FOR RELEASE: 4/27/07
MEDIA CONTACT: Ben Kiser, 402.458.3024
INVESTOR CONTACT: Cheryl Watson, 317.469.2064
NELNET, INC. SUPPLEMENTAL FINANCIAL INFORMATION FOR THE FIRST QUARTER 2007
The following supplemental information should be read in connection with the
first-quarter 2007 earnings press release of Nelnet, Inc. (the "Company"), dated
April 27, 2007.
Information contained in this earnings supplement, 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 the Company's
operating results, performance, or financial condition expressed or implied by
the forward-looking statements 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. Certain prior year amounts have been
reclassified to conform to the current period presentation. For more information
see our filings with the Securities and Exchange Commission.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
------------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Interest income:
Loan interest $ 418,113 $ 410,015 $ 347,522
Amortization of loan premiums and deferred
origination costs (21,059) (22,838) (21,862)
Investment interest 21,496 24,310 19,541
------------ ------------ ------------
Total interest income 418,550 411,487 345,201
Interest expense:
Interest on bonds and notes payable 350,226 347,615 258,949
------------ ------------ ------------
Net interest income 68,324 63,872 86,252
Less provision for loan losses 2,753 1,800 9,618
------------ ------------ ------------
Net interest income after provision
for loan losses 65,571 62,072 76,634
------------ ------------ ------------
Other income (expense):
Loan and guarantee servicing income 49,445 50,985 47,074
Other fee-based income 40,029 36,868 18,155
Software services income 5,748 4,064 3,409
Other income 6,931 4,850 1,987
Derivative market value, foreign currency,
and put option adjustments (12,130) (19,510) 39,263
Derivative settlements, net 4,240 7,013 4,744
------------ ------------ ------------
Total other income (expense) 94,263 84,270 114,632
------------ ------------ ------------
Operating expenses:
Salaries and benefits 70,009 60,842 57,684
Other expenses 59,259 60,916 44,930
Amortization of intangible assets 6,918 6,794 5,633
Impairment expense - 31,090 -
------------ ------------ ------------
Total operating expenses 136,186 159,642 108,247
------------ ------------ ------------
Income (loss) before income taxes 23,648 (13,300) 83,019
Income tax expense (benefit) 8,868 (5,990) 30,711
------------ ------------ ------------
Net income (loss) before minority interest 14,780 (7,310) 52,308
Minority interest in net earnings of subsidiaries - - (242)
------------ ------------ ------------
Net income (loss) $ 14,780 $ (7,310) $ 52,066
============ ============ ============
Earnings (loss) per share, basic and diluted $ 0.29 $ (0.14) $ 0.96
============ ============ ============
Weighted average shares outstanding 50,982,187 52,506,936 54,241,341
CONDENSED CONSOLIDATED BALANCE SHEETS AND FINANCIAL DATA
AS OF AS OF AS OF
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
----------- ------------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
Assets:
Student loans receivable, net $ 25,013,045 $ 23,789,552 $ 21,320,374
Cash, cash equivalents, and investments 1,417,304 1,777,494 1,456,181
Goodwill 191,214 191,420 132,389
Intangible assets, net 154,176 162,994 162,396
Other assets 906,264 875,413 732,811
------------ ------------ ------------
Total assets $ 27,682,003 $ 26,796,873 $ 23,804,151
============ ============ ============
Liabilities:
Bonds and notes payable $ 26,537,482 $ 25,562,119 $ 22,670,772
Other liabilities 533,403 562,904 416,173
------------ ------------ ------------
Total liabilities 27,070,885 26,125,023 23,086,945
------------ ------------ ------------
Shareholders' equity 611,118 671,850 717,206
------------ ------------ ------------
Total liabilities and shareholders' equity $ 27,682,003 $ 26,796,873 $ 23,804,151
============ ============ ============
Return on average total assets 0.22% 0.27% 0.90%
Return on average equity 9.4% 9.6% 30.4%
Shareholders' equity to total assets 2.21% 2.51% 3.01%
NON-GAAP PERFORMANCE MEASURES
In accordance with the Rules and Regulations of the Securities and Exchange
Commission ("SEC"), the Company prepares financial statements in accordance with
generally accepted accounting principles ("GAAP"). In addition to evaluating the
Company's GAAP-based financial information, management also evaluates the
Company on a non-GAAP performance measure referred to as base net income. While
base net income is not a substitute for reported results under GAAP, the Company
provides base net income as additional information regarding its financial
results.
Base net income is the primary financial performance measure used by management
to develop financial plans, allocate resources, track results, evaluate
performance, establish corporate performance targets, and determine incentive
compensation. The Company's board of directors utilizes base net income to set
performance targets and evaluate management's performance. The Company also
believes analysts, rating agencies, and creditors use base net income in their
evaluation of the Company's results of operations. While base net income is not
a substitute for reported results under GAAP, the Company utilizes base net
income in operating its business because base net income permits management to
make meaningful period-to-period comparisons by eliminating the temporary
volatility in the Company's performance that arises from certain items that are
primarily affected by factors beyond the control of management. Management
believes base net income provides additional insight into the financial
performance of the core business activities of the Company's operations.
The following table provides a reconciliation of GAAP net income (loss) to base
and adjusted base net income.
THREE MONTHS ENDED
-----------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
------------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
GAAP net income (loss) $ 14,780 $ (7,310) $ 52,066
Base adjustments:
Derivative market value, foreign currency,
and put option adjustments 12,130 19,510 (39,263)
Amortization of intangible assets 6,918 6,794 5,633
Non-cash stock based compensation
related to business combinations 477 476 318
Variable-rate floor income - - -
------------- ------------ ------------
Total base adjustments before income taxes 19,525 26,780 (33,312)
Net tax effect (b) (6,638) (9,865) 12,861
------------- ------------ ------------
Total base adjustments 12,887 16,915 (20,451)
------------- ------------ ------------
Base net income 27,667 9,605 31,615
Adjustments to base net income:
Special allowance yield adjustment (a) - - (13,910)
Derivative settlements, net - - (4,164)
------------- ------------ ------------
Total adjustments to base net income
before income taxes - - (18,074)
Net tax effect (b) - - 6,868
------------- ------------ ------------
Total adjustments to base net income - - (11,206)
------------- ------------ ------------
Adjusted base net income $ 27,667 $ 9,605 $ 20,409
============= ============ ============
Earnings (loss) per share, basic and diluted:
GAAP net income (loss) $ 0.29 $ (0.14) $ 0.96
Total base adjustments 0.25 0.32 (0.37)
------------- ------------ ------------
Base net income 0.54 0.18 0.59
Total adjustments to base net income - - (0.21)
------------- ------------ ------------
Adjusted base net income $ 0.54 $ 0.18 $ 0.38
============= ============ ============
- ----------------------------
(a) As previously disclosed, on January 19, 2007, the Company entered into a
Settlement Agreement (the "Agreement") with the Department of Education
(the "Department") to resolve the audit by the Department's Office of
Inspector General (the "OIG") of the Company's portfolio of student
loans receiving 9.5% special allowance payments. Under the terms of the
Agreement, all 9.5% special allowance payments were eliminated for
periods on and after July 1, 2006. The Company had been deferring
recognition of 9.5% special allowance payments related to those loans
subject to the OIG audit effective July 1, 2006 pending satisfactory
resolution of this issue.
(b) Tax effect computed at 38%. The change in the value of the put option is
not tax effected as this is not deductible for income tax purposes.
LIMITATIONS OF BASE NET INCOME
While GAAP provides a uniform, comprehensive basis of accounting, for the
reasons discussed above, management believes that base net income is an
important additional tool for providing a more complete understanding of the
Company's results of operations. Nevertheless, base net income is subject to
certain general and specific limitations that investors should carefully
consider. For example, unlike financial statements prepared in accordance with
GAAP, the Company's base net income presentation does not represent a
comprehensive basis of accounting. In addition, the Company's base net income is
not a defined term within GAAP and may not be comparable to similarly titled
measures reported by other companies. Investors, therefore, may not be able to
compare our Company's performance with that of other companies based upon base
net income. Base net income results are only meant to supplement GAAP results by
providing additional information regarding the operational and performance
indicators that are most closely monitored and used by the Company's management
and board of directors to assess performance and information which the Company
believes is important to analysts, rating agencies, and creditors.
Other limitations of base net income arise from the specific adjustments that
management makes to GAAP results to derive base net income results. These
differences are described below.
DIFFERENCES BETWEEN GAAP AND BASE NET INCOME
Management's financial planning and evaluation of operating results does not
take into account the following items because their volatility and/or inherent
uncertainty affect the period-to-period comparability of the Company's results
of operations. A more detailed discussion of the differences between GAAP and
base net income follows.
DERIVATIVE MARKET VALUE, FOREIGN CURRENCY, AND PUT OPTION ADJUSTMENTS: Base net
income excludes the periodic unrealized gains and losses that are caused by the
change in fair value on derivatives in which the Company does not qualify for
"hedge treatment" under GAAP. Statement of Financial Accounting Standards No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No.
133"), requires that changes in fair value of derivative instruments be
recognized currently in earnings unless specific hedge accounting criteria, as
specified by SFAS No. 133, are met. The Company maintains an overall interest
rate risk management strategy that incorporates the use of derivative
instruments to reduce the economic effect of interest rate volatility.
Derivative instruments primarily used by the Company include interest rate
swaps, basis swaps, interest rate floor contracts, and cross-currency interest
rate swaps. Management has structured all of the Company's derivative
transactions with the intent that each is economically effective. However, the
Company does not qualify its derivatives for "hedge treatment" as defined by
SFAS No. 133, and the stand-alone derivative must be marked-to-market in the
income statement with no consideration for the corresponding change in fair
value of the hedged item. Since the Company plans to hold all derivative
instruments until their maturity, the Company believes these point-in-time
estimates of asset and liability values that are subject to interest rate
fluctuations make it difficult to evaluate the ongoing results of operations
against its business plan and affect the period-to-period comparability of the
results of operations. Included in base net income are the economic effects of
the Company's derivative instruments, which includes any cash paid or received
being recognized as an expense or revenue upon actual derivative settlements.
These settlements are included in "Derivative settlements, net" on the Company's
consolidated statements of operations.
Base net income excludes the foreign currency transaction gains or losses caused
by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.
In connection with the issuance of the Euro-denominated bonds, the Company has
entered into cross-currency interest rate swaps. Under the terms of these
agreements, the principal payments on the Euro-denominated notes will
effectively be paid at the exchange rate in effect at the issuance date of the
bonds. The cross-currency interest rate swaps also convert the floating rate
paid on the Euro-denominated bonds' (EURIBOR index) to an index based on LIBOR.
Included in base net income are the economic effects of any cash paid or
received being recognized as an expense or revenue upon actual settlements of
the cross-currency interest rate swaps. These settlements are included in
"Derivative settlements, net" on the Company's consolidated statements of
operations. However, the gains or losses caused by the re-measurement of the
Euro-denominated bonds to U.S. dollars and the change in market value of the
cross-currency interest rate swaps are excluded from base net income as the
Company believes the point-in-time estimates of value that are subject to
currency rate fluctuations related to these financial instruments make it
difficult to evaluate the ongoing results of operations against the Company's
business plan and affect the period-to-period comparability of the results of
operations. The re-measurement of the Euro-denominated bonds correlates with the
change in fair value of the cross-currency interest rate swaps. However, the
Company will experience unrealized gains or losses related to the cross-currency
interest rate swaps if the two underlying indices (and related forward curve) do
not move in parallel.
Base net income also excludes the change in fair value of put options issued by
the Company for certain business acquisitions. The put options are valued by the
Company each reporting period using a Black-Scholes pricing model. Therefore,
the fair value of these options is primarily affected by the strike price and
term of the underlying option, the Company's current stock price, and the
dividend yield and volatility of the Company's stock. The Company believes these
point-in-time estimates of value that are subject to fluctuations make it
difficult to evaluate the ongoing results of operations against the Company's
business plans and affects the period-to-period comparability of the results of
operations.
The gains and/or losses included in "Derivative market value, foreign currency,
and put option adjustments" on the Company's consolidated statements of
operations are primarily caused by interest rate and currency volatility,
changes in the value of put options based on the inputs used in the
Black-Scholes pricing model, as well as the volume and terms of put options and
of derivatives not receiving hedge treatment. Base net income excludes these
unrealized gains and losses and isolates the effect of interest rate, currency,
and put option volatility on the fair value of such instruments during the
period. Under GAAP, the effects of these factors on the fair value of the put
options and the derivative instruments (but not the underlying hedged item) tend
to show more volatility in the short term.
AMORTIZATION OF INTANGIBLE ASSETS: Base net income excludes the amortization of
acquired intangibles, which arises primarily from the acquisition of definite
life intangible assets in connection with the Company's acquisitions, since the
Company feels that such charges do not drive the Company's operating performance
on a long-term basis and can affect the period-to-period comparability of the
results of operations.
NON-CASH STOCK BASED COMPENSATION RELATED TO BUSINESS COMBINATIONS: The Company
has structured certain business combinations in which the stock consideration
paid has been dependent on the sellers' continued employment with the Company.
As such, the value of the consideration paid is recognized as compensation
expense by the Company over the term of the applicable employment agreement.
Base net income excludes this expense because the Company believes such charges
do not drive its operating performance on a long-term basis and can affect the
period-to-period comparability of the results of operations. If the Company did
not enter into the employment agreements in connection with the acquisition, the
amount paid to these former shareholders of the acquired entity would have been
recorded by the Company as additional consideration of the acquired entity,
thus, not having an effect on the Company's results of operations.
VARIABLE-RATE FLOOR INCOME: Loans that reset annually on July 1 can generate
excess spread income compared with the rate based on the special allowance
payment formula in declining interest rate environments. The Company refers to
this additional income as variable-rate floor income. The Company excludes
variable rate floor income from its base net income since its timing and amount
(if any) is uncertain, it has been eliminated by legislation for all loans
originated on and after April 1, 2006, and it is in excess of expected spreads.
In addition, because variable rate floor income is subject to the underlying
rate for the subject loans being reset annually on July 1, it is a factor beyond
the Company's control which can affect the period-to-period comparability of
results of operations. There was no variable-rate floor income in the periods
presented.
SPECIAL ALLOWANCE YIELD ADJUSTMENT AND RELATED HEDGING ACTIVITY: The Company
excludes the special allowance yield adjustments and the net settlements
received or paid on those derivative instruments used to hedge the student loans
that were earning 9.5% special allowance payments. Pursuant to the settlement
agreement entered into with the Department, effective July 1, 2006, the Company
no longer receives 9.5% special allowance payments. Prior to this agreement, the
Company excluded the special allowance yield adjustments from base net income
because the Company expected 9.5% special allowance payments to decline over
time due to the fact that in April 2004 it ceased adding loans receiving 9.5%
special allowance payments to its portfolio.
STUDENT LOANS RECEIVABLE
Student loans receivable includes all student loans owned by or on behalf of the
Company and includes the unamortized cost of acquisition or origination less an
allowance for loan losses. The following table describes the components of the
Company's loan portfolio:
AS OF AS OF AS OF
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
---------------------- ---------------------- ----------------------
PERCENT PERCENT PERCENT
DOLLARS OF TOTAL DOLLARS OF TOTAL DOLLARS OF TOTAL
------------ --------- ------------ -------- ------------ --------
(DOLLARS IN THOUSANDS)
Federally insured:
Stafford $ 6,096,393 24.4 % $ 5,724,586 24.1 % $ 6,541,680 30.7 %
PLUS/SLS 460,575 1.8 365,112 1.5 431,268 2.0
Consolidation 17,835,192 71.3 17,127,623 72.0 13,826,647 64.8
Non-federally insured 224,870 0.9 197,147 0.8 163,624 0.8
------------ --------- ------------ --------- ------------ ---------
Total 24,617,030 98.4 23,414,468 98.4 20,963,219 98.3
Unamortized premiums and deferred
origination costs 422,239 1.7 401,087 1.7 379,380 1.8
Allowance for loan losses:
Allowance - federally insured (7,859) (0.0) (7,601) (0.0) (7,075) (0.0)
Allowance - non-federally insured (18,365) (0.1) (18,402) (0.1) (15,150) (0.1)
------------ --------- ------------ --------- ------------ ---------
Net $25,013,045 100.0 % $23,789,552 100.0 % $21,320,374 100.0 %
============ ========= ============ ========= ============ =========
The following table sets forth the loans originated or acquired through each of
the Company's channels:
THREE MONTHS ENDED
--------------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
Beginning balance $23,414,468 $22,534,661 $19,912,955
Direct channel:
Consolidation loan originations 1,064,238 1,762,371 1,024,835
Less consolidation of existing portfolio (473,795) (843,749) (433,900)
------------ ------------ ------------
Net consolidation loan originations 590,443 918,622 590,935
Stafford/PLUS loan originations 354,827 192,533 306,148
Branding partner channel (a) (b) 202,290 69,498 230,150
Forward flow channel 375,941 332,702 351,812
Other channels (b) 205,918 12,209 243,953
------------ ------------ ------------
Total channel acquisitions 1,729,419 1,525,564 1,722,998
Repayments, claims, capitalized
interest, and other (235,807) (125,756) (365,158)
Consolidation loans lost to external parties (239,404) (307,649) (270,400)
Loans sold (51,646) (212,352) (37,176)
------------ ------------ ------------
Ending balance $24,617,030 $23,414,468 $20,963,219
============ ============ ============
(a) Included in the branding partner channel are private loan originations
of $44.3 million, $19.7 million, and $10.5 million for the three months
ended March 31, 2007, December 31, 2006, and March 31, 2006,
respectively.
(b) Included in other channels for the three months ended March 31, 2006 is
$190.1 million of acquisitions that were previously presented as
branding partner channel acquisitions. This reclassification was made
for comparative purposes due to the nature of the transactions.
STUDENT LOAN SPREAD
The following table analyzes the student loan spread on the Company's portfolio
of student loans. This table represents the spread on assets earned in
conjunction with the liabilities used to fund the assets, including the effects
of net derivative settlements.
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
------------- ------------- -------------
Student loan yield (a) 7.90 % 7.88 % 7.68 %
Consolidation rebate fees (0.79) (0.76) (0.71)
Premium and deferred origination costs
amortization (b) (0.36) (0.33) (0.44)
------------- ------------- -------------
Student loan net yield 6.75 6.79 6.53
Student loan cost of funds (c) (5.46) (5.48) (4.63)
------------- ------------- -------------
Student loan spread 1.29 1.31 1.90
Special allowance yield adjustments, net of
settlements on derivatives (d) - - (0.36)
------------- ------------- -------------
Core student loan spread 1.29 % 1.31 % 1.54 %
============= ============= =============
Average balance of student loans (in thousands) $23,844,815 $22,978,951 $ 20,237,068
Average balance of debt outstanding (in thousands) 25,378,267 24,552,113 21,796,549
- -------------------------------------------
(a) The student loan yield for the three months ended December 31, 2006 does
not include the $2.8 million charge to write off accounts receivable
from the Department related to third quarter 2006 9.5% special allowance
payments that were not received under the Company's previously disclosed
Settlement Agreement with the Department. The $2.8 million relates to
loans earning 9.5% special allowance payments that were not subject to
the OIG audit.
(b) Premium and deferred origination costs amortization for the three months
ended December 31, 2006 excludes premium amortization related to the
Company's portfolio of 9.5% loans purchased in October 2005 as part of a
business combination.
(c) The student loan cost of funds includes the effects of net settlement
costs on the Company's derivative instruments used to hedge the
Company's student loan portfolio.
(d) The special allowance yield adjustments represent the impact on net
spread had loans earned at statutorily defined rates under a taxable
financing. The special allowance yield adjustments include net
settlements on derivative instruments that were used to hedge this loan
portfolio earning the excess yield. As previously disclosed, on January
19, 2007, the Company entered into a Settlement Agreement with the
Department to resolve the audit by the OIG of the Company's portfolio of
student loans receiving 9.5% special allowance payments. Under the terms
of the Agreement, all 9.5% special allowance payments were eliminated
for periods on and after July 1, 2006. The Company had been deferring
recognition of 9.5% special allowance payments related to those loans
subject to the OIG audit effective July 1, 2006 pending satisfactory
resolution of this issue.
INTEREST RATE SENSITIVITY
A portion of the Company's student loan assets earn a fixed rate. As a result,
management uses fixed-rate debt and interest rate swaps to reduce the economic
effect of interest rate volatility. The following table shows the Company's
student loan assets currently earning at a fixed rate as of March 31, 2007:
BORROWER/
FIXED LENDER ESTIMATED
INTEREST WEIGHTED VARIABLE BALANCE
RATE AVERAGE CONVERSION OF FIXED
RANGE YIELD RATE (A) RATE ASSETS
--------- ------------- ------------ -------------
(DOLLARS IN
THOUSANDS)
8.0-9.0 % 8.23 % 5.59 % $ 362,919
>9.0 9.05 6.41 402,077
-------------
$ 764,996
=============
------------------
(a) The estimated variable conversion rate is the estimated short-term
interest rate at which loans would convert to variable rate.
The following table summarizes the outstanding derivative instruments as of
March 31, 2007 used by the Company to hedge the fixed-rate loan portfolio.
WEIGHTED AVERAGE
NOTIONAL FIXED RATE PAID BY
MATURITY VALUES THE COMPANY
---------------- -------------- -----------------
(DOLLARS IN
THOUSANDS)
2008 $ 462,500 3.76%
2009 312,500 4.01%
------------ ---------------
Total $ 775,000 3.86%
============ ===============
In addition to the interest rate swaps with notional values of $0.8 billion
summarized above, as of March 31, 2007, the Company had $376.4 million of
fixed-rate debt (excluding the Company's fixed-rate unsecured debt of $475.0
million) that was used by the Company to hedge fixed-rate student loan assets.
DERIVATIVE SETTLEMENTS
The following table summarizes the components of derivative settlements.
THREE MONTHS ENDED
----------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
---------- ------------ ----------
(DOLLARS IN THOUSANDS)
Interest rate and basis swap derivatives- loan portfolio $ 2,895 $ 4,291 $ 1,732
Interest rate swap derivatives- other (a) 4,664 7,044 -
Special allowance yield adjustment derivatives (a) - - 4,164
Cross currency interest rate swaps (3,319) (4,322) (1,152)
---------- ------------ ----------
Derivative settlements, net $ 4,240 $ 7,013 $ 4,744
========== ============ ==========
(a) Derivative settlements for interest rate swaps "other" include
settlements on the portfolio of derivatives that the Company had used to
hedge 9.5% special allowance payments and the portfolio of off-setting
interest rate swaps the Company entered into during the fourth quarter
2006. The new derivatives mirror the 9.5% special allowance payment
derivatives. Settlements on the 9.5% special allowance derivatives were
classified in the special allowance yield adjustment derivatives line
item through September 30, 2006.
STUDENT LOAN SERVICING
The Company performs servicing activities for its own portfolio and third
parties. The following table summarizes the Company's loan servicing volumes:
AS OF MARCH 31, AS OF DECEMBER 31, AS OF MARCH 31,
2007 2006 2006
-------------------------------- --------------------------------- -------------------------------
COMPANY THIRD PARTY TOTAL COMPANY THIRD PARTY TOTAL COMPANY THIRD PARTY TOTAL
---------- ----------- --------- ---------- ------------ --------- --------- ----------- ---------
(DOLLARS IN MILLIONS)
FFELP and private loans $ 23,274 $ 8,935 $ 32,209 $ 21,869 $ 8,725 $ 30,594 $ 18,017 $ 10,626 $ 28,643
Canadian loans
(in U.S. $) (a) - 9,266 9,266 - 9,043 9,043 - 8,388 8,388
---------- ----------- --------- ---------- ------------ --------- --------- ----------- ---------
Total $ 23,274 $ 18,201 $ 41,475 $ 21,869 $ 17,768 $ 39,637 $ 18,017 $ 19,014 $ 37,031
========== =========== ========= ========== ============ ========= ========= =========== =========
(a) As previously disclosed, EDULINX Canada Corporation, a subsidiary of
Nelnet, TED] announced that the Government of Canada decided to award a
competitive contract to provide services in support of the Canada and
Integrated Student Loan Programs (CSLP) upon the expiration of the
current EDULINX contract for such services to another service provider.
The Government of Canada is EDULINX's largest customer. This contract is
scheduled to expire on March 31, 2008. As a result of this decision,
EDULINX will be required to transition the existing CSLP portfolio it
services to the selected service provider. As of March 31, 2007, the
Company serviced $8.0 billion of CSLP loans.