Fee-based revenue for 2006 and the fourth-quarter of 2006 represented 50 percent and 59 percent of Nelnet's total revenue, respectively. This is an increase from 2005 and the fourth quarter of 2005 when fee-based revenue represented 37 percent and 42 percent of total revenue, respectively.
Income from loan and guarantee servicing fees reached $190.6 million for 2006, up from $152.5 million in 2005. In the fourth quarter of 2006, loan and guarantee servicing income grew to $51.0 million, up from $43.2 million in the fourth quarter of 2005.
Other fee-based income, generated primarily by Nelnet Business Solutions and Enrollment Services, increased to $102.3 million for 2006 compared with $35.6 million for 2005. For the fourth quarter of 2006, other fee-based income increased to $36.9 million, up from $12.8 million in the same period a year ago. Other income increased to $23.4 million for 2006 compared with $7.7 million a year ago. For the fourth-quarter 2006, other fee income increased to $4.9 million, up from $2.3 million in the fourth-quarter 2005.
In 2006, net student loan assets increased by $3.5 billion, or 17 percent, to $23.8 billion at December 31, 2006. The company reported net new consolidation loan originations of $1.5 billion and $611.0 million and net consolidation loan originations of $2.7 billion and $918.6 million for 2006 and the fourth quarter of 2006, respectively.
Net interest income for 2006 was $308.7 million compared with $329.1 million for 2005. For the fourth quarter of 2006, Nelnet reported net interest income of $63.9 million compared with $81.3 million for the fourth quarter of 2005. Excluding the impact of the special allowance yield adjustment earned in 2005 and the first six months of 2006, the company's net interest income increased $49.8 million, or 21 percent, year over year.
The company reported core student loan spread of 1.42 percent for 2006 compared with 1.51 percent in 2005. For the fourth quarter of 2006, Nelnet reported core student loan spread of 1.31 percent compared with 1.44 percent in the same period of 2005 and 1.34 percent for the third quarter of 2006.
For 2006, the company reported operating expenses of $511.0 million compared with $322.3 million for 2005. Operating expenses were $159.6 million in the fourth quarter of 2006 compared with $98.1 million for the same period a year ago. The increase in operating expenses is primarily attributable to recent acquisitions.
Nelnet is instituting a quarterly cash dividend and will issue a cash dividend for the first-quarter 2007 on its outstanding shares of Class A common stock and Class B common stock of $0.07 per share. The dividend will be paid on March 15, 2007 to shareholders of record at the close of business on March 1, 2007. Nelnet currently has approximately 52.5 million shares of common stock outstanding.
Nelnet announced that Steve Butterfield, Vice Chairman and Co-Chief Executive Officer, will retire as Co-Chief Executive Officer following the company's annual meeting of shareholders in May 2007. Mr. Butterfield will remain on the Board of Directors (Board) as Vice Chairman.
"Steve and I have worked side by side for more than 15 years to make educational dreams possible for so many people, and we've led the company as Co-CEOs since the public offering in 2003," said Mr. Dunlap. "We're fortunate that Steve will continue to serve as Vice Chairman and will stay active in supporting our marketing efforts and building client relationships."
"I am proud of the great company we have built at Nelnet," said Mr. Butterfield. "So much of what we have accomplished has been through the hard work of our associates. It has been my great privilege to work for them. Their dedication and professionalism gives me great confidence in the future of Nelnet."
As Mr. Butterfield transitions his role with Nelnet, he is planning to reduce his position in Nelnet stock. Therefore, the Board has approved a privately negotiated share repurchase of approximately 2.0 million shares of Class B common stock from Mr. Butterfield. After the repurchase, Mr. Butterfield will continue to be a major Nelnet shareholder, holding approximately 4.0 million shares of Class B common stock.
In addition, the Board approved the repurchase of approximately 700,000 shares of Class A common stock from certain members of management seeking to diversify their holdings. Mr. Dunlap is not participating in the share repurchase. The approximately 2.7 million shares of Class A and Class B common stock will be repurchased at a discount to market price.
The Board also approved an increase to 10 million the total number of shares of common stock authorized for repurchase under the company's existing stock repurchase program. Including the above, the company will have repurchased approximately 4.6 million shares out of the 10 million share authorization. The authorization provides the company the flexibility to repurchase shares from time to time in the future when it makes sense as a part of the company's capital management strategy.
A description of base net income and a reconciliation of GAAP net income to base net income can be found in supplemental financial information to this earnings release that is available online at www.nelnetinvestors.net/releases.cfm?reltype=Financial.
Nelnet will host a conference call to discuss this earnings release at 11:00 a.m. (Eastern) today. To access the call live, participants in the United States and Canada should dial 800.310.6649 and international callers should dial 719.457.2693 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 2:00 p.m. (Eastern) today and 11:45 p.m. (Eastern) February 16, 2007. To access the replay via telephone within the United States 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 7164392. A replay of the audio Web cast will also be available at www.nelnetinvestors.net.
For 28 years, Nelnet has been helping the education-seeking family plan for their education, pay for their education, and prepare for their careers. The company has invested hundreds of millions of dollars in products, services, and technology improvements for students and the educational institutions they attend. These services include live counseling to help families through all aspects of the financial aid process, benefits for borrowers, including tens of millions of dollars in fee reductions, and Nelnet sponsored scholarships. Nelnet serves students in 50 states, employs approximately 4,000 associates, and has $23.8 billion in net student loan assets.
Additional information is available at www.nelnet.com.
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. For more information see our filings with the Securities and Exchange Commission.
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