. Cash Equivalents: Highly liquid assets; assets that can be readily converted into cash. Credit Rating: An evaluation of a company’s ability to repay debt. Ratings are issued by Moody’s, S&P, and Fitch. Investors and analysts use these ratings to assess the risk of an investment. Commercial Paper: Unsecured (i.e. no collateral required), unregistered short-term debt that typically comes due within 270 days. Debt To Cap: An indicator of financial leverage; the ratio of long-term debt to total capitalization. Companies with significant cash positions will often calculate Net Debt to Cap, which modifies the figures as if cash had been used (first) to repay current maturities of long term debt and (second) to reduce long term debt. Deverticalization: Leggett’s term for encouraging customers to cease making their own components. Leggett becomes their component supplier, freeing them to concentrate on retailing, marketing and assembly. Die Casting: Process for producing engineered parts by forcing molten metal under high pressure into reusable steel molds (called dies). Dividend: The portion of a company’s profit paid (usually in cash) to shareholders. Dividend Yield: The fraction of the stock price returned to shareholders annually as dividends (equals dividends paid divided by stock price). A stock selling for $30 that pays shareholders $.60 in annual dividends has a dividend yield of 2.0% (= 0.60 / 30.00). EBIT: Earnings before interest and taxes. EBIT Margin: EBIT divided by sales, equals the amount of EBIT earned per dollar of sales. EPS: Earnings per share. A company’s after-tax profit divided by the number of shares of stock. If a company earning $6 million had 3 million shares of stock, its EPS would be $2 per share. Weighted average number of shares is often used. Form 10-K: An annual report filed with the SEC by all corporations having at least 500 shareholders and assets of over $10 million. Fortune 500: Fortune magazine’s listing of the top 500 U.S. corporations, ranked by annual sales. Forward Looking Statements: Comments the company makes regarding beliefs or expectations about the future. Goodwill: The premium paid for an acquisition; value in excess of the readily apparent fair market value of the assets acquired. Gross Margin: Gross profit (which is net sales less cost of goods sold) divided by net sales. Innerspring: The set of steel coil springs, bound together, that form the core of about 90% of mattresses in North America. Intangible Asset: A non-financial asset lacking physical substance; examples include goodwill, patents, trademarks and licenses. Interest Rate Swap: Agreement under which two parties agree to exchange one type of interest rate cash flows for another. One party typically pays a fixed interest amount, but receives variable payments computed using a published index. Inter-segment Sales: Sales of product from one segment of the company to another (e.g. sales of wire from Leggett’s Industrial Materials segment to the Residential Furnishings segment). LIFO: Stands for “Last In, First Out”; an inventory accounting method that assumes the products acquired last are the ones sold first. Long-Term Debt: Liability (e.g. bond or note) that comes due (i.e. must be repaid) more than one year into the future. Maker/User: Leggett’s term for a customer that makes its own components for use in the assembly of a product it manufactures. Motion Mechanism: The highly-engineered (usually steel) component that enables furniture to recline, tilt, swivel, elevate, etc. Net Debt: The amount of debt remaining if all cash and cash equivalents are used to pay off debt. Net Margin: Net earnings divided by net sales; a measure of after-tax profitability per dollar of sales. Also called net earnings margin. Net Sales: Overall sales to third parties adjusted for discounts and/or return of product. Excludes inter-segment sales. One Stop Supplier: A vendor that can provide the full variety of products the customer needs, enabling the customer to deal with only one supplier, rather than having to deal with many separate manufacturers. Organic Sales Growth: Also called same location sales growth. The amount of sales increase not attributable to acquisitions. Sales growth that comes from the same plants and facilities that the company owned one year earlier. Point-of-Purchase Display: Temporary or semi-permanent, brand-specific, promotional exhibit located in a retail store. Revolving Credit: Contractual agreement to loan up to a specified amount of money, for a specified period of time; any amounts repaid can be borrowed again. Return On Shareholders’ Equity: Net earnings divided by shareholders’ equity; a measure of the amount earned on the investment of the stockholders. Return On Total Capital: The sum of (net earnings + after-tax interest expense) divided by total capitalization; a measure of the amount earned on the investment of both the stockholders and the debt holders.S&P 500: An index of 500 widely-held large-company stocks that measures the general performance of the U.S. stock market. S&P 500: An index of 500 widely-held large-company stocks that measures the general performance of the U.S. stock market. Same Location Sales Growth: See “Organic Sales Growth.” Segment: A major subset of the company’s operations that contains business groups and units. Leggett reports results in five segments. Shareholders’ Equity: Another term for net worth. The company’s total assets minus total liabilities. Shelf Registration: SEC rule that allows a company to comply with registration requirements up to two years prior to issuing debt or equity; once filed, the shelf allows the company to issue securities as conditions become favorable. Store Fixture: Shelving, display case, rack, cart, kiosk, partition, or cabinet used to hold or present a product in a retail environment. Steel Rod: Commodity product produced at steel mills. Rod looks like a coil of thick wire, is rolled (or formed) from a billet (a long bar of steel), and is commonly used to make wire, bolts and nails. Leggett is the largest consumer of steel rod in the U.S. Total Capitalization: The sum of four items on the balance sheet: long-term debt, other liabilities, deferred income taxes, and shareholder’s equity. In essence it is a measure of the total amount invested in the firm by both shareholders and lenders Total Sales: Net sales plus inter-segment sales. Working Capital: The strict accounting definition is: current assets less current liabilities. Many companies, including Leggett, exclude cash and equivalents, and current maturities of long term debt, when analyzing how efficiently working capital is being utilized.