LINCOLN, Neb., March 3, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Nelnet, Inc. (NYSE: NNI) today reported GAAP net income for the fourth quarter of 2008 of $31.0 million, or $0.63 per share, compared with $19.0 million, or $0.39 per share, for the fourth quarter of 2007. Base net income excluding discontinued operations and restructuring, impairment, and certain liquidity related charges for the fourth quarter of 2008 was $15.8 million, or $0.32 per share, compared with $16.6 million, or $0.34 per share, in the fourth quarter of 2007.
GAAP net income for 2008 was $28.7 million, or $0.58 per share, compared with $32.9 million, or $0.66 per share, for 2007. Base net income excluding discontinued operations and legislative, restructuring, impairment, and certain liquidity related charges for 2008 was $81.1 million, or $1.65 per share, compared with $85.3 million, or $1.72 per share, for 2007.
Throughout the year, Nelnet significantly improved its liquidity position by reducing the amount of student loans in its federal student loan warehouse facility from $6.6 billion at December 31, 2007, to $1.4 billion at December 31, 2008.
The company reduced the amount of student loans in this facility by issuing asset-backed securitizations and selling loans. During 2008, the company incurred charges from losses on the sale of loans of $51.4 million, of which $4.0 million were incurred in the fourth quarter. In addition, the company incurred $13.5 million of expenses in the fourth quarter of 2008 related to liquidity contingency planning.
"We are pleased with our 2008 results," said Mike Dunlap, Chairman and Chief Executive Officer of Nelnet. "In one of the most challenging financial environments, we were profitable and improved our financial position. Specifically, our fee-based businesses performed well and have considerable operating margins and growth opportunities."
Last week, the President announced his budget proposal, which includes a request that the federal government originate all education loans through the Direct Lending program and use private corporations only for the servicing of the loans. "While we disagree with this recommendation, the proposal is only the beginning of a budget process that will give us the opportunity to work with Congress to shape the future of the federal student loan programs," said Dunlap. "We believe Congress will see the value of a student loan program that maintains the benefits of choice and competition and does not contribute significantly to the national debt."
Fee-based Businesses
Total revenue from fee-based businesses for the quarter and year ended December 31, 2008 was $68.7 million and $288.0 million, respectively. In recent years, 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 order to reduce legislative risk. In 2008, revenue from these businesses increased $25.0 million, or 20 percent, compared with the same period in 2007.
Margin Analysis
For the fourth quarter of 2008, Nelnet reported net interest income of $38.5 million, compared with $44.3 million for the fourth quarter of 2007. Net interest income for 2008 was $187.9 million compared with $244.6 million for 2007.
The company reported core student loan spread of 0.90 percent for the fourth quarter of 2008 compared with 0.93 percent in the same period of 2007 and 1.02 percent for the third quarter of 2008.
Operating Expenses
Operating expenses were $110.2 million in the fourth quarter of 2008 down from $120.3 million for the same period a year ago. For 2008, operating expenses decreased $95.0 million, or 18 percent, year over year to $440.6 million. Excluding restructuring, impairment, and liquidity related charges, operating expenses decreased $74.7 million, or 16 percent, year over year.
Student Loan Assets
At December 31, 2008, net student loan assets were $25.4 billion. Approximately 90 percent of these student loans are financed to term at rates that the company believes will generate cash flow in excess of $1.4 billion.
In addition, Nelnet has liquidity for new loan originations through the Department of Education's loan participation and put programs, which will allow Nelnet to make loans to all eligible students through the 2009-2010 academic year.
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/releases.cfm?reltype=Financial.
Nelnet will host a conference call to discuss this earnings release at 3:00 p.m. (Eastern) Today. To access the call live, participants in the United States and Canada should dial 877.795.3610, and international callers should dial 719.325.4799 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 March 13, 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 6429634. 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, which may reduce the volume, average term, special allowance payments, and yields on student loans under the Federal Family
Education Loan Program (the "FFEL Program" or "FFELP") of the U.S. Department of Education (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; 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 Income
Three months ended Year ended
December September December December December
31, 30, 31, 31, 31,
2008 2008 2007 2008 2007
(unaudited) (unaudited) (unaudited)
(dollars in thousands, except share data)
Interest income:
Loan interest $286,279 304,226 437,128 1,224,678 1,755,064
Variable rate
floor income - 1,580 2,416 42,325 3,013
Amortization of
loan premiums
and deferred
origination
costs (21,036) (21,338) (23,878) (90,620) (91,020)
Investment
interest 8,084 9,118 18,988 37,998 80,219
Total interest
income 273,327 293,586 434,654 1,214,381 1,747,276
Interest expense:
Interest on bonds
and notes
payable 234,868 234,016 390,399 1,026,489 1,502,662
Net interest
income 38,459 59,570 44,255 187,892 244,614
Less provision for
loan losses 7,000 7,000 4,550 25,000 28,178
Net interest
income after
provision
for loan losses 31,459 52,570 39,705 162,892 216,436
Other income:
Loan and guaranty
servicing income 22,526 30,633 32,953 104,176 128,069
Other fee-based
income 46,082 45,887 44,572 178,699 160,888
Software services
income 3,892 4,217 5,647 19,757 22,669
Other income 462 1,242 1,564 4,760 15,612
Gain (loss) on
sale of loans (3,988) - 309 (51,414) 3,597
Derivative market
value, foreign
currency, and put
option adjustments 46,348 6,085 14,940 10,827 26,806
Derivative
settlements, net 9,668 789 11,577 55,657 18,677
Total other
income 124,990 88,853 111,562 322,462 376,318
Operating expenses:
Salaries and
benefits 41,262 44,739 54,621 183,393 236,631
Other expenses 62,413 52,332 59,256 212,157 219,048
Amortization of
intangible assets 6,511 6,598 6,412 26,230 30,426
Impairment expense - - - 18,834 49,504
Total operating
expenses 110,186 103,669 120,289 440,614 535,609
Income before
income taxes 46,263 37,754 30,978 44,740 57,145
Income tax expense 16,103 13,969 11,810 17,896 21,716
Income from
continuing
operations 30,160 23,785 19,168 26,844 35,429
Income (loss) from
discontinued
operations,
net of tax 837 - (159) 1,818 (2,575)
Net income $30,997 23,785 19,009 28,662 32,854
Earnings per share,
basic and diluted:
Income from
continuing
operations $0.61 0.48 0.39 0.54 0.71
Income (loss)
from discontinued
operations,
net of tax 0.02 - - 0.04 (0.05)
Net income $0.63 0.48 0.39 0.58 0.66
Weighted average
shares
outstanding 49,075,755 49,176,436 49,047,048 49,099,967 49,618,107
Condensed Consolidated Balance Sheets and Financial Data
As of As of As of
December 31, September 30, December 31,
2008 2008 2007
(unaudited)
(dollars in thousands)
Assets:
Student loans receivable, net $25,413,008 26,376,269 26,736,122
Unrestricted cash and liquid
investments 189,847 325,007 111,746
Restricted cash, cash
equivalents, and investments 1,158,257 1,129,874 1,009,092
Goodwill 175,178 175,178 164,695
Intangible assets, net 77,054 83,565 112,830
Other assets 841,553 880,122 1,028,298
Total assets $27,854,897 28,970,015 29,162,783
Liabilities:
Bonds and notes payable $26,787,959 28,004,835 28,115,829
Other liabilities 423,712 355,450 438,075
Total liabilities 27,211,671 28,360,285 28,553,904
Shareholders' equity 643,226 609,730 608,879
Total liabilities and
shareholders' equity $27,854,897 28,970,015 29,162,783
(Code #: nnif)
SOURCE Nelnet, Inc.
http://www.nelnet.com
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