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Exhibit (12)
THE McGRAW-HILL COMPANIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years Ended December 31,
------------------------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(In thousands of dollars)
Earnings
Earnings from operations
before income tax expense,
extraordinary item (net of
taxes) and cumulative change $891,162 $605,382 $757,477 $ 691,059 $549,146
in accounting (net of taxes)
(a)(b)(c)(d)(e)
Fixed charges (f) 76,094 99,472 92,098 78,198 79,618
Capitalized interest - - - - -
-------- -------- -------- --------- --------
Total Earnings $967,256 $704,854 $849,575 $ 769,257 $628,764
======== ======== ======== ========= ========
Fixed Charges(f)
Interest expense $ 25,004 $ 57,976 $ 56,434 $ 44,953 $ 51,857
Portion of rental payments
Deemed to be interest 51,090 41,496 35,664 33,245 27,761
-------- ------- -------- --------- --------
Total Fixed Charges $ 76,094 $ 99,472 $ 92,098 $ 78,198 $ 79,618
======== ======== ======== ========= ========
Ratio of Earnings to Fixed charges:
Earnings from operations
before income tax expense,
cumulative adjustment,
extraordinary item and net of 12.7x 7.1x 9.2x 9.8x 7.9x
taxes (a)(b)(c)(d)(e)(f)
(a) 2002 includes a $14.5 million pre-tax loss on the sale of MMS
International.
(b) 2001 includes a $159.0 million provision for restructuring and asset
write-down, a $6.9 million pre-tax gain on the sale of real estate, a
$8.8 million pre-tax gain on the sale of DRI, and a $22.8 million
pre-tax charge for the write-down of certain assets, the shutdown of
Blue List and the contribution of Rational Investors.
(c) 2000 includes a $16.6 million pre-tax one-time gain on the sale of the
company's Tower Group International Division.
(d) 1999 includes a $39.7 million pre-tax one-time gain on the sale of the
company's Petrochemical publications.
(e) 1998 includes the impact from the early extinguishment of $155 million
of the company's 9.43% Notes in 1998, a $26.7 million gain on the sale
of a building at 65 Broadway and a $16.0 million charge for the
write-down of assets at the Continuing Education Center.
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(f) For purposes of computing the ratio of earnings to fixed charges,
"earnings from continuing operations before income tax expense"
excludes undistributed equity in income of less than 50%-owned
companies, primarily the Company's earnings in its 45% interest in
Rock-McGraw, Inc. The Rock-McGraw earnings over the past five years are
as follows: 2002 $13.9 million; 2001 $9.7 million; 2000 $9.9 million;
1999 $6.6 million; and 1998 $7.1 million. "Fixed charges" consist of
(1) interest on debt, and (2) the portion of the Company's rental
expense deemed representative of the interest factor in rental expense.
46