Glossary Technical glossary of financial terms and abbreviations. Imprimer A - What does « Adjusted price » mean? The price of an equity (or share or security) recalculated after adjustments for any transactions impacting capital such as stock splits or capital increases in cash. The adjustments enables analysis of the stock’s performance over time. What does « Amf – autorité des marchés financiers » mean? AMF is the Regulatory Authority of the French Stock Exchange, a product of the merger in 2002 between COB (Comité des Opérations de Bourse - Stock Exchange Transactions Committee) and CMF (Conseil des Marchés Financiers - Financial Market Council). AMF dictates the organizational and ethical rules governing the French financial marketplace. It plays a watchdog role in the protection of the investments made in securities and supervises the financial information provided to investors and shareholders. AMF also controls the rating agencies and the financial analyst community. B - What does « Blue chips (investment-grade securities) » mean? Highly sought after securities with high traded volumes. Michelin is one of the Blue chips of compartment A of CAC 40, made of capitalizations in excess of 1 billion euros. What does « Bond – fixed income security » mean? A fixed-interest security issued by companies or public organizations, to be redeemed at a pre-determined date and price. C - What does « Cac 40 » mean? Nyse Euronext Paris stock exchange index tracking 40 stocks chosen from among the 100 largest and most liquid stock market capitalizations on the regulated market. What does « Capital gain/loss » mean? The difference in value between the purchase price and the selling price of a share (or equity). What does « Confirmation slip » mean? Document sent by financial intermediaries to their customers describing the terms under which their buy or sell orders were carried out on the stock market. What does « Consensus forecast » mean? Average figures calculated on the basis of the estimates provided by the analysts covering a listed company What does « Consolidated financial statements » mean? Financial statements are used to measure the financial standing of a group of companies as though they formed an integrated whole. European companies must publish IFRS-compliant consolidated accounts (see below). What does « Corporate value » mean? Corporate value: the sum of market capitalization and of net financial debt (usually measured at market value). It is often used to assess the price of an acquisition. What does « Coupon » mean? The coupon entitles the owner of a share to receive dividends and the owner of a bond to receive interest for the financial year. What does « Custodial fees » mean? Administrative and custody service fees in connection with registered shares. Michelin’s Share Services Department’s custodial services are free of charge. D - What does « Deferred payment » mean? A facility on the SRD (Service à Réglement Différé) Nyse Euronext market that allows investors to postpone settlement of their buying (bull) or selling (bear) positions to the next monthly settlement. What does « Diluted earnings per share » mean? Net earnings per share adjusted to reflect potential dilution in the event of exercise of share subscription rights, call of options, debt conversion or other securities giving access to capital. What does « Dilution (dilutive) » mean? Net earnings per share decrease resulting from new share issues such as in a capital increase, an acquisition of, or merger with, another company, or a conversion of bonds into shares. What does « Dividend » mean? The portion of a company’s net earnings that is paid out to shareholders. As Michelin is a partnership by shares, this amount is proposed by the Managing Partners and submitted to the Shareholders’ vote at the Annual Meeting. What does « Deferred settlement market » mean? This service is reserved to the most liquid securities. In exchange for a fee it makes it possible to settle one’s stock market transactions once a month on the liquidation date. The Michelin Share may be traded in the SRD market. E - What does « Economic assets » mean? Sum of the fixed assets (net of amortization) and WCR , plus a number of other non-current assets. Capital employed is shown in the liability side of the balance sheet and corresponds to economic assets on the asset side. What does « Ebitda (earnings before interest, taxes, depreciation and amortization) » mean? EBITDA is an intermediate balance used for financial analysis purposes. It corresponds to operating income before depreciation of property, plant and equipment and amortization of intangible assets and any related impairment loss. What does « Employee shareholder plan » mean? A scheme authorized by the Annual Shareholders’ Meeting enabling a Company’s employees to acquire shares in their employer’s company on special terms. What does « Euronext 100 » mean? A Stock Exchange Index listing the first 100 stocks in terms of market capitalization and liquidity on Nyse Euronext’s pan European stock market (including Amsterdam, Brussels, Lisbon and Paris). What does « Euronext paris » mean? Euronext organises, manages and develops the securities market for the securities traded on the Paris stock exchange. It performs a market regulation role on behalf of AMF. F - What does « Free cash flow » mean? Free cash flow, which is stated before dividend payments and financing transactions, corresponds to net cash from operating activities less net cash used in investing activities, adjusted for net cash flows relating to cash management financial assets and borrowing collaterals What does « Free float » mean? The part of a company’s capital in public ownership and tradable on stock markets. The higher the free float is, the greater the liquidity of the shares. 100% of Michelin’s equity is publically held (free floating). G - What does « Gearing (debt ratio) » mean? The ratio of a company’s long-term debt to its capital. What does « Goodwill (positive goodwill) » mean? The difference between the acquisition price of a company and its book value on the date of merger. I - What does « Ifrs (international financial reporting standards) » mean? International accounting standards drawn up by IASB (International Accounting Standards Board). On January 1, 2005 IFRS became mandatory for European listed companies (for consolidated accounts only) in order to provide a common yardstick to measure their financial statements. L - What does « Liquidation date » mean? The monthly wind-up date for transactions carried out on a deferred settlement basis. The fifth Paris Stock Exchange trading session before the last trading session in a month. M - What does « Market capitalization » mean? A company’s market value at any given time, also referred to as “market cap” is equal to the last quoted share price multiplied by the number of shares outstanding. Michelin’s market capitalization at December 31, 2009 amounted to 7.90 billion euros. What does « Minority interests » mean? Portion of the capital held by investors (called minority shareholders) in the fully consolidated subsidiaries of a company. What does « Mif (marchés d’instruments financiers) (financial instruments market or fim) » mean? European directive on the financial instruments market aimed at creating an integrated financial market. Effective since November 2007, the FIM directive defines the rules for financial markets and intermediaries including investor protection rules. What does « Market capitalization » mean? A company’s market value at any given time, also referred to as “market cap” is equal to the last quoted share price multiplied by the number of shares outstanding. Michelin’s market capitalization at December 31, 2009 amounted to 7.90 billion euros. What does « Minority interests » mean? Portion of the capital held by investors (called minority shareholders) in the fully consolidated subsidiaries of a company. What does « Mif (marchés d’instruments financiers) (financial instruments market or fim) » mean? European directive on the financial instruments market aimed at creating an integrated financial market. Effective since November 2007, the FIM directive defines the rules for financial markets and intermediaries including investor protection rules. N - What does « Net earnings per share – eps » mean? The consolidated net Group share of income divided by the number of capital shares. What does « Net financial debt » mean? Interest-bearing debt less investments and securities available for sale. What does « Net income » mean? Corporate profit or loss after tax. Net result Group share excludes the portion of net result which is attributable to minority interests. What does « Non-recurring income and expenses » mean? Net amount of significant operating income components which are not part of day-to-day operations, are one-off or unusual. What does « Net income per share » mean? Net earnings Group share divided by the average number of shares during the period. Financial analysts use this ratio either to assess a company’s performance over time, or to compare the relative performance of companies in a given sector. This is also used to calculate PER. O - What does « Operating margin » mean? Operating income divided by net sales before tax. What does « Operating income » mean? Net result before financial result, tax and the Group’s share in associated companies. P - What does « Per (price earning ratio) – net income capitalization ratio » mean? The share price/net earnings per share ratio enables a comparison of the relative value of equities of different companies. What does « Pay-out ratio » mean? Percentage of net earnings distributed to shareholders as dividends. What does « Par value » mean? The stated share face value in the Company’s Bylaws. The Company’s share capital is the par value of the share multiplied by the number of shares outstanding. The par value of the Michelin share is 2 euros. Q - What does « Quotation » mean? Price of a marketable security resulting from the current bid price and ask price at a given time. What does « Quorum » mean? The minimum percentage of voting shares represented by attending shareholders or by proxy vote certificates legally needed for a Shareholders’ Meeting to be held validly. R - What does « Roa (return on assets) » mean? Operating income divided by economic assets. What does « Roce = return on capital employed » mean? Return on capital employed is measured as follows: • net operating profit after tax (NOPAT)(1), calculated at a standard tax rate of 25%, corresponding to the Group's average effective tax rate; divided by average economic assets employed during the year (2), i.e., all of the Group’s intangible assets, property, plant and equipment, loans and deposits, investments in equity-accounted companies, and net working capital requirement. (1) NOPAT = Segment operating income + amortization of acquired intangible assets + the Group’s share of profit from equity-accounted companies. (2) Average between the opening and closing balance sheets for the year. S - What does « Shareholders’ equity – own funds (before or after dividend distribution), shareholders’ funds » mean? Include the shares outstanding and the cumulated retained earnings for the previous financial years plus : - earnings for the financial year (before dividend pay out) - the portion of net income for the year retained in reserves (after dividend pay out). What does « Stock market index » mean? Reference used to measure the changes in performance of securities and representing the average (plain or weighted) of the share prices of the basket of securities selected in a given market or sector. What does « Socially responsible investment (sri) » mean? Socially Responsible Investment (SRI) involves weighing the social and/or environmental issues along with the financial objectives before reaching any investment decision. This investment approach aims at increasing social corporate accountability. Michelin is rated by multiple major ISR agencies: SAM and Stoxx for DJSI (world and Europe), Ethibel for ESI and VIGE O for ASPI Eurozone. What does « Split » mean? The split consists in increasing the number of Michelin shares in circulation, which mechanically decreases the share price. What does « Stock options » mean? Profit sharing scheme based on an option given to executive or non executive employees to buy or subscribe to a limited amount of shares of the company at a fixed price, with the beneficiaries being able to call their option from a given date. What does « Share or stock » mean? A tradable security held by a shareholder and representing a portion of a company’s capital. Shares carry a number of rights including: information, voting (at the Annual Shareholders’ Meeting) and financial (dividends, pre-emptive subscription rights, et al). Shares may be either registered or bearer shares. What does « Share turnover rate » mean? Number of shares traded during the financial year divided by the average number of shares issued. T - What does « Treasury stock » mean? Shares held by a company in its own capital. Treasury stock does not carry any voting or dividend rights. Michelin held no treasury stock at December 31, 2009. What does « Takeover bid, exchange offer » mean? Operation whereby a company (the “bidder”) offers publically to the shareholders of another listed company to purchase (takeover bid) their shareholdings for a price in cash or to exchange their shareholdings (exchange offer) for securities issued by it. What does « Tsr (total shareholder return) » mean? Dividends collected plus or less the change in share value divided by the acquisition price. V - What does « Volatility » mean? Share price variation rate compared with overall market trends. Y - What does « Yield » mean? Dividend per share/market price ratio. Subscribe Read more Regulatory Information and publications Read more