Attached files
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| EX-99.2 - NELNET INC | nni-63012x10qxsupplement.htm |
| 8-K - NELNET INC | nni63012form8-k.htm |
Nelnet Reports Second Quarter 2012 Results
• | Net income $1.13 per share for the quarter, excluding derivative market value adjustments |
• | Loan and Guaranty Servicing revenue increased 26 percent |
• | Tuition Payment Processing and Campus Commerce revenue increased 14 percent |
LINCOLN, Neb., August 8, 2012 /PRNewswire/ -- Nelnet (NYSE: NNI) today reported $53.5 million, or $1.13 per share, of net income, excluding derivative market value adjustments, for the second quarter of 2012, compared with $47.5 million, or $0.98 per share, for the same period a year ago.
GAAP net income for the second quarter of 2012 and 2011 was $41.4 million, or $0.87 per share, and $37.1 million, or $0.76 per share, respectively. Derivative market value adjustments were $12.1 million, or $0.26 per share after tax, for the second quarter of 2012, compared with $10.4 million, or $0.22 per share after tax, for the second quarter of 2011.
"In the second quarter of 2012, we reported strong results and showed progress toward achieving our core objectives," said Mike Dunlap, Nelnet Chairman and Chief Executive Officer. “We continue to focus on growing our fee-based and asset management businesses, driving diversification around our core businesses, and improving our customers' experiences."
Nelnet operates four primary business segments, earning interest income on student loans in its Asset Generation and Management operating segment and fee-based revenue in its Student Loan and Guaranty Servicing, Tuition Payment Processing and Campus Commerce, and Enrollment Services operating segments. In the second quarter of 2012, the company increased its total revenue to $184.2 million, compared with $175.6 million in the second quarter of 2011. Operating expenses for the second quarter of 2012 and 2011 were $108.2 million and $100.6 million, respectively.
Student Loan and Guaranty Servicing
Revenue from the company's Student Loan and Guaranty Servicing segment increased 26 percent, or $10.7 million, to $52.4 million for the second quarter of 2012 from $41.7 million for the second quarter of 2011. The increase in revenue is primarily the result of growth in servicing volume for the Department of Education (Department), remote hosting fees, and fee revenue from rehabilitated loans.
As of June 30, 2012, the company was servicing $56.0 billion of loans for 3.1 million borrowers on behalf of the Department, compared with $38.8 billion of loans for 2.7 million borrowers as of June 30, 2011. Revenue from this contract increased to $16.1 million for the second quarter of 2012, up from $11.9 million for the same period a year ago.
The Student Loan and Guaranty Servicing segment also includes revenue from monthly fees earned from third parties using Nelnet's new hosted servicing software solution to service Federal Direct Loan Program and Federal Family Education Loan Program loans. As of June 30, 2012, 7.9 million borrowers were hosted on the company's solution.
Tuition Payment Processing and Campus Commerce
For the second quarter of 2012, revenue from the company's Tuition Payment Processing and Campus Commerce segment was $16.8 million, an increase of $2.0 million, or 14 percent, from the same period in 2011.
Asset Management
As of June 30, 2012, net student loan assets were $23.5 billion. Substantially all of Nelnet's federal student loans are financed for the life of the loan at rates the company currently believes will generate significant future cash flow of $1.87 billion. On July 1, 2010, the company stopped originating federal student loans because legislation eliminated the Federal Family Education Loan Program. As a result, the company's student loan portfolio will run off over a period of several years.
Historically low interest rates are continuing to provide an opportunity for the company to generate substantial near-term value and cash flow from its student loan portfolio. For the second quarter of 2012, Nelnet reported net interest income of $84.6 million, compared with $88.7 million for the same period a year ago. Net interest income includes $37.0 million and $32.8 million of fixed rate floor income in the second quarters of 2012 and 2011, respectively.
Board of Directors Approves Dividend
The Nelnet Board of Directors declared a third quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.10 per share. The dividend will be paid on September 15, 2012, to shareholders of record at the close of business on September 1, 2012. Nelnet currently has 35.8 million shares of Class A common stock and 11.5 million shares of Class B common stock outstanding.
Non-GAAP Performance Measures
Information regarding the company's operating results has historically been provided using "base net income," which consisted of GAAP net income excluding the derivative market value and foreign currency adjustments, amortization of intangible assets, compensation related to business combinations, and variable rate floor income, net of settlements on derivatives. Due to the decrease in the number and dollar amount of differences between "base net income" and GAAP net income, the company has discontinued utilizing "base net income" when evaluating the performance and profitability of the company and reporting its operating results.
The company will continue to provide additional information related to specific items management believes to be important in the
evaluation of its financial position and performance, including specifically, but not limited to, the impact of the unrealized gains and losses resulting from the change in fair value of derivative instruments in which the company does not qualify for "hedge treatment" under GAAP, and the foreign currency transaction gains or losses resulting from the re-measurement of the company's Euro-denominated bonds to U.S. dollars. The company believes these point-in-time estimates of asset and liability values related to these financial instruments that are subject to interest and currency rate fluctuations affect the period-to-period comparability of the results of operations.
Forward-looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of federal securities laws. These statements are based on management's current expectations as of the date of this release and are subject to known and unknown risks and uncertainties that may cause actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Such risks include, among others, risks related to the company's student loan portfolios such as interest rate basis and repricing risk and the use of derivatives to manage exposure to interest rate fluctuations; the company's funding requirements to satisfy asset financing needs; the company's ability to maintain and increase volumes under its loan servicing contract with the Department to service federally owned student loans; changes in the student loan and educational credit and services marketplace resulting from the implementation of or changes in applicable laws, regulations, and government programs; changes in the demand or preferences for educational financing and related services by educational institutions, students, and their families; uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations; and changes in general economic and credit market conditions. For more information, see the "Risk Factors" sections and other cautionary discussions of risks and uncertainties included in documents filed or furnished by the company with the Securities and Exchange Commission, including the cautionary information about forward-looking statements contained in the company's supplemental financial information for the second quarter ended June 30, 2012. All information in this release is as of the date of this release. Although the company may from time to time voluntarily update or revise its forward-looking statements to reflect actual results or changes in the company's expectations, the company disclaims any commitment to do so except as required by securities laws.
Condensed Consolidated Statements of Income (unaudited)
(Dollars in thousands, except share data)
Three months ended | Six months ended | ||||||||||||||
June 30, 2012 | March 31, 2012 | June 30, 2011 | June 30, 2012 | June 30, 2011 | |||||||||||
Interest Income: | |||||||||||||||
Loan interest | $ | 151,675 | 154,118 | 146,827 | 305,793 | 294,174 | |||||||||
Amortization/accretion of loan premiums/discounts and deferred origination costs, net | (687 | ) | (1,060 | ) | (7,893 | ) | (1,747 | ) | (17,882 | ) | |||||
Investment interest | 1,055 | 1,095 | 856 | 2,150 | 1,582 | ||||||||||
Total interest income | 152,043 | 154,153 | 139,790 | 306,196 | 277,874 | ||||||||||
Interest expense: | |||||||||||||||
Interest on bonds and notes payable | 67,476 | 69,297 | 51,054 | 136,773 | 103,361 | ||||||||||
Net interest income | 84,567 | 84,856 | 88,736 | 169,423 | 174,513 | ||||||||||
Less provision for loan losses | 7,000 | 6,000 | 5,250 | 13,000 | 9,000 | ||||||||||
Net interest income after provision for loan losses | 77,567 | 78,856 | 83,486 | 156,423 | 165,513 | ||||||||||
Other income (expense): | |||||||||||||||
Loan and guaranty servicing revenue | 52,391 | 49,488 | 41,735 | 101,879 | 82,148 | ||||||||||
Tuition payment processing and campus commerce revenue | 16,834 | 21,913 | 14,761 | 38,747 | 34,130 | ||||||||||
Enrollment services revenue | 29,710 | 31,664 | 32,315 | 61,374 | 66,183 | ||||||||||
Other income | 8,800 | 10,954 | 6,826 | 19,754 | 13,318 | ||||||||||
Gain on sale of loans and debt repurchases | 935 | — | — | 935 | 8,307 | ||||||||||
Derivative market value and foreign currency adjustments, net | (19,532 | ) | (15,407 | ) | (16,813 | ) | (34,939 | ) | (15,697 | ) | |||||
Derivative settlements, net | (2,086 | ) | 227 | (3,522 | ) | (1,859 | ) | (7,674 | ) | ||||||
Total other income | 87,052 | 98,839 | 75,302 | 185,891 | 180,715 | ||||||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | 48,703 | 49,095 | 42,881 | 97,798 | 86,793 | ||||||||||
Cost to provide enrollment services | 20,374 | 21,678 | 22,140 | 42,052 | 44,979 | ||||||||||
Depreciation and amortization | 8,226 | 8,136 | 6,769 | 16,362 | 13,545 | ||||||||||
Other | 30,908 | 32,263 | 28,767 | 63,171 | 54,872 | ||||||||||
Total operating expenses | 108,211 | 111,172 | 100,557 | 219,383 | 200,189 | ||||||||||
Income before income taxes | 56,408 | 66,523 | 58,231 | 122,931 | 146,039 | ||||||||||
Income tax expense | (14,878 | ) | (23,230 | ) | (21,106 | ) | (38,108 | ) | (54,034 | ) | |||||
Net income | 41,530 | 43,293 | 37,125 | 84,823 | 92,005 | ||||||||||
Net income attributable to noncontrolling interest | 136 | 152 | — | 288 | — | ||||||||||
Net income attributable to Nelnet, Inc. | $ | 41,394 | 43,141 | 37,125 | 84,535 | 92,005 | |||||||||
Earnings per common share: | |||||||||||||||
Net income attributable to Nelnet, Inc. shareholders - basic | $ | 0.87 | 0.91 | 0.76 | 1.78 | 1.90 | |||||||||
Net income attributable to Nelnet, Inc. shareholders - diluted | $ | 0.87 | 0.91 | 0.76 | 1.78 | 1.89 | |||||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 47,049,055 | 46,989,773 | 48,302,779 | 47,020,811 | 48,237,411 | ||||||||||
Diluted | 47,292,147 | 47,184,079 | 48,488,046 | 47,240,659 | 48,425,886 | ||||||||||
Condensed Consolidated Balance Sheets
(Dollars in thousands)
As of | As of | As of | |||||||
June 30, 2012 | December 31, 2011 | June 30, 2011 | |||||||
(unaudited) | (unaudited) | ||||||||
Assets: | |||||||||
Student loans receivable, net | $ | 23,501,382 | 24,297,876 | 23,228,778 | |||||
Cash, cash equivalents, and investments | 130,310 | 93,350 | 148,005 | ||||||
Restricted cash and investments | 976,708 | 724,131 | 675,182 | ||||||
Goodwill | 117,118 | 117,118 | 117,118 | ||||||
Intangible assets, net | 19,006 | 28,374 | 37,564 | ||||||
Other assets | 524,618 | 591,368 | 664,864 | ||||||
Total assets | $ | 25,269,142 | 25,852,217 | 24,871,511 | |||||
Liabilities: | |||||||||
Bonds and notes payable | $ | 23,836,250 | 24,434,540 | 23,605,413 | |||||
Other liabilities | 287,994 | 351,472 | 277,314 | ||||||
Total liabilities | 24,124,244 | 24,786,012 | 23,882,727 | ||||||
Equity: | |||||||||
Total Nelnet, Inc. shareholders' equity | 1,144,605 | 1,066,205 | 988,784 | ||||||
Noncontrolling interest | 293 | — | — | ||||||
Total equity | 1,144,898 | 1,066,205 | 988,784 | ||||||
Total liabilities and equity | $ | 25,269,142 | 25,852,217 | 24,871,511 | |||||
Contacts:
Media, Ben Kiser, +1-402-458-3024, or Investors, Phil Morgan, +1-402-458-3038, both of Nelnet, Inc.