Electronic Design
The Method Behind Our Mathematics, 2014

The Method Behind Our Mathematics, 2014

For our Fiscal 2013 line score rankings (Fiscal 2013 vs. Fiscal 2012 data), we used a total pool of 97 public companies:

1-Data was gathered for both 2013 and 2012, mainly from company 10-K reports filed with the SEC, reflecting a company’s 2013 fiscal year. In many cases, this did not mirror the calendar year of January to December 2013.    

Changes in the company pool this year were as follows:

Deleted:

LSI Corporation (LSI) – acquired by Avago in April 2014

Tellabs Inc. (TLAB) – acquired by Marlin Equity Partners in December 2013 and merged with their Coriant business, which is a combo of Sycamore Networks Solutions and Nokia Siemens Networks Optical

Added:

SAIC (SAI) – split into two companies in October 2013 – SAIC (SAIC) and Leidos (LDOS).  Leidos was added to the list.  Leidos focuses their offerings in the national security, health, and energy vertical markets.

All $ financial data is shown in millions.

2-Employee data was mostly gathered from 10-K reports.  In the few instances where they could not be found, annual reports or company websites were used. In most cases, the 2012 data had to be gathered from the 2012 10-K report, as the previous year’s employee count is not included on the 2013 10-K for most companies.  Employee count is typically reflected as of the last day of the fiscal calendar year being reported.

When employees were broken out separately by U.S. and International, both numbers were added together as long as a comparable breakout was available for the prior comparison year.

In the case of acquisitions or divestitures, our best guess was used, so as not to severely credit or penalize a company based on year over year changes.  Employee data pertaining to the unit acquired or divested is typically not separated out for the time frames required, if available at all.

In cases where a reasonable assumption could not be made, the line score was adjusted, again in the spirit of not severely penalizing or crediting a company.

3-Sales or total revenues was gathered from 2013 10K reports. 

4-Pretax Income was gathered from 2013 10K reports where for most companies, it is reported as “Income Before Income Taxes” or with similar terminology.  The emphasis was on comparing the profit/loss generated solely by the operations of the company but to also include interest expense, which is a result of business strategy or the nature of the business.  We also wanted to be as consistent as possible across companies.

5- Pretax Income Margin is simply Pretax Income divided by Sales.

6-Long Term Debt and Stockholder’s Equity data was taken from the 2013 balance sheets, reasonably trying to include all debt of a non current nature, even though at times it is not specifically labeled “long term debt” on the balance sheet. 

With respect to stockholder’s equity, the previous year’s balance (2012) is always taken from the current year’s (2013) 10K, as prior year restatements can be made that affect that balance, unless any differences are minor.

7-Long Term Debt to Shareholder’s Equity ratio is simply the former divided by the latter.  In cases where a company has a negative stockholder’s equity position as of the balance sheet date, the resulting negative number does not have much meaning, other than a negative equity position is never a good situation.

8-2013 Total Patents Issued data was taken from a report sorted by company generated by the U.S. PATENT AND TRADEMARK OFFICE.

9-High and Closing Stock prices for 2013 were taken from Yahoo Finance for all companies.  Stock data was gathered on a calendar year basis, so the time frame may differ from that of the financial data, for those companies who don’t report on a calendar year basis. 

Closing prices (on 12/31/2013) were not adjusted for dividends and splits so as to be comparable to the “high” price.

10-Research and development expenses came mainly from a separate note contained within the 10-K or in some cases, a line on the Income Statement. Most companies do not separate R & D as a separate line on the Income Statement.

For Comcast and Verizon only, capital expenditures were used for the comparison instead of R & D, as this is more relevant for these companies.

11-Our final rankings are determined by what we call our Total Line Score.  Our line score methodology is as follows:

a-Each of the following 9 categories is ranked for each company:

Employee growth % (2013 v. 2012)  

Sales growth % (2013 v. 2012)                                                                                              

Pretax Income growth % (2013 v. 2012)                                                                               

Pretax Margin improvement Pts. (2013 v. 2012)                                                                   

LT Debt to S/H Equity Ratio Improvement Pts. (2013 v. 2012)                                          

2013 Total # of Patents Issued

Change In Total # of Patents Issued (2013 v. 2012)                                                 

2013 Stock Price Closing as a % of 2013 Stock Price High                                                  

R&D Expense change % (2013 v. 2012)       

Line score points are then given to each category ranking as follows:

Rank In A Category                          Pts. Given                                                                                   

01 - 10                                                 10                                                                               

11 - 20                                                 9                                                                                

21 - 30                                                 8                                                                                

31 - 40                                                 7                                                                                

41 - 50                                                 6                                                                                

51 - 60                                                 5                                                                                

61 - 70                                                 4                                                                                

71 - 80                                                 3                                                                                

81 - 90                                                 2                                                                                

91 - 97                                                 1

Bonus 10th Category

A maximum of 10 bonus points are given based on company responses to 5 key questions on the Electronic Design 2014 Reader Survey.  Points are accumulated based on individual employee responses to each question and then averaged by the total number of respondents for a particular company.

B5. How satisfied are you in your current position? 

a) Extremely satisfied  

b) Very satisfied  

c) Satisfied  

d) Not very satisfied  

e) Not at all satisfied

B7. Do you feel that you are being challenged intellectually with the engineering projects you work on at your present job?

a) Sufficiently challenged

b) Somewhat challenged

c) Not challenged enough

C1. To the best of your knowledge, what is the engineering employment outlook at your company in the coming year?

a) My company plans to increase the number of engineering jobs

b) My company plans to maintain the current level of engineering jobs

c) My company plans to scale back engineering staff

C4. Do you feel that your organization is more focused on employee retention this year as compared to a year ago?

a) Yes

b) No

C15. How concerned are you with the prospect of losing your job to outsourcing?

a) Very concerned  

b) Somewhat concerned  

c) Not very concerned  

d) Not at all concerned                                                                        

Maximum total line score points possible are 100. 9 categories with a maximum of 10 pts. each plus a bonus 10th category with a maximum 10 bonus points. Highest actual total equaling our #1, 2014 (based on fiscal 2013 data) ranking, was the 86 pts. awarded to SanDisk.

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