(Source: PRNewswire-FirstCall)
LINCOLN, Neb., Aug. 10 /PRNewswire-FirstCall/ -- Nelnet, Inc. today reported GAAP net income for the second quarter of 2009 of $8.2 million, or $0.16 per share, compared with $43.7 million, or $0.88 per share, for the second quarter of 2008. Base net income for the second quarter of 2009 was $29.7 million, or $0.60 per share, compared with $26.5 million, or $0.54 per share, in the second quarter of 2008. Base net income excludes discontinued operations and restructuring, impairment, and certain liquidity related charges.
GAAP net income for the first six months of 2009 was $33.7 million, or $0.68 share, compared with a GAAP net loss of $26.1 million, or $0.53 per share, for the first six months of 2008. Base net income excluding discontinued operations and restructuring, impairment, and certain liquidity related charges for the first six months of 2009 was $62.2 million, or $1.26 per share, compared to $41.8 million, or $0.85 per share, for the first six months of 2008.
Other income for the first and second quarters of 2009 includes a pre-tax gain of $8.1 million and $5.8 million, respectively, from the company's purchase of unsecured debt.
"Through the first half of 2009, we are pleased with our results and the progress we are making towards achieving our 2009 objectives of increasing and diversifying our fee-based businesses, managing operating expenses, maximizing the value of our student loan portfolio, improving liquidity, and reducing our operating debt," said Mike Dunlap, Chairman and Chief Executive Officer of Nelnet. "Meeting these objectives will be important to our long-term success and to our ongoing transformation to a company focused on providing education-related processing for a fee."
On June 17, 2009, Nelnet announced it had been awarded a contract by the U.S. Department of Education (Department) to service federal student loans. Servicing volume will initially be allocated by the Department to servicers awarded a contract; however, performance factors such as customer satisfaction levels and default rates will determine volume allocations over time.
"We are excited by the opportunity to begin serving families and schools on behalf of the Department later in the third quarter," said Dunlap. "Winning this contract allows us to leverage our existing infrastructure, brings stability, and adds significant revenue to the company."
Fee-based Businesses
Total revenue from fee-based businesses for the second quarter of 2009 was $75.9 million compared with $66.0 million for the second quarter of 2008. Total revenue from fee-based businesses for the first six months of 2009 was $152.8 million compared with $139.9 million for the same period in 2008. 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 second quarter of 2009, revenue from these businesses increased $6.3 million, or 23 percent, compared with the same period in 2008.
Margin Analysis
For the second quarter of 2009, Nelnet reported net interest income including derivative settlements of $66.6 million compared with $77.8 million for the second quarter of 2008. Net interest income including derivative settlements for the first six months of 2009 was $119.5 million compared with $135.1 million for the first six months of 2008.
The company reported core student loan spread of 1.09 percent for the second quarter of 2009 compared with 1.11 percent for the same period of 2008 and 0.94 percent for the first quarter of 2009. The company's core student loan spread for the second quarter of 2009 includes $37.1 million of fixed rate floor income, up from $9.9 million in the second quarter of 2008 and $30.3 million in the first quarter of 2009.
Operating Expenses
Operating expenses were $97.4 million in the second quarter of 2009 compared with $97.9 million for the second quarter of 2008 and $92.6 million in the first quarter of 2009. For the first six months of 2009, the company reported operating expenses of $189.9 million, down from $226.8 million for the same period a year ago. Excluding restructuring, impairment, and other charges, operating expenses decreased $7.6 million, or 9 percent, and $19.9 million, or 12 percent, for the three and six months ended June 30, 2009, compared to the same periods in 2008. This decrease was the result of the company's continued focus on managing costs and gaining efficiencies.
Student Loan Assets
At June 30, 2009, net student loan assets were $25.6 billion, of which $1.7 billion were classified as held for sale. Loans held for sale are funded using the Department's participation program and are expected to be sold to the Department during 2009. Approximately 90 percent of student loans held for investment are financed to term at rates that the company currently believes will generate cash flow in excess of $1.4 billion. In addition, Nelnet has liquidity for new loan originations through the Department'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 balance of $403.7 million at June 30, 2009.
