EXHIBIT 99.1
NELNET 121 South 13th Street, Suite 400 p 402-458-2370 www.nelnet.net
Lincoln, NE 68508 f 402-458-2344 NELNET CORPORATE
SERVICES, INC.
Media contact: Sheila Odom
402.458.2329
nelnetcommunications@nelnet.net
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Investor contact: Cheryl Watson
317.469.2064
investorrelations@nelnet.net
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For release April 28, 2004
NELNET, INC. ANNOUNCES FIRST-QUARTER 2004 EARNINGS
HIGHLIGHTED BY A 24% ANNUAL INCREASE IN NET STUDENT LOAN ASSETS
(Lincoln, NE) -- Nelnet, Inc. (NYSE: NNI) today announced first-quarter 2004
earnings of $9.1 million, highlighted by a 24% annual increase in net student
loan assets to $11.2 billion.
Nelnet reported GAAP net income of $9.1 million for the first quarter of 2004,
or $0.17 earnings per share, compared to $9.6 million, or $0.21 earnings per
share for the first quarter of 2003.
"We are excited by the results of our first full quarter as a public company,"
commented Steve Butterfield, Nelnet Vice Chairman and Co-CEO. "Our strong asset
growth from our school-based originations and loan Consolidation business is
translating into powerful earnings."
"Our net income, adjusted for the change in variable-rate floor income,
amortization of intangibles, and the loss on the mark-to-market of our
derivative instruments, increased by more than 42% and our earnings per share by
more than 22%," added Mr. Butterfield.
In the first quarter of 2004, Nelnet recorded approximately $0.3 million of
variable-rate floor income, or floor income generated by the annual reset of
borrower rates on July 1. Variable-rate floor income during the first quarter of
2003 approximated $5.8 million, a reduction of $5.5 million. In the first
quarter of 2004, operating expenses included $2.1 million of amortization of
identifiable intangible assets resulting from acquisitions, compared to $3.7
million in the first quarter of 2003.
Nelnet's interest rate risk management strategy incorporates the use of
derivative instruments to reduce the economic effect of interest rate
volatility. Derivative instruments that are currently used include interest rate
swaps and basis swaps. Nelnet management has structured derivative transactions
with the intent that each is economically effective. However, such derivative
instruments may not qualify for hedge accounting under the Statement of
Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. Included in the derivative market value
adjustment on the company's consolidated statement of income for the first
quarter of 2004 are changes in the fair value of derivative instruments of $2.5
million and net settlements of $1.2 million.
Net student loans receivable increased by $2.2 billion to $11.2 billion at March
31, 2004 as compared to $9.0 billion at March 31, 2003.
"We continue to be pleased with the strength of our balance sheet," said Terry
Heimes, Nelnet Chief Financial Officer. "In addition to our solid growth in loan
volume, our unamortized cost of loan acquisitions or premiums has been reduced
from 1.8% to 1.4% in the last year."
"Our consolidation efforts are not only protecting our existing portfolio
assets, but allowing us to add significant volumes of additional assets to our
book. During the first quarter alone, we originated approximately $800 million
in consolidation loans adding new assets of more than $485 million," said Mr.
Butterfield.
Nelnet will host a conference call to discuss this earnings release at 4:00 p.m.
(Eastern) today. To access the call live, participants in the U.S. and Canada
should dial 800.289.0529 and international callers should dial 913.981.5523 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 7:00 p.m.
(Eastern) today and 11:59 p.m. (Eastern) May 5. To access the replay via
telephone within the U.S. 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 240512. 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.
About Nelnet
Nelnet is one of the leading educational finance companies in the United States
and is focused on providing quality student loan products and services to
students and schools nationwide. With over $12 billion in total assets, Nelnet
originates in excess of $2 billion for itself and its service partners annually,
services more than $19 billion in student loans, and provides servicing software
for an additional $27 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 as well as
technology-based products, including student loan origination and lending,
guarantee servicing, and a suite of software solutions. The company's products
are designed to simplify the student loan process by automating financial aid
delivery, loan processing, and funds disbursement. Nelnet's services help to
facilitate and streamline educational 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.
Additional information is available at www.nelnet.net.
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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.
CONDENSED STATEMENTS OF INCOME AND FINANCIAL DATA
Three Months Ended
March 31,
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2004 2003
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(Unaudited)
(dollars in thousands,
except share data)
Interest income:
Loan interest, excluding variable
rate floor income $ 108,196 $ 100,009
Variable rate floor income 348 5,800
Amortization of loan premiums (19,817) (16,127)
Investment interest 3,651 3,925
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Total interest income 92,378 93,607
Interest expense:
Interest on bonds and notes payable 49,043 51,349
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Net interest income 43,335 42,258
Less provision for loan losses 3,115 2,410
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Net interest income after
provision for loan losses 40,220 39,848
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Other income:
Loan servicing and other fee income 25,709 25,837
Software services and other income 5,578 4,640
Derivative market value adjustment and
net settlements (3,741) -
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Total other income 27,546 30,477
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Operating expenses:
Salaries and benefits 27,769 26,505
Other expenses 23,365 24,924
Amortization of intangible assets 2,078 3,696
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Total operating expenses 53,212 55,125
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Income before income taxes 14,554 15,200
Income tax expense 5,433 5,622
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Net income $ 9,121 $ 9,578
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Earnings per share, basic and diluted $ 0.17 $ 0.21
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Weighted average shares outstanding 53,635,631 44,982,490
CONDENSED BALANCE SHEETS AND FINANCIAL DATA
As of March 31,
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2004 2003
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(Unaudited)
(dollars in thousands)
Assets
Student loans receivable, net $ 11,206,609 $ 9,035,318
Cash, cash equivalents and investments 1,099,678 790,433
Other assets 322,280 282,888
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Total assets $ 12,628,567 $ 10,108,639
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Liabilities and shareholders' equity
Liabilities:
Bonds and notes payable $ 12,140,725 $ 9,890,819
Other liabilities 173,205 98,957
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Total liabilities 12,313,930 9,989,776
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Shareholders' equity 314,637 118,863
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Total liabilities and shareholders' equity $ 12,628,567 $ 10,108,639
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Average student loans $ 10,453,826 $ 8,348,923
Return on average total assets 0.30% 0.39%
Return on average equity 11.7% 33.8%