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Nasdaq Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 8, 2012 11:26AM
Nasdaq (NDAQ) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:We have a profit-sharing contribution feature to our 401(k) Plan which allows eligible U.S. employees to receive employer retirement contributions, or ERCs, if we meet annual corporate goals. In addition, we have a supplemental ERC for select highly compensated employees whose ERCs are limited by the annual Internal Revenue Service compensation limit. ERC expense recorded in compensation and benefits expense in the Condensed Consolidated Statements of Income was immaterial for the three months ended March 31, 2012 and $1 million for the three months ended March 31, 2011.
The 3.75% convertible notes are accounted for under the if-converted method, as we previously have settled the convertible notes in shares of our common stock. For the three months ended March 31, 2012 and 2011, all of the shares underlying the outstanding 3.75% convertible notes were included in the computation of diluted earnings per share, as their inclusion was dilutive.
The 2.50% convertible senior notes are accounted for under the treasury stock method as it is our intent and policy to settle the principal amount of the notes in cash. Based on the settlement structure of the 2.50% convertible senior notes, which permits the principal amount to be settled in cash and the conversion premium to be settled in shares of our common stock or cash, we will reflect the impact of the convertible spread portion of the convertible notes in the diluted calculation using the treasury stock method. For the three months ended March 31, 2012 and 2011, the conversion spread of our 2.50% convertible senior notes was out of the money, and as such, they were properly excluded from the computation of diluted earnings per share.
European listing services revenues decreased in the first quarter of 2012 compared with the same period in 2011 primarily due to an unfavorable impact from foreign exchange of $1 million. European listing services revenues are recognized ratably over a 12-month period.
NASDAQ OMXs income tax provision was $53 million in the first quarter of 2012 compared with $49 million in the first quarter of 2011. The overall effective tax rate was 39% in the first quarter of 2012 and 32% in the first quarter of 2011. The increase in the effective tax rate in the first quarter of 2012 when compared to the same period in 2011 was primarily due to the asset impairment related to our equity interest in EMCF, for which we are not able to recognize a tax benefit, as well as a change in the geographic mix of earnings and losses. Furthermore, in the first quarter of 2012, we recorded significant adjustments related to our 2005-2010 tax return liabilities which resulted in an increase to the tax provision.
Stocks Discussed: NDAQ,