EX-12.1 3 dex121.txt COMPUTATION OF RATIO OF EARNINGS Exhibit 12.1 Charming Shoppes, Inc Computation of Earnings to Fixed Charges (Unaudited)
Six Months Fiscal Year Ended Ended Pro Forma Ratio (4) ------------------------------------------------------------------------------------------------------------- 1998 1999 2000 2001 2002 August 4, August 3, Fiscal Year Ended Six Months Ended 2001 2002 2002 August 3, 2002 ------------------------------------------------------------------------------------------------------------- Earnings: Pre-tax income (loss)from continuing operations (1) $ 29,422 $(30,989) $ 71,911 $ 84,652 $ (4,526) $ 37,954 $ 67,005 $ 4,810 $ 71,477 Fixed charges 34,405 34,069 33,239 44,241 66,364 22,764 42,635 57,028 38,163 ------------------------------------------------------------------------------------------------------------- Total earnings available for fixed charges (a) $ 63,827 $ 3,080 $ 105,150 $128,893 $ 61,838 $ 60,718 $ 109,640 $ 61,838 $ 109,640 ================================ Non-recurring and restructuring items (2) (13,018) 54,246 (10,171) - 37,708 - - --------------------------------------------------------------------------- Adjusted earnings (b) 50,809 57,326 94,979 128,893 99,546 60,718 109,640 =========================================================================== Fixed Charges: Interest expense $ 10,390 $ 10,052 $ 7,308 $ 8,894 $ 18,701 $ 4,771 $ 12,480 $ 9,365 $ 8,008 Interest component of operating leases 24,015 24,017 25,931 35,347 47,663 17,993 30,155 47,663 30,155 ------------------------------------------------------------------------------------------------------------- Total fixed charges (c) 34,405 34,069 33,239 44,241 66,364 22,764 42,635 57,028 38,163 ------------------------------------------------------------------------------------------------------------- Ratio of earnings to fixed charges (a)/(c) 1.86x 0.09x(3) 3.16x 2.91x 0.93x(3) 2.67x 2.57x 1.08x 2.87x ============================================================================================================= Adjusted ratio of earnings to fixed charges (b)/(c) 1.48x 1.68x 2.86x 2.91x 1.50x 2.67x 2.57x ===========================================================================
(1) During the quarter ended August 3, 2002, the Company adopted FAS 145, "Recission of FAS Statements No. 4, 44, and 64, Amendment of FAS 13, and Technical Corrections," which requires that prior-period financial statements be reclassified consistent with the new rules. During the year ended January 29, 2000, the Company had reported a $1.2 million after-tax gain on the early retirement of debt as an extraordinary item in accordance with the accounting rules in effect at that time. This gain on the retirement of debt does not qualify as an extraordinary item under the new rules; accordingly, it has been reclassified to income before the cumulative effect of an accounting change for the year ended January 29, 2000. (2) For purposes of this adjusted ratio of earnings to fixed charges, earnings represent income (loss) before cumulative effect of accounting change, restructuring charge (credit), non-recurring gain from demutualization from insurance company, fixed charges and income taxes, and fixed charges represent gross interest expense, including capitalized interest, and a share of rental expense, which is deemed to be representative of the interest factor. (3) The Company would have had to generate additional earnings of $4,526,000 in the fiscal year ended February 2, 2002 and $30,989,000 in the fiscal year ended January 30, 1999 to achieve a ratio of earnings to fixed charges of 1:1. (4) All proceeds from the offering of the notes to be registered will be received by the selling noteholders. The net proceeds received by the Company from the sales of notes to the initial purchasers were used to retire $67.5 million of term notes, redeem $6.9 million of convertible notes called for redemption and paydown $3.5 million of revolving credit debt. The remaining $67.6 million together with $16.5 million in existing cash was used to purchase $84.1 million of treasury stock. In connection with the sale of notes to the initial purchasers, the Company called for redemption all of its $96.0 million of 7.5% convertible notes due 2006. $89.1 million of those notes were converted to common stock. The pro forma ratio of earnings to fixed charges adjusts the historical ratio for the elimination of all interest expense associated with the Company's 7.5% convertible notes that were either converted or redeemed, the elimination of interest expense associated with the term debt and revolving credit borrowings which were paid, and the addition of interest expense related to $77.9 million of the 4.75% Senior Convertible Notes, which were used to redeem the 7.5% convertible notes and pay the term debt and revolving credit borrowings. Borrowings used to pay the term debt were assumed to be outstanding from August 16, 2001, when the term debt was issued. The pro forma adjustments do not include any interest expense on the amount of indebtedness used to purchase treasury stock. The pro forma ratio of earnings to fixed charges is not necessarily indicative of what the future ratio of earnings to fixed charges will be.