Glossary

Annualize: To take a measurement covering a period of less than one year, and extrapolate it to cover a full year.

Basis Point: A unit of measure equal to 1/100th of 1%.

Book Value Per Share: Another term for per share equity, or net worth. A company’s total assets minus total liabilities, divided by the number of shares of stock outstanding.

Business Group or Unit: An organizational subset of Leggett & Platt’s operations; there are currently 10 business groups and 17 business units (BUs).

Capital Expenditure (Capex): Funds used to purchase physical assets including property, plant, and equipment.

Cash Equivalents: Highly liquid assets; assets that can be readily converted into cash.

ComfortCore: Our fabric-encased innerspring coils used in hybrid and other mattresses.

Commercial Paper: Unsecured (i.e., no collateral required), unregistered short-term debt that comes due within 270 days.

Continuing Operations: The core businesses the company expects to continue to own and operate for the foreseeable future.

De-Contenting: Modifying product design to replace higher cost components with lower cost components.

Debt to Capital: An indicator of financial leverage; the ratio of long-term debt to total capitalization.

Deverticalization: Leggett & Platt’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.

Discontinued Operations: The portions of business that have been sold, disposed of, or abandoned.

Dividend: The portion of a company’s profit paid to shareholders, usually in cash.

Dividend Yield: The portion of the stock price returned to shareholders annually as dividends (equal to dividends declared divided by stock price). For example, a stock selling for $20 that pays shareholders $1.00 in annual dividends has a dividend yield of 5.0% (= 1.00 / 20.00).

EBIT: Earnings before interest and taxes.

EBIT, Adjusted: EBIT, adjusted to exclude items such as restructuring-related costs, impairments, gains or losses on sale, litigation accruals, etc. We make these adjustments to aid investors’ understanding of underlying operational profitability.

EBIT Margin: EBIT divided by sales; equal to the amount of EBIT earned per dollar of sales.

EBIT Margin, Adjusted: Adjusted EBIT divided by sales.

EBITDA: EBIT + Depreciation + Amortization.

EPS: Earnings per share. After-tax profit divided by the weighted average number of shares of stock. For instance, a company earning $6 million, with 3 million shares of stock, has an EPS of $2 per share.

EPS, Adjusted: EPS, adjusted to exclude items such as restructuring-related costs, impairments, gains or losses on sale, unusual tax items, litigation accruals, etc. We make these adjustments to aid investors’ understanding of underlying operational profitability.

Equity: Another term for net worth. A company’s total assets minus total liabilities.

Form 10-K: An annual report filed with the SEC by public corporations.

Forward-Looking Statements: Comments a company makes regarding beliefs or expectations about the future.

Free Cash Flow: Amount of cash the BU generates; equal to: EBITDA - Taxes - Capex - Change in Working Capital - Acquisitions + Divestiture Proceeds.

Geo Components: Product group that includes geotextiles, ground stabilization, geogrids, and silt fencing.

Goodwill: The premium paid for an acquisition; the amount paid in excess of the fair market value of the assets acquired.

Gross Margin: Gross profit (which is net sales less cost of goods sold) divided by net sales.

Hedge: An investment made specifically to reduce or eliminate risks related to items such as interest rates, foreign currency exchange rates, and commodity costs.

Hybrid Mattress: Mattresses that combine layers of specialty foam on top of innerspring cores.

Impairment: A reduction in the balance sheet value of assets to reflect current estimated fair value.

Innerspring: The set of steel coil springs, bound together, that form the core of approximately 85-90% of mattresses in North America.

Intangible Asset: A non-financial asset lacking physical substance; examples include goodwill, patents, trademarks, and licenses.

Inter-Segment Sales: Sales of product from one segment of the company to another (e.g., sales of wire from the Industrial Materials segment to the Residential Furnishings segment).

Letter of Credit: A bank-issued “promise to pay” that ensures sellers that the buyer will pay.

LIFO: “Last In, First Out”; an inventory accounting method that assumes the products acquired last are the first ones sold.

Long-Term Debt: Liability, such as a bond or a note, that comes due (i.e., must be repaid) more than one year into the future.

Maker/User: Leggett & Platt’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 component that enables furniture to recline, tilt, swivel, elevate, etc; usually made from steel.

Net Debt: The amount of debt remaining if all cash and cash equivalents are used to pay off debt.

Net Debt to Net Capital: A measure of financial leverage that allows meaningful comparison across periods during which cash fluctuates significantly; equal to: (Long-term Debt + Current Debt Maturities - Cash & Equivalents) / (Total Capitalization + Current Debt Maturities - Cash & Equivalents).

Net Sales: Overall sales to third parties adjusted for discounts and/or return of product. Excludes inter-segment sales.

Organic Sales Growth: Also called “same location sales growth” or “internal sales growth.” The amount of sales increase not attributable to acquisitions; i.e., in the same plants and facilities the company owned one year earlier.

Payout Ratio: The percentage of earnings that is paid to shareholders; dividends declared divided by EPS.

Portfolio Roles: Grow = Profitably grow competitively advantaged positions; Core = Maximize cash in stable, competitive positions; Fix = Rapidly improve (< 12 months); or Divest.

Return on Equity: Net earnings divided by equity; a measure of the amount earned on the investment of the stockholders.

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.

S&P 500: An index of 500 widely held large-company stocks that reflects 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 four segments.

Steel Rod: Commodity product produced at steel mills. Rod looks like a coil of thick wire and is rolled (or formed) from a billet (which is a long bar of steel). Rod is commonly used to make wire, reinforcing mesh, bolts, and nails.

Total Business Unit Return (TBR): Analogous to TSR, but at the BU level; equal to: (Change in BU Market Value + Free Cash Flow) / Initial BU Market Value.

Total Capitalization: The sum of four balance sheet items: Long-term Debt, Other Liabilities, Deferred Income Taxes, and Equity. A measure of the total amount invested in the firm by both shareholders and lenders.

Total Sales: Net sales plus inter-segment sales.

Total Shareholder Return (TSR): Total benefit investor realizes from owning our stock; equal to: (Change in Stock Price + Dividends) / Initial Stock Price.

Working Capital: Current assets less current liabilities. Sometimes modified to exclude cash and equivalents, as well as current maturities of long-term debt, to better analyze how efficiently working capital is being utilized.