LINCOLN, Neb., Aug 10, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Nelnet, Inc. (NYSE: NNI) today reported GAAP net income for the second quarter of 2009 of $8.2 million, or $0.16 per share, compared with $43.7 million, or $0.88 per share, for the second quarter of 2008. Base net income for the second quarter of 2009 was $29.7 million, or $0.60 per share, compared with $26.5 million, or $0.54 per share, in the second quarter of 2008. Base net income excludes discontinued operations and restructuring, impairment, and certain liquidity related charges.
GAAP net income for the first six months of 2009 was $33.7 million, or $0.68 share, compared with a GAAP net loss of $26.1 million, or $0.53 per share, for the first six months of 2008. Base net income excluding discontinued operations and restructuring, impairment, and certain liquidity related charges for the first six months of 2009 was $62.2 million, or $1.26 per share, compared to $41.8 million, or $0.85 per share, for the first six months of 2008.
Other income for the first and second quarters of 2009 includes a pre-tax gain of $8.1 million and $5.8 million, respectively, from the company's purchase of unsecured debt.
"Through the first half of 2009, we are pleased with our results and the progress we are making towards achieving our 2009 objectives of increasing and diversifying our fee-based businesses, managing operating expenses, maximizing the value of our student loan portfolio, improving liquidity, and reducing our operating debt," said Mike Dunlap, Chairman and Chief Executive Officer of Nelnet. "Meeting these objectives will be important to our long-term success and to our ongoing transformation to a company focused on providing education-related processing for a fee."
On June 17, 2009, Nelnet announced it had been awarded a contract by the U.S. Department of Education (Department) to service federal student loans. Servicing volume will initially be allocated by the Department to servicers awarded a contract; however, performance factors such as customer satisfaction levels and default rates will determine volume allocations over time.
"We are excited by the opportunity to begin serving families and schools on behalf of the Department later in the third quarter," said Dunlap. "Winning this contract allows us to leverage our existing infrastructure, brings stability, and adds significant revenue to the company."
Fee-based Businesses
Total revenue from fee-based businesses for the second quarter of 2009 was $75.9 million compared with $66.0 million for the second quarter of 2008. Total revenue from fee-based businesses for the first six months of 2009 was $152.8 million compared with $139.9 million for the same period in 2008. In recent years, in order to reduce legislative risk, the company has expanded its products and services generated from businesses that are not dependent on the federal student loan program, including the company's enrollment services, tuition payment plan, and campus commerce businesses. In the second quarter of 2009, revenue from these businesses increased $6.3 million, or 23 percent, compared with the same period in 2008.
Margin Analysis
For the second quarter of 2009, Nelnet reported net interest income including derivative settlements of $66.6 million compared with $77.8 million for the second quarter of 2008. Net interest income including derivative settlements for the first six months of 2009 was $119.5 million compared with $135.1 million for the first six months of 2008.
The company reported core student loan spread of 1.09 percent for the second quarter of 2009 compared with 1.11 percent for the same period of 2008 and 0.94 percent for the first quarter of 2009. The company's core student loan spread for the second quarter of 2009 includes $37.1 million of fixed rate floor income, up from $9.9 million in the second quarter of 2008 and $30.3 million in the first quarter of 2009.
Operating Expenses
Operating expenses were $97.4 million in the second quarter of 2009 compared with $97.9 million for the second quarter of 2008 and $92.6 million in the first quarter of 2009. For the first six months of 2009, the company reported operating expenses of $189.9 million, down from $226.8 million for the same period a year ago. Excluding restructuring, impairment, and other charges, operating expenses decreased $7.6 million, or 9 percent, and $19.9 million, or 12 percent, for the three and six months ended June 30, 2009, compared to the same periods in 2008. This decrease was the result of the company's continued focus on managing costs and gaining efficiencies.
Student Loan Assets
At June 30, 2009, net student loan assets were $25.6 billion, of which $1.7 billion were classified as held for sale. Loans held for sale are funded using the Department's participation program and are expected to be sold to the Department during 2009. Approximately 90 percent of student loans held for investment are financed to term at rates that the company currently believes will generate cash flow in excess of $1.4 billion. In addition, Nelnet has liquidity for new loan originations through the Department's loan participation and purchase programs, which will allow Nelnet to make loans to all eligible students through the 2009-2010 academic year.
Nelnet continues to improve its liquidity position by reducing the amount of student loans in its federal student loan warehouse facility from $1.6 billion at December 31, 2008, to its balance of $403.7 million at June 30, 2009. On August 3, 2009, the company obtained a new $500 million federal student loan warehouse facility with a maturity in August 2012. The company plans to refinance the remaining loans in the federal warehouse facility that expires in May 2010 with this new facility.
Non-GAAP Performance Measures
A description of base net income and a reconciliation of GAAP net income to base net income can be found in supplemental financial information to this earnings release online at www.nelnetinvestors.com/results.cfm.
Nelnet will host a conference call to discuss this earnings release at 3:00 p.m. (Eastern) Wednesday, August 12, 2009. To access the call live, participants in the United States and Canada should dial 877.856.1965, and international callers should dial 719.325.4788 at least 15 minutes prior to the call. A live audio webcast of the call will also be available at www.nelnetinvestors.com under the Events & Webcasts menu. A replay of the conference call will be available through August 22, 2009. 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 1394529. A replay of the audio webcast will also be available at
www.nelnetinvestors.com.
This press release contains forward-looking statements and information that are based on management's current expectations as of the date of this document. Statements that are not historical facts, including statements about the company's expectations and statements that assume or are dependent upon future events, are forward-looking statements. These forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that may cause the actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of, or changes in, applicable laws and regulations, including changes resulting from new laws such as any new laws enacted to implement the Administration's 2010 budget proposals
as they relate to the Federal Family Education Loan Program (FFEL Program or FFELP), which may reduce the volume, average term, special allowance payments, and yields on student loans under the FFEL Program of the Department or result in loans being originated or refinanced under non-FFEL programs or may affect the terms upon which banks and others agree to sell FFELP loans to the company. The company could also be affected by changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students, and their families; the company's ability to maintain its credit facilities or obtain new facilities; the ability of lenders under the company's credit facilities to fulfill their lending commitments under these facilities; changes to the terms and conditions of the liquidity programs offered by the Department; changes in the general interest
rate environment and in the securitization markets for education loans, which may increase the costs or limit the availability of financings necessary to initiate, purchase, or carry education loans; losses from loan defaults; changes in prepayment rates, guaranty rates, loan floor rates, and credit spreads; the uncertain nature of estimated expenses that may be incurred and cost savings that may result from restructuring plans; incorrect estimates or assumptions by management in connection with the preparation of the consolidated financial statements; and changes in general economic conditions. Additionally, financial projections may not prove to be accurate and may vary materially. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.
For more information see the company's filings with the Securities and Exchange Commission. The company is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this press release or unforeseen events. Although the company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.
Condensed Consolidated Statements of Operations
Three months ended Six months ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
(dollars in thousands, except share data)
Interest
income:
Loan
interest $177,202 189,570 319,528 366,772 674,918
Amortization
of loan
premiums
and deferred
origination
costs (16,789) (18,651) (22,842) (35,440) (48,246)
Investment
interest 2,776 4,091 9,116 6,867 20,796
----- ----- ----- ----- ------
Total interest
income 163,189 175,010 305,802 338,199 647,468
Interest
expense:
Interest on
bonds and
notes payable 106,082 146,502 232,464 252,584 557,605
------- ------- ------- ------- -------
Net interest
income 57,107 28,508 73,338 85,615 89,863
Less provision
for loan losses 8,000 7,500 6,000 15,500 11,000
----- ----- ----- ------ ------
Net interest
income after
provision for
loan losses 49,107 21,008 67,338 70,115 78,863
------ ------ ------ ------ ------
Other income:
Loan and
guaranty
servicing
income 28,803 26,471 23,821 55,274 48,482
Tuition payment
processing and
campus commerce
revenue 11,848 15,538 10,270 27,386 24,117
Enrollment
Services
revenue 28,747 28,771 26,068 57,518 53,290
Software
services
revenue 6,119 5,705 5,979 11,824 14,183
Other income 11,527 16,862 6,125 28,389 12,379
Gain (loss) on
sale of loans (196) (206) 48 (402) (47,426)
Derivative market
value, foreign
currency, and
put option
adjustments (34,013) (4,880) 15,755 (38,893) (41,606)
Derivative
settlements,
net 9,535 24,358 4,437 33,893 45,200
------ ------- ------ ------- -------
Total other
income 62,370 112,619 92,503 174,989 108,619
------ ------- ------ ------- -------
Operating
expenses:
Salaries and
benefits 40,180 38,226 43,549 78,406 97,392
Cost to provide
enrollment
services 18,092 17,793 14,755 35,885 30,158
Other expenses 33,299 30,398 33,057 63,697 67,254
Amortization of
intangible
assets 5,785 6,154 6,561 11,939 13,121
Impairment
expense - - - - 18,834
--- --- --- --- ------
Total
operating
expenses 97,356 92,571 97,922 189,927 226,759
------ ------ ------ ------- -------
Income (loss)
before
income taxes 14,121 41,056 61,919 55,177 (39,277)
Income tax
(expense)
benefit (5,918) (15,601) (19,195) (21,519) 12,176
------ ------- ------- -------- ------
Income (loss)
from
continuing
operations 8,203 25,455 42,724 33,658 (27,101)
Income from
discontinued
operations, net
of tax - - 981 - 981
--- --- --- --- ---
Net income
(loss) $8,203 25,455 43,705 33,658 (26,120)
====== ====== ====== ====== ========
Earnings (loss)
per share, basic
and diluted:
Income (loss)
from
continuing
operations $0.16 0.52 0.86 0.68 (0.55)
Income from
discontinued
operations, net
of tax - - 0.02 - 0.02
--- --- ---- --- ----
Net income (loss) $0.16 0.52 0.88 0.68 (0.53)
===== ==== ==== ==== =====
Weighted average
shares
outstanding 9,534,413 49,142,324 49,095,153 49,339,451 49,073,580
As of As of As of
June 30, December 31, June 30,
2009 2008 2008
---- ---- ----
(unaudited) (unaudited)
(dollars in thousands)
Assets:
Student loans receivable,
net $23,889,571 25,413,008 25,993,307
Student loans receivable
- held for sale 1,749,290 - -
Cash and cash equivalents 366,827 189,847 138,454
Restricted cash and
investments 1,123,607 1,158,257 1,036,856
Goodwill 175,178 175,178 175,178
Intangible assets, Net 65,115 77,054 90,163
Other assets 740,954 841,553 997,967
------- ------- -------
Total assets $28,110,542 27,854,897 28,431,925
=========== ========== ==========
Liabilities:
Bonds and notes payable $27,169,573 26,787,959 27,530,237
Other Liabilities 259,782 423,712 317,646
------- ------- -------
Total Liabilities 27,429,355 27,211,671 27,847,883
---------- ---------- ----------
Shareholders' equity 681,187 643,226 584,042
------- ------- -------
Total liabilities
and shareholders'
equity $28,110,542 27,854,897 28,431,925
=========== ========== ==========
(code #: nnif)
SOURCE Nelnet, Inc.
http://www.nelnet.com
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