EX-12 13 exh12_1.txt EXHIBIT 12.1
THE CHARLES SCHWAB CORPORATION EXHIBIT 12.1 Computation of Ratio of Earnings to Fixed Charges (Dollar amounts in millions, unaudited) Year Ended December 31, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations before taxes on earnings and extraordinary gain $ 645 $ 717 $ 249 $ 128 $ 1,016 ------------------------------------------------------------------------------------------------------------------------------------ Fixed charges Interest expense: Brokerage client cash balances 113 76 164 678 1,057 Deposits from banking clients 105 96 94 128 155 Long-term debt 32 35 46 55 55 Short-term borrowings 18 13 20 27 20 Other 9 20 7 22 45 ------------------------------------------------------------------------------------------------------------------------------------ Total 277 240 331 910 1,332 Interest portion of rental expense 82 87 82 88 69 ------------------------------------------------------------------------------------------------------------------------------------ Total fixed charges (A) 359 327 413 998 1,401 ------------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations before taxes on earnings, extraordinary gain and fixed charges (B) $ 1,004 $ 1,044 $ 662 $ 1,126 $ 2,417 ==================================================================================================================================== Ratio of earnings to fixed charges (B) / (A)(1) 2.8 3.2 1.6 1.1 1.7 ------------------------------------------------------------------------------------------------------------------------------------ Ratio of earnings to fixed charges excluding brokerage client interest expense(2) 3.6 3.9 2.0 1.4 4.0 ------------------------------------------------------------------------------------------------------------------------------------ (1) The ratio of earnings to fixed charges is calculated in accordance with SEC requirements. For such purposes, "earnings" consist of earnings from continuing operations before taxes on earnings, 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) 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.