1
Exhibit (12)
McGRAW-HILL, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years Ended December 31
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1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands of dollars)
Earnings
Earnings from continuing
operations before income
tax expense, cumulative
effect on prior years of
changes in accounting in
1992, and unusual charges
in 1993 and 1989(a)(b)(c) $293,243 $264,877 $255,608 $299,715 $304,046
Fixed charges 75,930 81,724 89,050 97,555 61,849
Capitalized interest (536) (836) (507) (842) (594)
-------- -------- -------- -------- --------
Total Earnings $368,637 $345,765 $344,151 $396,428 $365,301
======== ======== ======== ======== ========
Earnings from continuing
operations before income
tax expense and cumulative
effect on prior years of
changes in accounting in
1992 (b)(c) $ 63,443 $264,877 $255,608 $299,715 $ 84,046
Fixed charges 75,930 81,724 89,050 97,555 61,849
Capitalized interest (536) (836) (507) (842) (594)
-------- -------- -------- -------- --------
Total Earnings $138,837 $345,765 $344,151 $396,428 $145,301
======== ======== ======== ======== ========
Fixed Charges(b)
Interest expense $ 46,998 $ 49,935 $ 59,350 $ 68,651 $ 36,718
Portion of rental payments
deemed to be interest 28,932 31,789 29,700 28,904 25,131
-------- -------- -------- -------- --------
Total Fixed Charges $ 75,930 $ 81,724 $ 89,050 $ 97,555 $ 61,849
======== ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges:
Before unusual charges
and cumulative adjustment 4.9x 4.2x 3.9x 4.1x 5.9x
After unusual charges
but before cumulative
adjustment 1.8x 4.2x 3.9x 4.1x 2.3x
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(a) Unusual charges in 1993 totaling $229.8 million before taxes in connection
with the purchase of 50% interest in the Macmillan/McGraw-Hill School
Publishing Company owned by Macmillan for $337.5 million in cash. The
unusual charges conisted of $199.8 million primarily to adjust the
company's original investment to values established in this transaction.
This charge has been allocated primarily to goodwill and other intangibles.
In addition, the company recorded a provision of $30 million relating to
the consolidation of certain functions and systems of Macmillan/McGraw-Hill
and the company's book publishing operations.
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2
Unusual charges in 1989 total $220 million before taxes. They include the
write-down of goodwill and other intangible assets of certain acquired
units of $82 million, a provision for the shutdown of certain units and the
write- down of other non-performing units and assets of $63 million and a
reserve of $75 million for severance payments associated with staff
reductions and for other items.
(b) For purposes of computing the ratio of earnings to fixed charges, "earnings
from continuing operations before income taxes" excludes undistributed
equity in income of less than 50%-owned companies. "Fixed charges" consist
of (1) interest on debt and capital leases, (2) the portion of the
company's rental expense deemed representative of the interest factor in
rental expense, and (3) the company's proportionate share of such fixed
charges of the Macmillan/McGraw-Hill joint venture through September 30,
1993.
(c) The cumulative adjustment in 1992 reflects the adoption of FAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions",
$183.5 million pretax, and FAS 112, "Employers' Accounting for
Postemployment Benefits", $25.3 million pretax.
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