EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
| | | NINE MONTHS ENDED SEPTEMBER 30,
2003
| | | NINE MONTHS ENDED SEPTEMBER 30,
2002
| | | YEAR ENDED DECEMBER 31, 2002
| | | YEAR ENDED DECEMBER 31,
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| | | ACTUAL
| | | PRO- FORMA
| | | ACTUAL
| | | PRO- FORMA
| | | ACTUAL
| | | PRO- FORMA
| | | 2001
| | | 2000
| | | 1999
| | | 1998
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Pre-tax loss before minority interest and cumulative effect of accounting change | | $ | (90 | ) | | $ | (93 | ) | | $ | (48 | ) | | $ | (51 | ) | | $ | (80 | ) | | $ | (83 | ) | | $ | (150 | ) | | $ | 183 | | | $ | (509 | ) | | $ | 207 | |
Loss (earnings) on Equistar investment | | | 69 | | | | 69 | | | | 39 | | | | 39 | | | | 73 | | | | 73 | | | | 83 | | | | (45 | ) | | | 7 | | | | (56 | ) |
Cash distributions from Equistar | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 83 | | | | 75 | | | | 317 | |
Add back fixed charges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | 72 | | | | 75 | | | | 67 | | | | 70 | | | | 90 | | | | 93 | | | | 85 | | | | 80 | | | | 72 | | | | 76 | |
Rent expenses (33%) | | | 5 | | | | 5 | | | | 6 | | | | 6 | | | | 7 | | | | 7 | | | | 6 | | | | 5 | | | | 4 | | | | 4 | |
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Total fixed charges | | | 77 | | | | 80 | | | | 73 | | | | 76 | | | | 97 | | | | 100 | | | | 91 | | | | 85 | | | | 76 | | | | 80 | |
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Adjusted earnings | | $ | 56 | | | $ | 56 | | | $ | 64 | | | $ | 64 | | | $ | 90 | | | $ | 90 | | | $ | 24 | | | $ | 306 | | | $ | (351 | ) | | $ | 548 | |
Ratio of earnings to fixed charges(1) | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 3.61 | x | | | N/A | | | | 6.85 | x |
| (1) | The less than one-to-one coverage ratio for the year ended December 31, 2001 and the year ended December 31, 1999 results from the impact on (loss) income from continuing operations before income taxes and minority interest of a $36 million charge for reorganization and plant closures and a $639 million charge to write down the value of Millennium Chemicals’ investment in Equistar, respectively. Excluding these charges, the 2001 ratio of earnings to fixed charges would have been 0.7x and the 1999 ratio of earnings to fixed charges would have been 3.8x. Additional earnings of $8 million would have been required to achieve a one-to-one ratio for 2001, excluding reorganization and plant closure charges. Additional earnings of $6 million for the year ended December 31, 2002 and additional earnings of $15 million and $8 million for the nine months ended September 30, 2003 and 2002, respectively, would have been required to achieve an actual one-to-one coverage ratio. |
Additional earnings of $9 million for the year ended December 31, 2002 and additional earnings of $17 million and $10 million for the nine months ended September 30, 2003 and 2002, respectively, would have been required to achieve a pro forma one-to-one coverage ratio.
