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LINCOLN, Neb., July 31, 2007 /PRNewswire-FirstCall via COMTEX News Network/ --
Nelnet, Inc. (NYSE: NNI) today reported GAAP net income for the first six months of 2007 of $29.5 million, or $0.59 per share, compared with $97.8 million, or $1.80 per share, for the first six months of 2006. Base net income excluding discontinued operations for the first six months of 2007 was $46.4 million, or $0.92 per share, and is comparable to $37.8 million, or $0.70 per share, for the first six months of 2006.
GAAP net income for the second-quarter 2007 was $14.8 million, or $0.30 per share, compared with $45.8 million, or $0.84 per share, for the second-quarter 2006. Base net income excluding discontinued operations for the second-quarter 2007 was $21.7 million, or $0.44 per share, and is comparable to $18.8 million, or $0.34 per share, for the same period a year ago.
On May 25, 2007, Nelnet sold EDULINX Canada Corporation, a Canadian student loan service provider and subsidiary of the company. As a result of this transaction, the results of operations for EDULINX are reported as discontinued operations.
"We are pleased with our results for the first six months and second quarter, especially the strength of our asset growth and the diversification and revenue contribution from our fee-based businesses," said Mike Dunlap, Nelnet Chairman and Chief Executive Officer. "These key elements of originating assets, diversification, and fee-based revenue have been and will continue to be an important part of our business strategy for mitigating margin compression and delivering long-term value. As the legislative process approaches a resolution, we will maintain our focus on these key elements and on providing exceptional service to students, families, and schools throughout the education life cycle."
Student Loan Assets
Since December 31, 2006, net student loan assets have increased 10 percent, or $2.4 billion, from $23.8 billion to $26.2 billion at June 30, 2007.
Fee-based Revenue
Fee-based revenue in the first six months of 2007 and the second quarter of 2007 represented 53 percent of Nelnet's total revenue for both periods. This is an increase from the first six months of 2006 and second quarter of 2006 when fee-based revenue represented 37 percent and 36 percent of total revenue, respectively.
Income from loan and guarantee servicing fees reached $62.1 million for the first six months of 2007, up from $59.2 million in the first six months of 2006. In the second quarter of 2007, loan and guarantee servicing income grew to $31.6 million from $28.9 million in the second quarter of 2006.
Other fee-based income increased to $78.3 million for the first six months of 2007 compared with $34.2 million for the first six months of 2006. For the second quarter of 2007, other fee-based income increased to $38.3 million, up from $16.1 million in the same period a year ago. Other fee-based income includes Nelnet's list management, direct marketing, tuition payment plan, and enrollment services businesses. In large part, the increase in fee-based revenue is attributable to acquisitions.
Margin Analysis
Net interest income for the first six months of 2007 was $136.0 million compared with $172.3 million for the first six months of 2006. For the second quarter of 2007, Nelnet reported net interest income of $68.0 million compared with $86.1 million for the second quarter of 2006. Net interest income for the first six months of 2006 and second quarter of 2006 includes a special allowance yield adjustment of $24.5 million and $10.6 million, respectively.
The company reported core student loan spread of 1.28 percent for the first six months of 2007 compared with 1.51 percent in the same period in 2006. For the second quarter of 2007, Nelnet reported core student loan spread of 1.28 percent compared with 1.49 percent in the same period of 2006 and 1.29 percent for the first quarter of 2007.
Operating Expenses
For the first six months of 2007, the company reported operating expenses of $241.9 million compared with $194.5 million for the first six months of 2006. Operating expenses were $120.7 million in the second quarter of 2007 compared with $101.3 million for the same period a year ago. The increase in operating expenses is primarily attributable to acquisitions.
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 that is available online at http://www.nelnetinvestors.com/releases.cfm?reltype=Financial.
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 866.558.6869 and international callers should dial 913.643.4199 at least 15 minutes prior to the call. A live audio Web cast of the call will also be available at http://www.nelnetinvestors.com under the conference calls and Web casts menu. A replay of the conference call will be available between 1:00 p.m. (Eastern) today and 11:59 p.m. (Eastern) August 7, 2007. 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 1546828. A replay of the audio Web cast will also be available at http://www.nelnetinvestors.com .
About Nelnet
For 28 years, Nelnet has been helping the education-seeking family plan for their education, pay for their education, and prepare for their careers. The company has invested hundreds of millions of dollars in products, services, and technology improvements for students and the educational institutions they attend. These services include live counseling to help families through all aspects of the financial aid process, benefits for borrowers, including tens of millions of dollars in borrower loan discounts and other benefits, and Nelnet sponsored scholarships. Nelnet serves students in 50 states, employs approximately 3,500 associates, and has $26.2 billion in net student loan assets.
Additional information is available at http://www.nelnet.com.
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. For more information see our filings with the Securities and Exchange Commission.
Condensed Consolidated Statements of Income
Three months ended
June 30, March 31, June 30,
2007 2007 2006
(unaudited) (unaudited) (unaudited)
(dollars in thousands, except share data)
Interest income:
Loan interest $439,720 $418,113 $383,867
Amortization of loan premiums and
deferred origination costs (22,634) (21,059) (21,125)
Investment interest 18,783 21,425 24,249
Total interest income 435,869 418,479 386,991
Interest expense:
Interest on bonds and notes payable 367,893 350,495 300,844
Net interest income 67,976 67,984 86,147
Less provision for loan losses 2,535 2,753 2,190
Net interest income after
provision for loan losses 65,441 65,231 83,957
Other income (expense):
Loan and guarantee servicing income 31,610 30,466 28,926
Other fee-based income 38,262 40,029 16,074
Software services income 5,848 5,748 4,018
Other income 2,937 6,879 2,906
Derivative market value, foreign
currency, and put option
adjustments 5,547 (12,130) 29,080
Derivative settlements, net 5,196 4,240 6,702
Total other income (expense) 89,400 75,232 87,706
Operating expenses:
Salaries and benefits 59,761 61,704 54,753
Other expenses 54,394 52,887 40,720
Amortization of intangible assets 6,491 6,638 5,817
Total operating expenses 120,646 121,229 101,290
Income before taxes 34,195 19,234 70,373
Income tax expense 13,306 7,264 26,038
Income before minority interest 20,889 11,970 44,335
Minority interest in net earnings of
subsidiaries --- --- ---
Income from continuing operations 20,889 11,970 44,335
Income (loss) from discontinued
operations, net of tax (6,135) 2,810 1,418
Net Income $14,754 $14,780 $45,753
Earnings (loss) per share, basic and
diluted
Income from continuing operations $0.42 $0.23 $0.81
Income (loss) from discontinued
operations, net of tax (0.12) 0.06 0.03
Net Income $0.30 $0.29 $0.84
Weighted average shares outstanding 49,452,960 50,982,187 54,297,230
Six months ended
June 30, June 30,
2007 2006
(unaudited) (unaudited)
(dollars in thousands, except share data)
Interest income:
Loan interest $857,833 $731,389
Amortization of loan premiums and
deferred origination costs (43,693) (42,987)
Investment interest 40,208 43,726
Total interest income 854,348 732,128
Interest expense:
Interest on bonds and notes payable 718,388 559,793
Net interest income 135,960 172,335
Less provision for loan losses 5,288 11,808
Net interest income after
provision for loan losses 130,672 160,527
Other income (expense):
Loan and guarantee servicing income 62,076 59,216
Other fee-based income 78,291 34,229
Software services income 11,596 7,427
Other income 9,816 4,893
Derivative market value, foreign
currency, and put option adjustments (6,583) 68,343
Derivative settlements, net 9,436 11,446
Total other income (expense) 164,632 185,554
Operating expenses:
Salaries and benefits 121,465 104,252
Other expenses 107,281 79,143
Amortization of intangible assets 13,129 11,115
Total operating expenses 241,875 194,510
Income before taxes 53,429 151,571
Income tax expense 20,570 56,080
Income before minority interest 32,859 95,491
Minority interest in net earnings of
subsidiaries --- (242)
Income from continuing operations 32,859 95,249
Income (loss) from discontinued
operations, net of tax (3,325) 2,570
Net Income $29,534 $97,819
Earnings (loss) per share, basic and
diluted
Income from continuing operations $0.66 $1.75
Income (loss) from discontinued
operations, net of tax (0.07) 0.05
Net Income $0.59 $1.80
Weighted average shares outstanding 50,213,349 54,269,440
Condensed Consolidated Balance Sheets and Financial Data
As of As of As of
June 30, December 31, June 30,
2007 2006 2006
(unaudited) (unaudited)
(dollars in thousands)
Assets:
Student loans receivable, net $26,174,958 $23,789,552 $22,404,492
Cash, cash equivalents, and
investments 1,367,257 1,773,751 1,971,740
Goodwill 191,256 191,420 145,950
Intangible assets, net 146,542 161,588 171,942
Assets of discontinued operations --- 27,309 34,232
Other assets 993,361 853,253 825,076
Total assets $28,873,374 $26,796,873 $25,553,432
Liabilities:
Bonds and notes payable $27,791,146 $25,562,119 $24,327,855
Liabilities of discontinued
operations --- 7,732 13,182
Other liabilities 471,050 555,172 460,206
Total liabilities 28,262,196 26,125,023 24,801,243
Shareholders' equity 611,178 671,850 752,189
Total liabilities and
shareholders' equity $28,873,374 $26,796,873 $25,553,432
Return on average total assets 0.21% 0.27% 0.81%
Return on average equity 9.5% 9.6% 27.4%
Shareholders' equity to total
assets 2.12% 2.51% 2.94%
(code #: nnif)
SOURCE Nelnet, Inc.
Media, Ben Kiser, +1-402-458-3024, or Investors, Cheryl Watson, +1-317-469-2064, both of Nelnet, Inc.
http://www.nelnetinvestors.com
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