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IntercontinentalExchange Reports Record Full-Year 2008 Revenues, Net Income and Operating Cash Flow; Record Fourth Quarter 2008 Revenues

Released : 10 February 2009

ATLANTA, Feb. 10 /PRNewswire-FirstCall/ -- IntercontinentalExchange(R), Inc. (NYSE: ICE), a leading operator of regulated global exchanges and over-the-counter (OTC) markets, reported that consolidated revenues in the fourth quarter rose to a record $207 million, a 30% increase over fourth quarter 2007 revenues of $159 million. Consolidated net income for the fourth quarter of 2008 was $49 million, a 24% decrease compared to $65 million for the prior fourth quarter. Adjusted to exclude the $16 million pre-tax, or $11 million after-tax, impairment charge related to ICE's(R) investment in the National Commodity and Derivatives Exchange (NCDEX) of India, non-GAAP net income for the quarter was $60 million, a decrease of 7% compared to the fourth quarter of 2007. Diluted GAAP earnings per share (EPS) in the fourth quarter were $0.67. Adjusted to exclude the NCDEX impairment charge, non-GAAP diluted EPS for the quarter were $0.82, down 9% compared to the prior year's fourth quarter.

For the year ended December 31, 2008, ICE achieved record revenues for the fifth consecutive year, reporting a 42% rise in consolidated revenues to $813 million compared with $574 million in the prior year. Consolidated GAAP net income increased 25% to a record $301 million in 2008 from $241 million in 2007, and diluted EPS for 2008 increased 23% to $4.17. Adjusted to exclude the NCDEX impairment charge, non-GAAP net income for 2008 was $312 million and non-GAAP diluted EPS were $4.33, up 30% and 28% over 2007, respectively. Consolidated cash flow from operations grew 30% to a record $375 million in 2008.

Volume in ICE's consolidated futures segment, comprising ICE Futures Europe(R), ICE Futures U.S.(R) and ICE Futures Canada(R), reached a record 237 million contracts in 2008, an increase of 21% over 2007. In 2008, average daily volume (ADV) for ICE Futures Europe was 590,541; ADV for ICE Futures U.S. and ICE Futures Canada was 331,317 contracts. Average daily commissions (ADC) for ICE's OTC energy markets during 2008 increased to a record $1.1 million, a 32% increase over 2007. Creditex(R) Group Inc., ICE's wholly-owned credit derivatives subsidiary, had brokerage revenues of $52 million, which are also reflected in ICE's OTC segment for the period of September 2008 through December 2008. ICE completed its acquisition of Creditex on August 29, 2008.

"We excelled in a challenging year by responding to the needs of customers, expanding the markets we serve and executing on our strategic and financial objectives," said ICE Chairman and CEO, Jeffrey C. Sprecher. "As we enter 2009, we again have a range of initiatives, market opportunities and plans for growth based on the strong global risk management infrastructure ICE has established. Extending further into the OTC markets by developing CDS clearing is just one initiative designed to leverage our infrastructure. While we anticipate another challenging year in the global markets, we believe we are well positioned to meet our customers' risk management needs amid volatility and change."

"Our long-standing disciplined approach to managing our financial performance has served us well, particularly given the global economic climate of the past 12 months," said ICE CFO Scott Hill. "We have an excellent balance sheet, including low leverage and strong cash flow, as well as a business model that is diversified across futures and OTC markets, geographies and customer types. Our focus on smart growth and disciplined investment has allowed us to produce excellent results for our shareholders while weathering uncertainty in the broader markets."

Fourth Quarter 2008 Results

ICE's fourth quarter 2008 consolidated revenues increased 30% to $207 million compared to $159 million in the fourth quarter of 2007. Consolidated transaction and clearing revenues increased 34% to $178 million in the fourth quarter of 2008, from $133 million during the same period in 2007. The increase in transaction and clearing revenue was driven primarily by new products, strong trading volume in ICE's futures and global OTC segments, the launch of ICE Clear Europe in November 2008, an increase of participants in ICE's markets and the Creditex acquisition.

Transaction and clearing revenues in ICE's consolidated futures segment totaled $86 million in the fourth quarter of 2008, an increase of 18% over $72 million in the same period in 2007. Fourth quarter 2008 volume for all ICE futures exchanges increased to 60 million contracts, which is a 22% increase compared to the fourth quarter of 2007. ICE Futures Europe recorded quarterly volume of 37 million contracts. ADV for ICE's European futures business was 569,140 contracts, an increase of 3% over the fourth quarter of 2007. The average rate per contract (RPC) for ICE Futures Europe in the fourth quarter was $1.42. ICE Futures U.S. and ICE Futures Canada recorded fourth quarter volume of 23 million contracts and 0.7 million contracts, respectively. ADV for ICE Futures U.S. was 350,395 contracts in the fourth quarter of 2008, a 74% increase compared to the fourth quarter of 2007. Total volume for ICE Futures U.S. represented the highest quarter in exchange history, due in part to the successful transition of the Russell Index futures complex in September. RPC for ICE Futures U.S. agricultural futures and options contracts was $2.25, and the RPC for financial contracts averaged $0.78 for the fourth quarter of 2008. ADV for ICE Futures Canada was 11,625 contracts during the quarter compared to 17,347 in the year-ago period.

Fourth quarter 2008 transaction and clearing revenues in ICE's global OTC segment increased 54% to $92 million, compared to $60 million in the same period in 2007. In ICE's OTC energy markets, ADC were $872,440, a decline of 4% from $912,967 in the same period of 2007. Cleared contracts accounted for 95% of OTC energy contract volume during the fourth quarter of 2008. In ICE's credit derivative markets, fourth quarter revenues were $36 million, roughly flat versus the same period in 2007 on a pro-forma basis. ICE did not own Creditex in 2007.

Consolidated market data revenues increased 16% during the fourth quarter of 2008 to a record $27 million compared to $23 million in the same period in 2007. Consolidated other revenues were $2 million during the fourth quarter of 2008.

Consolidated operating expenses increased $47 million to $110 million for the fourth quarter of 2008 versus $63 million in the same period in 2007. The increase was primarily driven by $33 million of expenses relating to Creditex's business following ICE's acquisition during the third quarter of 2008 and continued investment in growth initiatives. Amortization expenses on acquired intangibles were $16 million for the fourth quarter of 2008 compared to $3 million in the same period of 2007, and included $6 million related to the Creditex acquisition and $6 million related to ICE's exclusive Russell license. Depreciation expense, primarily related to technology investments, was $9 million in the fourth quarter of 2008, an increase of 30% over the fourth quarter of 2007.

Fourth quarter 2008 consolidated operating income was $97 million, an increase of 1% compared to the fourth quarter of 2007. Consolidated operating margin was 47% for the fourth quarter of 2008, compared to 61% for the same period in 2007.

ICE has taken a pre-tax, non-cash impairment charge of $16 million related to its 8% equity ownership in NCDEX, a derivatives exchange located in Mumbai, India. ICE acquired its stake for $37 million in 2006. In response to political pressure regarding high commodity prices, the Indian government suspended trading in several key agricultural contracts traded on NCDEX during 2007, and that ban remains in place. The Indian government also announced a law that may require foreign entities, including ICE, to divest holdings above an imposed limit of 5% total ownership in Indian commodities exchanges. This may result in ICE reducing its stake in NCDEX from 8% to the 5% threshold by June 30, 2009. Considering these factors and current valuations in the global exchange sector, management determined that its cost method investment in NCDEX is impaired under U.S. GAAP standards. ICE continues to work closely with NCDEX as a key strategic partner, which provides access to an important emerging market.

The effective tax rate for the fourth quarter of 2008 was 39.8% compared to 32.7% for the fourth quarter of 2007. The increase in the tax rate was primarily the result of the tax effect of the NCDEX impairment charge and an increase in the percentage of income taxable in the U.S. at higher statutory rates, such as in New York State.

Full-Year 2008 Results

For the year ended December 31, 2008, consolidated revenues increased 42% to $813 million compared to $574 million in 2007. Consolidated transaction and clearing revenues increased 41% to $693 million in 2008 from $490 million in 2007. The increase in transaction and clearing revenues was driven primarily by new products, strong trading volume in ICE's futures and global OTC segments, an increase of participants in ICE's markets and the Creditex acquisition.

Transaction and clearing revenues in ICE's consolidated futures segment totaled $352 million in 2008, an increase of 26% over $279 million in 2007. In 2008 volume for all ICE futures exchanges totaled 237 million contracts, a 21% increase over 2007. ICE Futures Europe achieved record volume of 153 million contracts during 2008. ADV for ICE's European futures business was 590,541 contracts, an increase of 10% compared to 2007. ICE Futures U.S. and ICE Futures Canada recorded 2008 volume of 81 million contracts and 3 million contracts, respectively. Total volume for ICE Futures U.S. in 2008 represented the highest 12-month period in exchange history. ADV for ICE Futures U.S. was 318,085 contracts in 2008, a 48% increase over 2007. ADV for ICE Futures Canada was 13,232 contracts during the year, a 5% decrease compared to 2007.

Transaction and clearing revenues in ICE's global OTC segment increased 61% to $342 million in 2008 compared to $212 million in 2007. ADC for ICE's OTC energy business increased 32% to $1.1 million in 2008 compared to $845,572 in 2007. Cleared contracts accounted for 91% of OTC energy contract volume during 2008. Creditex contributed $52 million in brokerage revenues from September 2008 through December 2008, representing a 10% increase over Creditex's results during the same period in 2007, on a pro-forma basis. ICE did not own Creditex in 2007.

Consolidated market data revenues increased 46% in 2008 to a record $103 million compared to $70 million in 2007. Consolidated other revenues were $17 million for the year, up from $14 million in the same period in 2007.

Consolidated operating expenses during 2008 were $320 million, an increase of 45% compared to $221 million in 2007. The increase was driven by $47 million of expenses relating to Creditex's business following ICE's acquisition and continued investment in growth initiatives. Spending associated with the development of ICE Clear Europe(R) was $8 million in 2008, compared to $4 million in 2007. Depreciation related primarily to technology investments was $31 million in 2008, an increase of 37%. Amortization expenses on acquired intangibles, including $8 million related to the Creditex acquisition and $7 million related to ICE's exclusive Russell license, were $30 million in 2008 compared to $10 million in 2007. Non-cash compensation for the year, excluding Creditex, increased to $32 million, compared to $24 million for 2007.

Consolidated operating income for the full year was $494 million in 2008, an increase of 40% compared to $354 million in operating income in 2007. Operating margin was 61% for the year ended December 31, 2008, compared to 62% for the same period in 2007.

The effective tax rate for 2008 was 36.4% compared to 32.9% in 2007.

Consolidated cash flow from operations was $375 million in 2008, up 30% from $288 million in 2007. Capital expenditures for 2008 were $30 million, compared to $31 million in 2007. Capital expenditures primarily related to ICE Futures Europe's new London headquarters and hardware purchases to enhance ICE's electronic trading and clearing technology and related infrastructure. Capitalized software development costs totaled $18 million for the full year, compared to $12 million in 2007.

Unrestricted cash and investments were $290 million as of December 31, 2008. At the end of the year, ICE had $379 million in outstanding debt.

Guidance and Additional Information

-- Expense synergies from the Creditex acquisition are expected to be in the range of $8 million to $10 million on an annualized basis beginning in 2009.

-- ICE had 795 employees at the end of 2008. ICE expects headcount to decline between 5% and 7% during the first quarter of 2009. ICE expects to incur a charge of $2 million to $3 million associated with the headcount reductions primarily in the first quarter. For the full year, headcount is expected to be flat to down 5% from current levels, excluding any personnel additions relating to merger and acquisition activity in 2009.

-- ICE expects non-cash compensation expense in the range of $42 million to $46 million for 2009, assuming the achievement of certain Board-approved financial objectives.

-- ICE expects 2009 capital expenditures in the range of $30 million to $34 million driven by continued investments in trading and clearing technology and data centers.

-- ICE expects depreciation and amortization for 2009 in the range of $108 million to $114 million, including approximately $26 million related to the amortization of payments for the exclusive Russell Index license and $24 million for the amortization of intangibles associated with the Creditex acquisition.

-- ICE's consolidated tax rate is expected to be in the range of 34% to 36% for 2009.

-- ICE's diluted share count for the first quarter of 2009 is expected to be in the range of 73.8 million to 74.4 million weighted average shares outstanding, and the diluted share count for fiscal year 2009 to be in the range of 73.5 million to 74.5 million weighted average shares outstanding. ICE's remaining capacity in its share repurchase program is approximately $200 million.

-- As previously announced, ICE is working with nine major dealers to develop and launch a central counterparty clearing house for credit default swaps. In addition, ICE has announced plans to acquire The Clearing Corporation (TCC) as part of this initiative. Regulatory approvals are pending and are expected to be received during the first quarter. ICE will provide further details on the timing and financial impacts of CDS clearing upon closure of the TCC transaction and receipt of regulatory approvals.

Earnings Conference Call Information

ICE will hold a conference call today, February 10, at 8:30 a.m. ET to review its fourth quarter and fiscal year 2008 financial results. A live audio webcast of the earnings call will be available on the company's website at www.theice.com under About ICE/Investors & Media. Participants may also listen via telephone by dialing (888) 737-3705 if calling from the United States, or (913) 312-6672 if dialing from outside of the United States. For participants on the telephone, please place your call ten minutes prior to the start of the call.

The call will be archived on the company's website for replay. A telephone replay of the earnings call will also be available at (888) 203-1112 for callers within the United States and at (719) 457-0820 for callers outside of the United States. The passcode for the replay is 6904442.

Historical futures volume and OTC commission data can be found at: http://ir.theice.com/supplemental.cfm

About IntercontinentalExchange

IntercontinentalExchange(R) (NYSE: ICE) operates regulated global futures exchanges and over-the-counter (OTC) markets for agricultural, energy, equity index and currency contracts, as well as credit derivatives. ICE(R) offers these markets to participants around the world through its technology infrastructure and trading platform, together with clearing, market data and risk management services. ICE Futures Europe(R) is ICE's regulated energy futures exchange. ICE's regulated North American exchanges, ICE Futures U.S.(R) and ICE Futures Canada(R), offer markets for agricultural and financial contracts. Creditex, a market leader in trade execution and processing for credit derivatives, is also a wholly-owned subsidiary of ICE. A member of the Russell 1000(R) and S&P 500 indices, ICE is headquartered in Atlanta, with offices in New York, London, Chicago, Winnipeg, Calgary, Houston and Singapore. www.theice.com.

IntercontinentalExchange is a registered trademark of IntercontinentalExchange, Inc., registered in the United States and the European Union.

ICE, ICE & block design, ICE Clear Europe, and ICE Clear U.S. are registered trademarks and marque deposes of IntercontinentalExchange, Inc., registered in the United States, the European Union, Canada and Singapore.

ICE Futures Canada, ICE Futures Europe and ICE Futures U.S. are registered trademarks of IntercontinentalExchange, Inc., in the United States, the European Union and Singapore.

Forward-Looking Statements

This press release may contain "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements regarding IntercontinentalExchange's business that are not historical facts are forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. These statements are not guarantees of future performance and actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statement. The factors that might affect our performance include, but are not limited to: our business environment; increasing competition and consolidation in our industry; conditions in global financial markets; our ability to develop new products and services and pursue strategic acquisitions and alliances on a timely, cost-effective basis; our ability to minimize the risks associated with operating multiple clearing houses in multiple jurisdictions; changes in domestic and foreign regulations or government policy; technological developments, including clearing developments; developing a clearing initiative for the credit default swap market; the accuracy of our cost estimates and expectations; adjustments to exchange fees or commission rates; our belief that cash flows will be sufficient to service our debt and fund our working capital needs and capital expenditures at least through the end of 2010; our ability to increase the connectivity to our marketplace; maintaining existing market participants and attracting new ones; protecting our intellectual property rights; not violating the intellectual property rights of others; potential adverse litigation results; our belief in our electronic platform and disaster recovery system technologies; our ability to gain access to comparable products and services if our key technology contracts were terminated; and the risk that acquired businesses will not be integrated successfully or the revenue opportunities, cost savings and other anticipated synergies from mergers may not be fully realized or may take longer to realize than expected. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in ICE's Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 13, 2008, and ICE's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2008 and September 30, 2008, as filed with the SEC on August 4, 2008 and October 30, 2008, respectively, and ICE's Annual Report on Form 10-K for the year ended December 31, 2008, to be filed with the SEC. These filings are also available in the Investors & Media section of our website. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Except for any obligations to disclose material information under the Federal securities laws, ICE undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this press release.


                      Consolidated Financial Statements

               INTERCONTINENTALEXCHANGE, INC. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                        Year Ended        Three Months Ended
                                        December 31,          December 31,
                                      2008       2007       2008       2007
    Revenues:
      Transaction and clearing
       fees, net                   $693,229   $490,358   $178,159   $132,555
      Market data fees              102,944     70,396     26,960     23,306
      Other                          16,905     13,539      2,141      3,435
    Total revenues                  813,078    574,293    207,260    159,296

    Operating expenses:
      Compensation and benefits     159,792    101,397     57,004     34,913
      Professional services          29,705     23,047      6,716      4,820
      Patent royalty                      -      1,705          -          -
      CBOT merger-related
       transaction costs                  -     11,121          -         33
      Selling, general and
       administrative                67,800     50,759     20,157     13,457
      Depreciation and amortization  62,247     32,701     26,056      9,546
    Total operating expenses        319,544    220,730    109,933     62,769
    Operating income                493,534    353,563     97,327     96,527
    Other income (expense):
      Interest and investment
       income                        11,536     11,865      2,394      3,049
      Interest expense              (19,573)   (18,641)    (5,958)    (5,500)
      Other income (expense), net   (12,001)    11,647    (12,607)     2,013
    Total other income
     (expense), net                 (20,038)     4,871    (16,171)      (438)
    Income before income taxes      473,496    358,434     81,156     96,089
    Income tax expense              172,524    117,822     32,301     31,437
    Net income                     $300,972   $240,612    $48,855    $64,652

    Earnings per common share:
      Basic                           $4.23      $3.49      $0.68      $0.93
      Diluted                         $4.17      $3.39      $0.67      $0.90

    Weighted average common
     shares outstanding:
      Basic                          71,184     68,985     72,280     69,735
      Diluted                        72,164     70,980     73,465     71,565



               INTERCONTINENTALEXCHANGE, INC. AND SUBSIDIARIES
                     UNAUDITED CONSOLIDATED BALANCE SHEET
                                (IN THOUSANDS)

                                                             December 31,
                                                           2008        2007
    Assets
    Current assets:
      Cash and cash equivalents                         $283,522    $119,597
      Short-term restricted cash                          30,724      19,624
      Short-term investments                               3,419     140,955
      Customer accounts receivable, net                   81,248      52,018
      Margin deposits and guaranty funds              12,117,820     792,052
      Prepaid expenses and other current assets           35,855      17,848
    Total current assets                              12,552,588   1,142,094
    Property and equipment, net                           88,952      63,524
    Other noncurrent assets:
      Goodwill                                         1,434,816   1,009,687
      Other intangible assets, net                       728,855     537,722
      Long-term restricted cash                          105,740       3,000
      Cost method investments                             32,724      38,778
      Other noncurrent assets                             15,906       1,540
    Total other noncurrent assets                      2,318,041   1,590,727
    Total assets                                     $14,959,581  $2,796,345

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities           $49,663     $27,811
      Accrued salaries and benefits                       41,096      23,878
      Current portion of licensing agreement              12,686      10,572
      Current portion of long-term debt                   46,875      37,500
      Income taxes payable                                17,708      11,687
      Margin deposits and guaranty funds              12,117,820     792,052
      Current portion of unearned government grant         8,737       1,748
      Other current liabilities                           17,057       5,713
    Total current liabilities                         12,311,642     910,961
    Noncurrent liabilities:
      Noncurrent deferred tax liability, net             194,301     108,739
      Long-term debt                                     332,500     184,375
      Noncurrent portion of licensing agreement           82,989      89,645
      Long-term unearned government grant                      -       8,737
      Other noncurrent liabilities                        24,901      17,032
    Total noncurrent liabilities                         634,691     408,528
    Total liabilities                                 12,946,333   1,319,489
    Minority interest                                      5,949           -
    Redeemable stock put                                   1,068           -
    Shareholders' Equity
    Common stock                                             765         710
    Treasury stock, at cost                             (355,520)    (30,188)
    Additional paid-in capital                         1,608,344   1,043,971
    Retained earnings                                    732,752     431,708
    Accumulated other comprehensive income                19,890      30,655
    Total shareholders' equity                         2,006,231   1,476,856
    Total liabilities and shareholders' equity       $14,959,581  $2,796,345


Non-GAAP Financial Measures and Reconciliation

ICE provides adjusted net income and adjusted earnings per common share as additional information regarding its operating results. ICE uses these non- GAAP measures internally to evaluate its performance and in making financial and operational decisions. ICE believes that the presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, ICE believes the presentation of these measures is useful for period-to-period comparison of results because the NCDEX cost method impairment charge described below does not reflect historical operating performance. These measures are not in accordance with, or an alternative to, U.S. generally accepted accounting principles or 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. ICE strongly recommends that investors review the GAAP financial measures included in the Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto.

Adjusted net income for the 2008 periods below is calculated by adding net income and the NCDEX impairment charge, presented net of tax. ICE does not believe this item is representative of its future operating performance since the charge was not consistent with its historical operations. ICE believes that the NCDEX impairment charge is an unusual expense and is not representative of historical operating performance. Adjusted earnings per common share are calculated as adjusted net income divided by the weighted average common shares outstanding. These calculations exclude the NCDEX impairment charge. The following table reconciles the 2008 net income to adjusted net income and calculates adjusted earnings per common share.



                                                Year Ended  Three Months Ended
                                                December 31,    December 31,
                                                   2008            2008
                                      (In thousands, except per share amounts)

    Net income                                   $300,972         $48,855
    Add: NCDEX impairment charge                   15,700          15,700
    Less: Income tax benefit of NCDEX
     impairment charge                             (4,477)         (4,477)
      Adjusted net income                        $312,195         $60,078
    Earnings per common share on net income:
        Basic                                       $4.23           $0.68
        Diluted                                     $4.17           $0.67
    Adjusted earnings per common share on
     adjusted net income:
        Adjusted basic                              $4.39           $0.83
        Adjusted diluted                            $4.33           $0.82
    Weighted average common shares
     outstanding:
        Basic                                      71,184          72,280
        Diluted                                    72,164          73,465

SOURCE IntercontinentalExchange, Inc.