The impairment was driven primarily by adverse equity market conditions that have caused a material decline in industry market multiples in the latter part of 2008. This charge has no impact on debt covenants, cash flows, or normal day-to-day business operations. These results are presented in accordance with U.S. generally accepted accounting principles (GAAP).
Pro-forma non-GAAP net income in the fourth quarter was $137 million, or $0.52 per diluted share, compared to $0.65 per diluted share in the fourth quarter of 2007. On the same basis, net income for the full year 2008 was $763 million, or $2.87 per diluted share, an increase of 9% compared to 2007.
Pro forma non-GAAP results exclude activity assessment and Section 31 fees, merger expenses and exit costs, impairment charges, gains on sale of businesses and equity investments and other non-recurring items. A full reconciliation of these non-GAAP results is included in the attached tables. Financial highlights include:
* Gross revenues were up 21% in the fourth quarter and 19% for the full year, driven by increased volumes across all venues and pricing changes in the U.S. and European cash markets. These changes increased gross revenues, but also resulted in higher rebates to liquidity providers.
* Net revenues benefited from higher volumes, but were negatively impacted by new pricing initiatives which resulted in higher rebates to customers, including Pack Epsilon pricing in Europe, NYSE Arca tiered pricing in the U.S., and NYSE pricing changes made in connection with the introduction of the NYSE new market model designed to attract liquidity to the floor of the NYSE. Foreign exchange variances also negatively impacted net revenues by ($55) million in the quarter, but positively impacted full year net revenues by $25 million. Net revenues are defined as total revenues less direct transaction costs comprised of Section 31 fees, liquidity payments, and routing and clearing fees.
* Diluted earnings per share in the fourth quarter of 2008 declined by $0.13 or 20%, compared with the prior year, including a $0.07 per share negative impact for currency fluctuations and $0.06 per share impact for planned investments in NYSE Liffe U.S. and NYSE Amex, which was operating at a loss for the fourth quarter.