EXHIBIT 12.1
THE CHARLES SCHWAB CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before taxes on earnings (loss) and extraordinary gain $(26) $253 $138 $ 765
Fixed charges
Interest expense:
Brokerage client cash balances 195 263 460 504
Deposits from banking clients 34 38 74 73
Long-term debt 14 15 29 25
Stock-lending activities 5 11 14 24
Short-term borrowings 5 4 10 7
Other 4 2 3
- ------------------------------------------------------------------------------------------------------------------------------
Total 257 331 589 636
Interest portion of rental expense 23 18 46 34
- ------------------------------------------------------------------------------------------------------------------------------
Total fixed charges (A) 280 349 635 670
- ------------------------------------------------------------------------------------------------------------------------------
Earnings before taxes on earnings and extraordinary
gain and fixed charges (B) $254 $602 $773 $1,435
==============================================================================================================================
(2)
Ratio of earnings to fixed charges (B) / (A) (1) .9 1.7 1.2 2.1
Ratio of adjusted operating earnings (3) to fixed charges:
Ratio of adjusted operating earnings to fixed charges 1.5 1.9 1.5 2.3
Ratio of adjusted operating earnings to fixed charges excluding
brokerage client interest expense (4) 2.8 4.8 3.0 6.2
(1) The ratio of earnings to fixed charges is calculated in accordance with SEC requirements. For such purposes,
"earnings" consist of earnings (loss) before taxes on earnings (loss) and extraordinary gain and fixed charges.
"Fixed charges" consist of interest expense as listed above, including one-third of rental expense, which is
estimated to be representative of the interest factor.
(2) The amount of the deficiency in the ratio of earnings to fixed charges was $26 million for the three months
ended June 30, 2001.
(3) Adjusted operating earnings exclude: restructuring and other charges of $145 million for each of the three and
six months ended June 30, 2001; merger- and acquisition-related charges of $30 million and $71 million for the
three months ended June 30, 2001 and 2000, respectively, and $60 million and $95 million for the six months ended
June 30, 2001 and 2000, respectively.
(4) Because interest expense incurred in connection with payables to brokerage clients is completely offset by
interest revenue on related investments and margin loans, the Company considers such interest to be an operating
expense. Accordingly, the ratio of earnings to fixed charges excluding brokerage client interest expense reflects
the elimination of such interest expense as a fixed charge.