NDAQ » Topics » Deferred Tax Liability

These excerpts taken from the NDAQ 10-K filed Feb 27, 2009.

Deferred Tax Liability

 

An $11.3 million current deferred tax liability and a $466.1 million non-current deferred tax liability (total deferred tax liability of $477.4 million) has been set up against the $1,207.1 million increase in value of OMX AB’s intangible assets outlined in the table above. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($1,207.1 million) and the tax basis ($0) of such assets. The estimated amount of $477.4 million is determined by multiplying the difference of $1,207.1 million by the U.S. marginal tax rate of 39.55%.

 

Deferred Tax Liability

 

An $11.3 million current deferred tax liability and a $466.1 million non-current deferred tax liability (total deferred tax liability of
$477.4 million) has been set up against the $1,207.1 million increase in value of OMX AB’s intangible assets outlined in the table above. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned
fair value of the acquired intangible assets ($1,207.1 million) and the tax basis ($0) of such assets. The estimated amount of $477.4 million is determined by multiplying the difference of $1,207.1 million by the U.S. marginal tax rate of 39.55%.

 

Deferred Tax Liability

 

A $5.0 million current deferred tax liability and a $149.0 million non-current deferred tax liability (total deferred tax liability of $154.0 million) has been set up against the $336.8 million value of PHLX’s assets outlined in the above table. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($336.8 million) and the tax basis ($0) of such assets. The estimated amount of $154.0 million is determined by multiplying the difference of $336.8 million by the PHLX U.S. effective tax rate of 45.72%.

 

Deferred Tax Liability

 

A $24.9 million deferred tax liability has been set up against the $89.1 million value of the intangible assets acquired in the Nord Pool transaction outlined in the above table. The deferred tax liability represents the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($89.1 million) and the tax basis ($0) of such assets. The estimated amount of $24.9 million is determined by multiplying the difference of $89.1 million by the effective tax rate of 28.0%.

 

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The NASDAQ OMX Group, Inc.

 

Notes to Consolidated Financial Statements—(Continued)

 

Deferred Tax Liability

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A $24.9 million deferred tax liability has been set up against the $89.1
million value of the intangible assets acquired in the Nord Pool transaction outlined in the above table. The deferred tax liability represents the tax effect of the difference between the estimated assigned fair value of the acquired intangible
assets ($89.1 million) and the tax basis ($0) of such assets. The estimated amount of $24.9 million is determined by multiplying the difference of $89.1 million by the effective tax rate of 28.0%.

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The NASDAQ OMX Group, Inc.

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Notes to Consolidated Financial Statements—(Continued)

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This excerpt taken from the NDAQ 10-Q filed Nov 7, 2008.

Deferred Tax Liability

A $0.1 million current deferred tax liability and a $21.4 million non-current deferred tax liability (total deferred tax liability of $21.5 million) has been set up against the $52.3 million value of BSX’s assets outlined in the above table. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($52.3 million) and the tax basis ($0) of such assets. The estimated amount of $21.5 million is determined by multiplying the difference of $52.3 million by the BSX U.S. effective tax rate of 41.2%.

This excerpt taken from the NDAQ 10-Q filed Aug 8, 2008.

Deferred Tax Liability

An $11.8 million current deferred tax liability and a $730.9 million non-current deferred tax liability (total deferred tax liability of $742.7 million) has been set up against the $1,952.5 million increase in value of OMX’s assets outlined in the table under intangible assets above. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($1,877.8 million) and the tax basis ($0) of such assets. The estimated amount of $742.7 million is determined by multiplying the difference of $1,877.8 million by the U.S. marginal tax rate of 39.55%.

 

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This excerpt taken from the NDAQ 10-Q filed May 9, 2008.

Deferred Tax Liability

An $18.4 million current deferred tax liability and a $789.0 million non-current deferred tax liability (total deferred tax liability of $807.4 million) has been set up against the $2,116.1 million increase in value of OMX’s assets outlined in the table under intangible assets above. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($2,041.4 million) and the tax basis ($0) of such assets. The estimated amount of $807.4 million is determined by multiplying the difference of $2,041.4 million by the U.S. marginal tax rate of 39.55%.

This excerpt taken from the NDAQ 8-K filed May 2, 2008.

Deferred Tax Liability

A $18.4 million current deferred tax liability and a $789.0 million non-current deferred tax liability (total deferred tax liability of $807.4 million) has been set up against the $2,116.1 million increase in value of OMX’s assets outlined in the above table. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($2,041.4 million) and the tax basis ($0) of such assets. The estimated amount of $807.4 million is determined by multiplying the difference of $2,041.4 million by the U.S. effective tax rate of 39.55%.

(b) To eliminate amortization expense of $12.8 million for the year ended December 31, 2007 related to the historical intangible assets recorded by OMX.

        (c) To adjust debt obligations for the borrowing of $1,050.0 million ($68.9 million short-term and $981.1 million long-term) under a senior secured term loan facility and $475.0 million in 2.50% convertible senior notes by Nasdaq to finance the $1,967.8 million cash payment (See Note 3) and refinance existing debt at OMX of $294.1 million ($161.5 million short-term and $132.6 million long-term). Nasdaq also utilized cash on hand for the cash payment and OMX debt refinancing. The term loan has a variable interest rate, and the notes have a fixed interest rate.

 

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Pro forma interest expense resulting from our new capital structure is as follows (dollars in millions):

 

      Year ended
December 31,
2007
 

Average term loan borrowing(iii)

   $ 1,045.1  (1)

Interest rate (average 3 month LIBOR plus spread of 2.0%)(iv)

     7.36 %

Pro forma adjustment(iii)*(iv)

   $ 76.9  

Convertible note borrowing(iii)

   $ 475.0  

Interest rate (fixed 2.5%)(iv)

     2.5 %

Pro forma adjustment(iii)*(iv)

   $ 11.9  

Total pro forma interest expense

   $ 88.8  

 

(1)

The borrowings under the term loan facility have a mandatory principal payment of $19.7 million each quarter beginning September 30, 2008. We have incorporated this payment in our average outstanding debt balance in order to calculate the interest paid on the borrowing throughout the year.

A 1.0% increase in the variable interest rate on the term loan would result in additional interest expense of $10.5 million in pro forma interest expense for the year ended December 31, 2007.

As the interest expense calculated above includes the refinancing of the existing OMX debt, we have included pro forma adjustments to remove OMX’s historical interest expense of $21.3 million for the year ended December 31, 2007.

In addition, Nasdaq incurred and paid $46.8 million in debt issuance costs related to the above, which were capitalized as other assets at the time of the combination and will be amortized over five years. The amortization expense for the year ended December 31, 2007 would have been $9.4 million. The capitalized cost and amortization expense have been included as pro forma adjustments on the unaudited pro forma condensed combined financial statements.

(d) To record an income tax benefit of $141.0 million for the year ended December 31, 2007 based on the condensed combined statement of income pro forma adjustments related to the following items (in millions):

This excerpt taken from the NDAQ 8-K filed Feb 20, 2008.

Deferred tax liability

A $3.5 million current deferred tax liability and a $148.9 million non-current deferred tax liability (total deferred tax liability of $152.4 million) has been set up against the $333.7 million increase in value of PHLX’s assets outlined in the above table. The deferred tax liabilities represent the tax effect of the difference between the estimated assigned fair value of the acquired intangible assets ($333.7 million) and the tax basis ($0) of such assets. The estimated amount of $152.4 million is determined by multiplying the difference of $333.7 million by the U.S. effective tax rate of 45.66%.

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