COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges, the ratio of earnings to combined fixed charges and preferred stock dividends, as well as any deficiency of earnings are determined using the following applicable factors:
Earnings available for fixed charges are calculated first, by determining the sum of: (a) income (loss) from continuing operations before income taxes and equity income; (b) distributed equity income; (c) fixed charges, as defined below; and (d) amortization of capitalized interest, if any. From this total, we subtract capitalized interest and net income attributable to noncontrolling interests.
Fixed charges are calculated as the sum of: (a) interest costs (both expensed and capitalized); (b) amortization of debt expense and discount or premium relating to any indebtedness; and (c) that portion of rental expense that is representative of the interest factor.
Preferred stock dividends used in the ratio of earnings to combined fixed charges and preferred stock dividends consist of the amount of pre-tax earnings required to cover dividends paid on our Series A convertible preferred stock.
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (in millions) | | 2015 | | 2014 | | 2015 | | 2014 |
| Fixed Charges: | | | | | | | | |
| Interest expense | | $ | 88 |
| | $ | 92 |
| | $ | 267 |
| | $ | 288 |
|
| Capitalized interest | | — |
| | 1 |
| | — |
| | 3 |
|
| Portion of rental expense which represents interest factor | | 45 |
| | 68 |
| | 181 |
| | 203 |
|
| Total Fixed Charges | | $ | 133 |
| | $ | 161 |
| | $ | 448 |
| | $ | 494 |
|
| Earnings Available for Fixed Charges: | | | | | | | | |
| Pre-tax (loss) income | | $ | (173 | ) | | $ | 286 |
| | $ | 102 |
| | $ | 858 |
|
| Add: Distributed equity income of affiliated companies | | 3 |
| | 7 |
| | 32 |
| | 42 |
|
| Add: Fixed charges | | 133 |
| | 161 |
| | 448 |
| | 494 |
|
| Less: Capitalized interest | | — |
| | (1 | ) | | — |
| | (3 | ) |
| Less: Net income-noncontrolling interests | | (3 | ) | | (6 | ) | | (13 | ) | | (17 | ) |
| Total (Loss) Earnings Available for Fixed Charges | | $ | (40 | ) | | $ | 447 |
| | $ | 569 |
| | $ | 1,374 |
|
| Ratio of Earnings to Fixed Charges | | * |
| | 2.78 |
| | 1.27 |
| | 2.78 |
|
| | | | | | | | | |
| Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends: | | |
| Fixed Charges: | | | | | | | | |
| Interest expense | | $ | 88 |
| | $ | 92 |
| | $ | 267 |
| | $ | 288 |
|
| Capitalized interest | | — |
| | 1 |
| | — |
| | 3 |
|
| Portion of rental expense which represents interest factor | | 45 |
| | 68 |
| | 181 |
| | 203 |
|
| Total Fixed Charges before preferred stock dividends pre-tax income requirements | | 133 |
| | 161 |
| | 448 |
| | 494 |
|
| Preferred stock dividends pre-tax income requirements | | 10 |
| | 10 |
| | 29 |
| | 29 |
|
| Total Combined Fixed Charges and Preferred Stock Dividends | | $ | 143 |
| | $ | 171 |
| | $ | 477 |
| | $ | 523 |
|
| Earnings Available for Fixed Charges: | | | | | | | | |
| Pre-tax (loss) income | | $ | (173 | ) | | $ | 286 |
| | $ | 102 |
| | $ | 858 |
|
| Add: Distributed equity income of affiliated companies | | 3 |
| | 7 |
| | 32 |
| | 42 |
|
| Add: Fixed charges before preferred stock dividends | | 133 |
| | 161 |
| | 448 |
| | 494 |
|
| Less: Capitalized interest | | — |
| | (1 | ) | | — |
| | (3 | ) |
| Less: Net income-noncontrolling interests | | (3 | ) | | (6 | ) | | (13 | ) | | (17 | ) |
| Total (Loss) Earnings Available for Fixed Charges and Preferred Stock Dividends | | $ | (40 | ) | | $ | 447 |
| | $ | 569 |
| | $ | 1,374 |
|
| Ratio of Earnings to Fixed Charges and Preferred Stock Dividends | | * |
| | 2.61 |
| | 1.19 |
| | 2.63 |
|
* Earnings for the three months ended September 30, 2015 were inadequate to cover fixed charges by $173 and fixed charges and preferred dividends by $183.
Note: The ratio for the three and nine months ended September 30, 2014 have been restated to reflect the sale of our ITO business which was held for sale and reported as a discontinued operation at December 31, 2014 and up to its sale on June 30, 2015. Refer to Note 5 - Divestitures in the Condensed Consolidated Financial Statements for additional information regarding this sale.
