LINCOLN, Neb., Jan 28, 2005 /PRNewswire-FirstCall via COMTEX/ -- Nelnet, Inc. (NYSE: NNI) today reported 2004 base net income of $161.8 million, or $3.02 per share, compared with $27.8 million, or $0.61 per share, in 2003. GAAP net income for 2004 was $149.2 million, or $2.78 per share, compared to $27.1 million, or $0.60 per share, in the prior year.
For the fourth quarter of 2004, Nelnet reported base net income of $31.7 million, or $0.59 per share, compared to $9.5 million, or $0.20 per share, in the same period a year ago. GAAP net income for the fourth-quarter 2004 was $47.2 million, or $0.88 per share, compared to $10.3 million, or $0.22 per share, in the prior year.
Base net income as defined by Nelnet is GAAP net income excluding derivative market value adjustments, amortization of intangible assets, and variable-rate floor income. A description of base net income and reconciliation of GAAP net income to base net income are included in this release.
Net student loan assets at December 31, 2004 were $13.5 billion, up approximately 29 percent, or $3.0 billion, from $10.5 billion at year-end 2003. Growth in student loan assets is an important measure of Nelnet's success in the marketplace and a key driver of future earnings. It reflects the strength of the company's school-based products, services, and sales team, as well as the effectiveness of its direct-to-consumer strategies.
"Nelnet's first full year as a public company was a record-setter, providing strong growth in base net income and student loan assets, two key measures we use to evaluate our success," said Steve Butterfield, Nelnet Vice Chairman and Co-Chief Executive Officer. "More importantly, our accomplishments in 2004 have laid the foundation for continued growth.
"Acquisitions and strategic partnerships have positioned Nelnet for future student loan asset and fee-based revenue growth by expanding our national footprint and increasing our touch points along the financial aid value chain," stated Butterfield. "In addition, economies of scale continue to provide opportunities for servicing and financing efficiencies. Our long-term focus and strategy have positioned us well to build on the past year's success."
Nelnet prepares financial statements in accordance with generally accepted accounting principles ("GAAP"). In addition to evaluating the company's GAAP-based financial information, management and analysts also evaluate the company on certain non-GAAP performance measures that are referred to as base income adjustments. While base net income is not a substitute for reported results under GAAP, Nelnet provides base net income as additional information regarding our financial results.
Nelnet's base net income is a non-GAAP financial measure and may not be comparable to similarly titled measures reported by other companies. The company's base net income presentation does not represent another comprehensive basis of accounting.
The following table provides a reconciliation of GAAP net income to base
net income.
Three months ended Year ended
December 31, December 31,
2004 2003 2004 2003
(dollars in thousands)
GAAP net income $47,168 $10,332 $149,179 $27,103
Base adjustments:
Impact of derivative market value
adjustments (27,291) (3,948) 11,918 1,183
Amortization of intangible assets 2,336 2,785 8,768 12,766
Impact of variable-rate floor
income -- (130) (348) (12,830)
Total base adjustments before income
taxes (24,955) (1,293) 20,338 1,119
Net tax effect(a) 9,483 491 (7,728) (425)
Total base adjustments (15,472) (802) 12,610 694
Base net income $31,696 $9,530 $161,789 $27,797
Base earnings per share, basic
and diluted $0.59 $0.20 $3.02 $0.61
(a) Tax effect computed at 38%.
Nelnet will host a conference call to discuss this earnings release at 11:00 a.m. (Eastern) today. To access the call live, participants in the United States and Canada should dial 800.946.0783 and international callers should dial 719.457.2658 at least 15 minutes prior to the call. A live audio Web cast of the call will also be available at www.nelnetinvestors.net under the conference calls and Web casts menu. A replay of the conference call will be available between 2:00 p.m. (Eastern) today and 11:59 p.m. (Eastern) February 4. To access the replay via telephone within the United States and Canada, callers should dial 888.203.1112. International callers should dial 719.457.0820. All callers accessing the replay will need to use the confirmation code 645901. A replay of the audio Web cast will also be available at www.nelnetinvestors.net.
Supplemental financial information to this earnings release is available online at http://www.nelnetinvestors.net/releases.cfm?reltype=Financial.
Condensed Consolidated Statements of Income
Three months ended Year ended
December 31, December 31,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited)
(dollars in thousands, except share data)
Interest income:
Loan interest, excluding
variable-rate floor
income $185,977 $108,312 $705,036 $413,301
Variable-rate floor
income -- 130 348 12,830
Amortization of loan
premiums and deferred
origination costs (17,121) (19,556) (70,370) (69,316)
Investment interest 6,012 3,219 17,762 15,203
Total interest income 174,868 92,105 652,776 372,018
Interest expense:
Interest on bonds and
notes payable 84,670 48,812 254,610 200,296
Net interest income 90,198 43,293 398,166 171,722
Less provision (recovery)
for loan losses 477 2,600 (529) 11,475
Net interest income
after provision
(recovery) for loan
losses 89,721 40,693 398,695 160,247
Other income:
Loan servicing and other
fee income 26,273 25,635 98,661 102,959
Software services and
other income 6,870 5,341 25,868 19,017
Derivative market value
adjustments 27,291 3,948 (11,918) (1,183)
Derivative settlements,
net (14,751) (1,077) (34,140) (1,601)
Total other income 45,683 33,847 78,471 119,192
Operating expenses:
Salaries and benefits 31,802 31,524 133,667 124,273
Other expenses 27,703 23,893 100,316 96,002
Amortization of
intangible assets 2,336 2,785 8,768 12,766
Total operating expenses 61,841 58,202 242,751 233,041
Income before income
taxes 73,563 16,338 234,415 46,398
Income tax expense 26,395 6,006 85,236 19,295
Net income $47,168 $10,332 $149,179 $27,103
Earnings per share,
basic and diluted $0.88 $0.22 $2.78 $0.60
Weighted average shares
outstanding 53,662,152 46,928,358 53,648,605 45,501,583
Condensed Consolidated Balance Sheets and Financial Data
As of December 31,
2004 2003
(unaudited)
(dollars in thousands)
Assets:
Student loans receivable, net $13,461,814 $10,455,442
Cash, cash equivalents, and
investments 1,302,954 1,155,215
Other assets 395,237 321,529
Total assets $15,160,005 $11,932,186
Liabilities:
Bonds and notes payable $14,300,606 $11,366,458
Other liabilities 403,224 260,239
Total liabilities 14,703,830 11,626,697
Shareholders' equity 456,175 305,489
Total liabilities and
shareholders' equity $15,160,005 $11,932,186
Average student loans $11,809,663 $9,316,354
Return on average total assets 1.11% 0.25%
Return on average equity 39.7% 19.4%
Nelnet is one of the leading education finance companies in the United States and is focused on providing quality student loan products and services to students and schools nationwide. With over $15 billion in total assets, Nelnet originates in excess of $3 billion for itself and its service partners annually, and its servicing software is used by approximately 35 clients, including Nelnet, to service nearly $50 billion in student loans. Nelnet ranks among the nation's leaders in terms of total student loan assets.
Nelnet offers a broad range of student loan and financial services and technology-based products, including student loan origination and lending, guarantee servicing, and a suite of software solutions. Our products are designed to simplify the student loan process by automating financial aid delivery, loan processing, and funds disbursement. Our services help to facilitate and streamline education finance for all involved in the industry, including student and parent borrowers, lenders, financial aid officers, guaranty agencies, governmental agencies, servicers, and the capital markets.
Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or expected. Among the key factors that may have a direct bearing on Nelnet's operating results, performance, or financial condition are changes in terms of student loans and the educational credit marketplace, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, or changes in the general interest rate environment and in the securitization markets for education loans.
(code #: nnif)
SOURCE Nelnet, Inc.
Media, Sheila Odom, +1-402-458-2329, or Investors, Cheryl Watson, +1-317-469-2064,
both for Nelnet, Inc.
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