1
Exhibit 12.1
WorldCom,Inc.
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
Year Ended December 31,
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1990 1991 1992 1993 1994
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Earnings:
Pretax Income (loss) from continuing operations 61,645 65,646 20,401 198,237 (76,108)
Fixed charges, net of capitalized interest 38,109 38,116 38,720 58,999 87,455
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Earnings 99,754 103,762 59,121 257,236 11,347
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Fixed charges:
Interest expense 32,635 31,595 30,311 35,557 47,303
Interest capitalized 2,647 2,900 3,504 3,100 1,900
Amortization of financing costs 984 1,018 1,464 1,792 2,086
Interest factor of rent expense 4,490 5,503 4,833 9,967 10,300
Preferred dividend requirements - - 2,112 11,683 27,766
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Fixed charges 40,756 41,016 42,224 62,099 89,355
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Deficiency of earnings to fixed charges - - - - (78,008)
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Ratio of earnings to combined fixed
charges and preferred stock dividends 2.45:1 2.53:1 1.40:1 4.14:1 0.13:1
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Nine Months Ended
Pro Forma September 30,
Fiscal Year -----------------
1994 1994 1995
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Earnings:
Pretax Income (loss) from continuing operations (151,303) 31,428 276,151
Fixed charges, net of capitalized interest 276,506 59,900 239,461
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Earnings 125,203 91,328 515,612
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Fixed charges:
Interest expense 222,568 34,298 189,392
Interest capitalized 1,900 455 3,221
Amortization of financing costs 9,586 1,037 5,574
Interest factor of rent expense 16,586 3,737 11,809
Preferred dividend requirements 27,766 20,828 32,686
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Fixed charges 278,406 60,355 242,682
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Deficiency of earnings to fixed charges (153,203) - -
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Ratio of earnings to combined fixed
charges and preferred stock dividends 0.45:1 1.51:1 2.12:1
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See notes to computation of ratio of earnings to combined fixed charges and
preferred stock dividends.
2
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(1) On January 5, 1995, the Company completed the acquisition of Williams
Telecommunications Group, Inc. for approximately $2.5 billion in cash
(the "WilTel Acquisition"). The WilTel Acquisition is being accounted
for as a purchase.
(2) As a result of the mergers with IDB Communications Group, Inc. (the
"IDB Merger") and Advanced Telecommunications Corporation (the "ATC
Merger"), the Company initiated plans to reorganize and restructure
its management and operational organization and facilities to
eliminate duplicate personnel, physical facilities and service
capacity, to abandon certain products and marketing activities, and to
further take advantage of the synergy available to the combined
entities. Also, during the fourth quarter of 1993, plans were
approved to reduce IDB Communications Group, Inc.'s cost structure and
to improve productivity. Accordingly, in 1994, 1993 and 1992, the
Company charged to operations the estimated costs of such
reorganization and restructuring activities, including employee
severance, physical facility abandonment and duplicate service
capacity. These costs totaled $43.7 million in 1994, $5.9 million in
1993 and $79.8 million in 1992.
Also, during 1994 and 1992, the Company incurred direct merger costs
of $15.0 million and $7.3 million, respectively, related to the IDB
Merger (in 1994) and the ATC Merger (in 1992). These costs include
professional fees, proxy solicitation costs, travel and related
expenses and certain other direct costs attributable to these mergers.
(3) In connection with certain debt refinancing, the Company recognized in
1993 and 1992 extraordinary items of approximately $7.9 million and
$5.8 million, respectively, net of income taxes, consisting of
unamortized debt discount, unamortized issuance cost and prepayment
fees.
(4) In the third quarter of 1995, Metromedia Company ("Metromedia")
converted its Series 1 Preferred Stock into 21,876,976 shares of
WorldCom common stock and exercised warrants to acquire 3,106,976
shares of WorldCom common stock and immediately sold its position of
30,849,548 shares of WorldCom common stock in a public offering. In
connection with the preferred stock conversion, WorldCom made a
one-time non-recurring payment of $15.0 million to Metromedia,
representing a discount to the minimum nominal dividends that would
have been payable on the Series 1 Preferred Stock prior to the
September 15, 1996 optional call date of approximately $26.6 million
(which amount includes an annual dividend requirement of $24.5
million plus accrued dividends to such call date).