Jan 28, 2005

Nelnet Reports Student Loan Assets Up Approximately 29% Year Over Year; Strong Fourth-Quarter Earnings

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
                                                    (dollars in thousands)

       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

       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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