EX-12 2 y57255exv12.htm EX-12: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EX-12
 

Exhibit 12
 
SCHERING-PLOUGH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
 
                                                 
    Three Months
 		                               
    Ended
 		                               
    March 31,
 		    Years Ended December 31  
    2008(1)     2007(1)     2006     2005     2004     2003  
    (Dollars in millions)  
 
Income/(loss) before income taxes
  $ 363     $ (1,215 )   $ 1,483     $ 497     $ (168 )   $ (46 )
Less: Equity income
    517       2,049       1,459       873       347       54  
                                                 
(Loss)/income before income taxes and equity income
    (154 )     (3,264 )     24       (376 )     (515 )     (100 )
Add: Fixed charges:
                                               
Preference dividends
    38       118       86       86       34       —  
Interest expense
    138       245       172       163       168       81  
One-third of rental expense
    20       52       39       37       30       30  
Capitalized interest
    5       18       13       14       20       11  
                                                 
Total fixed charges
    201       433       310       300       252       122  
Less: Capitalized interest
    5       18       13       14       20       11  
Less: Preference dividends
    38       118       86       86       34       —  
Add: Amortization of capitalized interest
    3       15       10       10       9       9  
Add: Distributed income of equity investees
    539       1,787       1,332       647       228       32  
                                                 
Earnings/(loss) before income taxes and fixed charges (other than capitalized interest)
  $ 546     $ (1,165 )   $ 1,577     $ 481     $ (80 )   $ 52  
                                                 
Ratio of earnings to fixed charges
    2.7       (2.7 )*     5.1       1.6       (0.3 )**     0.4 ***
                                                 
 
 
(1) Income/(loss) before income taxes includes the purchase accounting impacts of the OBS acquisition.
 
*  For the year ended December 31, 2007, earnings were insufficient to cover fixed charges by $1.6 billion.
 
** For the year ended December 31, 2004, earnings were insufficient to cover fixed charges by $332 million.
 
*** For the year ended December 31, 2003, earnings were insufficient to cover fixed charges by $70 million.
 
“Earnings” consist of income/(loss) before income taxes and equity income, plus fixed charges (other than capitalized interest and preference dividends), amortization of capitalized interest and distributed income of equity investees. Schering-Plough includes interest expense or interest income on unrecognized tax benefits as a component of income tax expense. “Fixed charges” consist of interest expense, capitalized interest, preference dividends and one-third of rentals, which Schering-Plough believes to be a reasonable estimate of an interest factor on leases. Total rent expense was $60 million for the three months ended March 31, 2008 and was $156 million, $118 million, $110 million, $100 million and $91 million for the years ended December 31, 2007, 2006, 2005, 2004 and 2003, respectively.


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