May 11, 2009

Nelnet Reports First Quarter 2009 Results

LINCOLN, Neb., May 11, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Nelnet, Inc. (NYSE: NNI) today reported GAAP net income for the first quarter of 2009 of $25.5 million, or $0.52 per share, compared with a GAAP net loss of $69.8 million, or $1.42 per share, for the first quarter of 2008. Base net income for the first quarter of 2009 was $31.5 million, or $0.64 per share, compared with $15.3 million, or $0.31 per share, in the first quarter of 2008. Base net income in 2008 excluded discontinued operations and restructuring, impairment, and certain liquidity related charges.

Other income for the first quarter of 2009 includes a pre-tax gain of $8.1 million from the company's purchase at a discount of $34.9 million in principal of its 5.125 percent Senior Notes due 2010. In addition, other income includes a pre-tax gain of $3.5 million related to contingency payments received by the company during the first quarter of 2009 from the divestiture of Premiere Credit of North America in 2007.

"We are off to a good start in 2009 with our results for the first quarter," said Mike Dunlap, Chairman and Chief Executive Officer of Nelnet. "We continue to concentrate on transforming Nelnet into a company focused on education-related processing services for a fee by growing and diversifying our businesses. In addition, we have made progress toward our 2009 objectives of improving our liquidity and reducing our debt in this uncertain economy."

Fee-based Businesses

Total revenue from fee-based businesses for the first quarter of 2009 was $77.1 million, up from $75.3 million in the same period a year ago. 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 first quarter of 2009, revenue from these businesses increased $3.3 million, or 8 percent, compared with the same period in 2008.

Margin Analysis

For the first quarter of 2009, Nelnet reported net interest income of $28.5 million, compared with $16.5 million for the first quarter of 2008.

The company reported core student loan spread of 0.94 percent for the first quarter of 2009 compared with 0.91 percent in the same period of 2008 and 0.90 percent for the fourth quarter of 2008. For the first quarter of 2009, core student loan spread includes net derivative settlements of $24.4 million, compared with $9.7 million in the fourth quarter of 2008.

Operating Expenses

Operating expenses were $92.6 million in the first quarter of 2009, down from $128.8 million for the same period a year ago and $110.2 million in the fourth quarter of 2008.

Student Loan Assets

At March 31, 2009, net student loan assets were $25.6 billion. Approximately 90 percent of these student loans are financed to term at rates that the company believes will generate cash flow of $1.4 billion. In addition, Nelnet has liquidity for new loan originations through the Department of Education'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 current balance of $1.2 billion.

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

Nelnet will host a conference call to discuss this earnings release at 3:00 p.m. (Eastern) Wednesday, May 13, 2009. To access the call live, participants in the United States and Canada should dial 877.723.9511, and international callers should dial 719.325.4812 at least 15 minutes prior to the call. A live audio webcast of the call will also be available at under the Events & Webcasts menu. A replay of the conference call will be available through May 23, 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 4079097. A replay of the audio webcast will also be available at

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 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; 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
                                          March 31,  December 31,  March 31,
                                             2009        2008        2008
                                         (unaudited) (unaudited)  (unaudited)
                                     (dollars in thousands, except share data)

    Interest income:
      Loan interest                        $189,570     286,279      355,390
      Amortization of loan premiums
       and deferred
       origination costs                    (18,651)    (21,036)     (25,404)
      Investment interest                     4,091       8,084       11,680
        Total interest income               175,010     273,327      341,666

    Interest expense:
      Interest on bonds and notes payable   146,502     234,868      325,141

        Net interest income                  28,508      38,459       16,525
    Less provision for loan losses            7,500       7,000        5,000

        Net interest income after
         provision for loan losses           21,008      31,459       11,525

    Other income:
      Loan and guaranty servicing revenue    26,471      21,632       24,661
      Tuition payment processing and
       campus commerce revenue               15,538      12,175       13,847
      Enrollment services revenue            28,771      29,257       27,222
      Software services revenue               5,705       4,786        8,204
      Other income                           16,862       5,112        6,254
      Loss on sale of loans                    (206)     (3,988)     (47,474)
      Derivative market value,
       foreign currency,
       and put option adjustments            (4,880)     46,348      (57,361)
      Derivative settlements, net            24,358       9,668       40,763
        Total other income                  112,619     124,990       16,116

    Operating expenses:
      Salaries and benefits                  38,226      41,262       53,843
      Cost to provide enrollment services    17,793      16,903       15,403
      Other expenses                         30,398      45,510       34,197
      Amortization of intangible assets       6,154       6,511        6,560
      Impairment expense                         -           -        18,834
        Total operating expenses             92,571     110,186      128,837

        Income (loss) before income taxes    41,056      46,263     (101,196)

    Income tax (expense) benefit            (15,601)    (16,103)      31,371

        Income (loss) from continuing
         operations                          25,455      30,160      (69,825)

    Income from discontinued
     operations, net of tax                      -          837            -

        Net income (loss)                   $25,455      30,997      (69,825)

    Earnings (loss) per share, basic
     and diluted:
        Income (loss) from continuing
         operations                           $0.52        0.61        (1.42)
        Income from discontinued
         operations, net of tax                  -         0.02            -
        Net income (loss)                     $0.52        0.63        (1.42)
    Weighted average shares outstanding  49,142,324  49,075,755   49,051,745

    Condensed Consolidated Balance Sheets and Financial Data

                                           As of       As of       As of
                                          March 31,  December 31, March 31,
                                            2009        2008        2008
                                         (unaudited)             (unaudited)

                                                (dollars in thousands)
      Student loans receivable, net     $25,624,337  25,413,008   26,321,345
      Student loans receivable -
       held for sale                             -           -       423,651
      Unrestricted cash and liquid
       investments                          243,705     189,847      124,171
      Restricted cash, cash
       equivalents, and investments       1,274,122   1,158,257    1,844,593
      Goodwill                              175,178     175,178      175,178
      Intangible assets, net                 70,900      77,054       92,897
      Other assets                          704,895     841,553    1,037,981
        Total assets                    $28,093,137  27,854,897   30,019,816

      Bonds and notes payable           $27,130,406  26,787,959   29,129,133
      Other liabilities                     291,129     423,712      352,576
        Total liabilities                27,421,535  27,211,671   29,481,709

    Shareholders' equity                    671,602     643,226      538,107

        Total liabilities and
         shareholders' equity           $28,093,137  27,854,897   30,019,816

(code #: nnif)

SOURCE Nelnet, Inc.

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