Welcome!

Microsoft Cloud Authors: Pat Romanski, Srinivasan Sundara Rajan, Glenn Rossman, Janakiram MSV, Steven Mandel

News Feed Item

Nelnet Reports Third Quarter 2012 Results

- Net income $1.12 per share for the quarter, excluding derivative market value and foreign currency adjustments

LINCOLN, Neb., Nov. 8, 2012 /PRNewswire/ -- Nelnet (NYSE: NNI) today reported net income of $53.1 million, or $1.12 per share, excluding derivative market value and foreign currency adjustments, for the third quarter of 2012, compared to $56.1 million, or $1.16 per share, for the same period a year ago. The decrease in year-over-year net income was expected as the company's student loan portfolio runs off due to Congress' elimination of the Federal Family Education Loan (FFEL) Program in 2010. The decrease was partially offset by the growth of the company's fee-based businesses.

GAAP net income for the third quarter of 2012 was $36.8 million, or $0.78 per share, compared with GAAP net income for the third quarter of 2011, which was $47.5 million, or $0.98 per share. Derivative market value and foreign currency adjustments were an expense of $16.3 million, or $0.34 per share after tax, for the third quarter of 2012, compared to an expense of $8.6 million, or $0.18 per share after tax, for the third quarter of 2011.      

"We are consistently delivering strong results and making progress toward key objectives: Growing our core businesses, driving diversification around our core, and improving our customer's experiences," said Mike Dunlap, Nelnet Chairman and Chief Executive Officer, about the third quarter of 2012. "More specifically, we are excited to be ranked as the top servicer for the Department of Education for the past twelve-month period, which will significantly increase our servicing volume, and to have opportunities to purchase additional student loans."

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. The company reported net interest income after provision for loan losses of $80.3 million for the third quarter of 2012, compared with $91.5 million for the same period a year ago. The company reported total revenue from its fee-based segments in the third quarters of 2012 and 2011 of $101.9 million and $94.8 million, respectively. Consolidated operating expenses for the third quarter of 2012 were $104.9 million, compared with $104.8 million for the third quarter of 2011.

Student Loan and Guaranty Servicing

Revenue from the company's Student Loan and Guaranty Servicing segment increased 25 percent, or $10.7 million, to $53.3 million for the third quarter of 2012 from $42.6 million for the third quarter of 2011. The increase in revenue is primarily the result of growth in servicing volume under the company's contract with the Department of Education (Department), remote hosting fees, and fee revenue from rehabilitated loans.

As of September 30, 2012, the company was servicing $63.6 billion of loans for 3.6 million borrowers on behalf of the Department, compared to $44.6 billion of loans for 3.0 million borrowers as of September 30, 2011. Revenue from this contract increased to $19.1 million for the third quarter of 2012, up from $12.8 million for the same period a year ago.

The Department ranks the performance of its servicers quarterly based on five performance metrics to determine the loan servicing volume allocation each servicer will receive in the following contract year. Based on these performance metrics, the company achieved the first place ranking for the 2011-2012 contract year, which results in a larger allocation of loan volume to the company for the fourth year of the servicing contract (the period of August 15, 2012 through August 14, 2013). The company is allocated 30 percent of new loan volume originated by the Department during this current contract year, up from 16 percent the prior two years. 

Tuition Payment Processing and Campus Commerce

For the third quarter of 2012, revenue from the company's Tuition Payment Processing and Campus Commerce segment was $17.9 million, an increase of $1.1 million, or 7 percent, from the same period in 2011.

Asset Management

As of September 30, 2012, net student loan assets were $22.6 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 $1.88 billion.

On July 1, 2010, the company stopped originating federal student loans because legislation eliminated the FFEL Program.  As a result, the company's student loan portfolio will run off over a period of several years. However, Nelnet continues to pursue opportunities to purchase student loans from third parties and has purchased $1.1 billion of FFEL Program loans since the end of the third quarter of 2012, and anticipates purchasing additional loans before the end of the year.

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 third quarter of 2012, Nelnet reported net interest income after provision for loan losses of $80.3 million, compared with $91.5 million for the same period a year ago.  Net interest income includes $34.7 million and $40.6 million of fixed rate floor income in the third quarters of 2012 and 2011, respectively.   

Board of Directors Declares Dividend

Today, Nelnet's Board of Directors declared a cash dividend on the company's outstanding shares of Class A and Class B common stock of $1.10 per share.  The dividend consists of a regular quarterly dividend of $0.10 per share, and a special cash dividend of $1.00 per share.  Both dividends will be paid on November 27, 2012, to shareholders of record at the close of business on November 19, 2012. Nelnet currently has 35.8 million shares of Class A common stock and 11.5 million shares of Class B common stock outstanding.

The company will continue to evaluate quarterly dividends based on future earnings, capital requirements, financial condition, and other factors.

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 unrealized gains and losses resulting from changes in fair values of derivative instruments which do not qualify for "hedge treatment" under GAAP, and 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 third quarter ended September 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


Nine months ended


September 30,

2012


June 30,

2012


September 30,

2011


September 30,

2012


September 30,

2011

Interest Income:










Loan interest

$

150,528



150,988



156,955



454,574



433,247


Investment interest

1,140



1,055



672



3,290



2,254


Total interest income

151,668



152,043



157,627



457,864



435,501


Interest expense:










Interest on bonds and notes payable

66,402



67,476



60,866



203,175



164,227


Net interest income

85,266



84,567



96,761



254,689



271,274


Less provision for loan losses

5,000



7,000



5,250



18,000



14,250


Net interest income after provision for loan losses

80,266



77,567



91,511



236,689



257,024


Other income (expense):










Loan and guaranty servicing revenue

53,285



52,391



42,549



155,164



124,697


Tuition payment processing and campus commerce revenue

17,928



16,834



16,774



56,675



50,904


Enrollment services revenue

30,661



29,710



35,505



92,035



101,688


Other income

12,699



8,800



3,931



32,453



17,249


Gain on sale of loans and debt repurchases

195



935





1,130



8,307


Derivative market value and foreign currency adjustments, net

(26,224)



(19,532)



(13,888)



(61,163)



(29,585)


Derivative settlements, net

(5,051)



(2,086)



257



(6,910)



(7,417)


Total other income

83,493



87,052



85,128



269,384



265,843


Operating expenses:










Salaries and benefits

46,395



48,703



44,132



144,193



130,925


Cost to provide enrollment services

20,151



20,374



23,825



62,203



68,804


Depreciation and amortization

8,402



8,226



7,917



24,764



21,462


Other

29,989



30,908



28,904



93,160



83,776


Total operating expenses

104,937



108,211



104,778



324,320



304,967


Income before income taxes

58,822



56,408



71,861



181,753



217,900


Income tax expense

(21,870)



(14,878)



(24,410)



(59,978)



(78,444)


Net income

36,952



41,530



47,451



121,775



139,456


Net income attributable to noncontrolling interest

124



136





412




Net income attributable to Nelnet, Inc.

$

36,828



41,394



47,451



121,363



139,456


Earnings per common share:










Net income attributable to Nelnet, Inc.    shareholders - basic

$

0.78



0.87



0.98



2.56



2.88


Net income attributable to Nelnet, Inc.    shareholders - diluted

$

0.77



0.87



0.98



2.55



2.87


Weighted average common shares outstanding:










Basic

47,086,098



47,049,055



48,059,747



47,042,035



48,177,539


Diluted

47,321,797



47,292,147



48,253,888



47,267,036



48,367,923


 







Condensed Consolidated Balance Sheets

(Dollars in thousands)








As of


As of


As of


September 30,

2012


December 31,
2011


September 30, 2011


(unaudited)




(unaudited)

Assets:






Student loans receivable, net

$

22,559,341



24,297,876



24,641,614


Cash, cash equivalents, and investments

186,534



93,350



141,928


Restricted cash and investments

1,003,888



724,131



653,518


Goodwill

117,118



117,118



117,118


Intangible assets, net

14,360



28,374



33,074


Other assets

527,603



591,368



648,975


Total assets

$

24,408,844



25,852,217



26,236,227


Liabilities:






Bonds and notes payable

$

22,884,096



24,434,540



24,926,512


Other liabilities

348,510



351,472



298,232


Total liabilities

23,232,606



24,786,012



25,224,744


Equity:






Total Nelnet, Inc. shareholders' equity

1,175,821



1,066,205



1,011,483


Noncontrolling interest

417






Total equity

1,176,238



1,066,205



1,011,483


Total liabilities and equity

$

24,408,844



25,852,217



26,236,227














SOURCE Nelnet

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
IoT is fundamentally transforming the auto industry, turning the vehicle into a hub for connected services, including safety, infotainment and usage-based insurance. Auto manufacturers – and businesses across all verticals – have built an entire ecosystem around the Connected Car, creating new customer touch points and revenue streams. In his session at @ThingsExpo, Macario Namie, Head of IoT Strategy at Cisco Jasper, will share real-world examples of how IoT transforms the car from a static p...
There is little doubt that Big Data solutions will have an increasing role in the Enterprise IT mainstream over time. Big Data at Cloud Expo - to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA - has announced its Call for Papers is open. Cloud computing is being adopted in one form or another by 94% of enterprises today. Tens of billions of new devices are being connected to The Internet of Things. And Big Data is driving this bus. An exponential increase is...
If you had a chance to enter on the ground level of the largest e-commerce market in the world – would you? China is the world’s most populated country with the second largest economy and the world’s fastest growing market. It is estimated that by 2018 the Chinese market will be reaching over $30 billion in gaming revenue alone. Admittedly for a foreign company, doing business in China can be challenging. Often changing laws, administrative regulations and the often inscrutable Chinese Interne...
SYS-CON Events has announced today that Roger Strukhoff has been named conference chair of Cloud Expo and @ThingsExpo 2016 Silicon Valley. The 19th Cloud Expo and 6th @ThingsExpo will take place on November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. "The Internet of Things brings trillions of dollars of opportunity to developers and enterprise IT, no matter how you measure it," stated Roger Strukhoff. "More importantly, it leverages the power of devices and the Interne...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo Silicon Valley Call for Papers is now open.
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
SYS-CON Events announced today that China Unicom will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. China United Network Communications Group Co. Ltd ("China Unicom") was officially established in 2009 on the basis of the merger of former China Netcom and former China Unicom. China Unicom mainly operates a full range of telecommunications services including mobile broadband (GSM, WCDMA, LTE F...
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, will discuss how VPaaS enables you to move fast, creating scalable video experiences that reach your...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life sett...
Is your aging software platform suffering from technical debt while the market changes and demands new solutions at a faster clip? It’s a bold move, but you might consider walking away from your core platform and starting fresh. ReadyTalk did exactly that. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, will discuss why and how ReadyTalk diverted from healthy revenue and over a decade of audio conferencing product development to start an innovati...
In his general session at 18th Cloud Expo, Lee Atchison, Principal Cloud Architect and Advocate at New Relic, discussed cloud as a ‘better data center’ and how it adds new capacity (faster) and improves application availability (redundancy). The cloud is a ‘Dynamic Tool for Dynamic Apps’ and resource allocation is an integral part of your application architecture, so use only the resources you need and allocate /de-allocate resources on the fly.
“We're a global managed hosting provider. Our core customer set is a U.S.-based customer that is looking to go global,” explained Adam Rogers, Managing Director at ANEXIA, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
The vision of a connected smart home is becoming reality with the application of integrated wireless technologies in devices and appliances. The use of standardized and TCP/IP networked wireless technologies in line-powered and battery operated sensors and controls has led to the adoption of radios in the 2.4GHz band, including Wi-Fi, BT/BLE and 802.15.4 applied ZigBee and Thread. This is driving the need for robust wireless coexistence for multiple radios to ensure throughput performance and th...
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management solutions, helping companies worldwide activate their data to drive more value and business insight and to transform moder...
Fifty billion connected devices and still no winning protocols standards. HTTP, WebSockets, MQTT, and CoAP seem to be leading in the IoT protocol race at the moment but many more protocols are getting introduced on a regular basis. Each protocol has its pros and cons depending on the nature of the communications. Does there really need to be only one protocol to rule them all? Of course not. In his session at @ThingsExpo, Chris Matthieu, co-founder and CTO of Octoblu, walk you through how Oct...
SYS-CON Events announced today that CDS Global Cloud, an Infrastructure as a Service provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. CDS Global Cloud is an IaaS (Infrastructure as a Service) provider specializing in solutions for e-commerce, internet gaming, online education and other internet applications. With a growing number of data centers and network points around the world, ...
SYS-CON Events announced today that LeaseWeb USA, a cloud Infrastructure-as-a-Service (IaaS) provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LeaseWeb is one of the world's largest hosting brands. The company helps customers define, develop and deploy IT infrastructure tailored to their exact business needs, by combining various kinds cloud solutions.
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus...