Table Of Contents
See “Equity Method Investments,” of Note 6, “Investments,” to the consolidated financial statements for further discussion of our
investment in OCC.
Tax Matters
Nasdaq’s income tax provision was $ 203 million in 201 5 compared with $1 81 million in 201 4 and $ 2 1 6 million in 201 3 . The overall
effective tax rate was 3 2 . 2 % in 201 5 , 3 0 . 5 % in 201 4 and 36.3% in 201 3 . The higher tax rate in 2015 when compared to 2014, and the
lower effective tax rate in 2014 when compared to 2013, was primarily due to a decrease in unrecognized tax benefits in 2014.
The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and
losses. These same and other factors, including history of pre-tax earnings and losses, are taken into account in assessing the ability to realize
deferred tax assets.
In order to recognize and measure our unrecognized tax benefits, management determines whether a tax position is more likely than not to
be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.
Once it is determined that a position meets the recognition thresholds, the position is measured to determine the amount of benefit to be
recognized in the consolidated financial statements. Interest and/or penalties related to income tax matters are recognized in income tax expense.
See Note 10, "Income
Taxes,” to the consolidated financial statements for further discussion of our tax matters.
Non-GAAP Financial Measures
In addition to disclosing results determined in accordance with U.S. GAAP, we also have provided non-GAAP net income attributable to
Nasdaq and non-GAAP diluted earnings per share. Management uses this non-GAAP information internally, along with U.S. GAAP information,
in evaluating our performance and in making financial and operational decisions.
We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial
condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period
comparison of results as the items described below do not reflect operating performance. These measures are not in accordance with, or an
alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. Investors should not rely on any single
financial measure when evaluating our business. We recommend investors review the U.S. GAAP financial measures included in this Annual
Report on Form 10-K, including our consolidated financial statements and the notes thereto. When viewed in conjunction with our U.S. GAAP
results and the accompanying reconciliation, we believe these non-GAAP measures provide greater transparency and a more complete
understanding of factors affecting our business than U.S. GAAP measures alone. Our management uses these measures to evaluate operating
performance, and management decisions during the reporting period are made by excluding certain items that we believe have less significance
on, or do not impact, the day-to-day performance of our business. In addition, since management does not consider intangible asset amortization
expense for the purpose of evaluating the performance of the business or its managers or when making decisions to allocate resources, such
expenses have been shown as a non-GAAP adjustment.
We understand that analysts and investors regularly rely on non-GAAP financial measures, such as non-GAAP net income and non-GAAP
diluted earnings per share, to assess operating performance. We use non-GAAP net income attributable to Nasdaq and non-GAAP diluted
earnings per share because they more clearly highlight trends in our business that may not otherwise be apparent when relying solely on U.S.
GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our operating
performance. Non-GAAP net income attributable to Nasdaq for the periods presented below is calculated by adjusting net income attributable to
Nasdaq for charges or gains related to acquisition and divestiture transactions, integration activities related to acquisitions, amortization expense
of acquired intangible assets, other significant infrequent charges or gains and their related income tax effects that are not related to our core
business. We do not believe these items are representative of our future operating performance since these charges were not consistent with our
core operating performance.
Non-GAAP adjustments for the year ended December 31, 2015 primarily related to the following:
(i) income from our equity method investment in OCC of $13 million. See “Equity Method Investments,” of Note 6, “Investments,” to
the consolidated financial statements for further discussion , (ii) restructuring charges of $172 million. See Note 3, “Restructuring Charges,” to the
consolidated financial statements for further discussion, (iii) amortization expense of acquired intangible assets of $62 million, (iv) reversal of
previously recorded VAT receivables no longer deemed collectible of $12 million, (v) merger and strategic initiatives costs of $10 million
primarily related to certain strategic initiatives and our acquisition of DWA, and (vi) adjustment to the income tax provision of $90 million to
reflect these non-GAAP adjustments.
Non-GAAP adjustments for the year ended December 31, 2014 primarily related to the following:
(i) special legal expense of $2 million , (ii) amortization expense of acquired intangible assets of $69 million, (iii) loss on extinguishment
of debt of $11 million reflecting $9 million related to the early extinguishment of our 4.00% senior notes in June 2014
47