How The Globe 100 is determined

Correction: The Globe 100 section contained errors in three charts. Because of an editing error, the Globe National 25 chart incorrectly listed 2005 revenue for eight companies. The companies, and their correct 2005 revenue, are: Sovereign Bancorp, $2.1 billion; Verizon Communications, $75.1 billion; Royal Bank of Scotland, $44.5 billion; Sears Holdings Corp., $49.1 billion; McDonald's Corp., $20.5 billion; Securitas AB, $8.3 billion; Fortune Brands, $6.7 billion; and Whole Foods Market, $5.0 billion. Because of an editing error, Cynosure was mistakenly omitted from the list of IPOs in 2005. Cynosure went public on Dec. 8 with a price of $15.00 a share. Its shares traded at $18.50 on March 31, posting a gain of 23.3 percent in that time. That gain ranked it sixth among the 16 companies that went public in Massachusetts in 2005. Finally, because of an error by Standard & Poor's Compustat, which provides the data for Globe 100, the listing for Sonesta International Hotels Corp. is incorrect in the chart of most-leveraged companies. Sonesta's debt for 2005 should have been reported as $34.1 million, giving the company a debt-to-equity ratio of 2.9, which ranked it 11th among companies in the Globe 100 universe.

The Globe 100 ranks the best-performing publicly traded corporations based in Massachusetts by how well they increased sales, profits, and returns for shareholders during 2005.

This year, for the first time, the section also includes a ranking using the same criteria -- called The Globe National 25 -- of the top performers among publicly traded corporations based outside Massachusetts that are among the 100 biggest employers in the Bay State.

Standard & Poor's, a division of McGraw-Hill Cos., gathered information on 224 Bay State companies, from sources including Securities and Exchange Commission filings, commercial news services, and corporate and government reports, as well as on 34 out-of-state companies that meet the criteria for The Globe National 25.

To be considered for The Globe 100 a company must:

Maintain its corporate headquarters in Massachusetts;

Trade its shares on the New York Stock Exchange, the Nasdaq Stock Market, or the American Stock Exchange;

Have been a public company for all of 2005;

Report revenue and profit for both 2004 and 2005.

Royalty trusts and closed-end and exchange-traded funds are excluded. Real estate investment trusts and limited partnerships are included in Globe 100 calculations, but excluded from certain other charts, such as dividend yields, because of the methods used to account for income.

Rankings are derived from financial data for the four quarters ending closest to Dec. 31, 2005, and for corresponding quarters a year earlier.

In both The Globe 100 and The Globe National 25, companies are then ranked on four criteria:

Return on average equity, a measure of how effectively shareholder money is being employed;

One-year percentage change in revenue;

One-year percentage change in profit margin;

2005 revenue.

Companies are assigned a score in each of the four categories, based on their rankings; the four scores are then added together and divided by four to calculate the composite score. Companies are ranked highest to lowest, based on composite scores. Ties are broken based on 2005 revenue.

For example, this year's top performer, Akamai Technologies Inc. of Cambridge, ranked first in return on equity; 11th in change in revenue; fourth in profit margin; and 60th in revenue, giving the company a total score of 76. Dividing the score by four gives it a composite ranking of 19.0.

Return on shareholder equity is determined by dividing 2005 net income by the average of 2004 and 2005 shareholder equity.

Revenue for banks is calculated by adding net interest income after loan-loss provisions to total noninterest income.

Profit margin is determined by dividing net income by revenue. The one-year change in profit margin is calculated by computing the percentage change in profit margin between 2004 and 2005.

Net income, or profit, equals net income from continuing operations, before extraordinary or nonrecurring items, as filed on the company's income statement. Net income reflects income available to common shareholders. If a company includes special charges, such as merger costs, in its pretax figures, the numbers will not be considered extraordinary and will be included in net income. (This occurs most often in a pooling of interests.)

Stock prices in all tables and stories have been adjusted for splits.

To be considered for the Growth 50 chart, a company must be based in Massachusetts and have been public in both 2004 and 2005. Companies are ranked by a composite score of two-year average annual sales and profit growth rates.