UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
DECEMBER 22, 2006
NELNET, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA 001-31924 84-0748903
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
121 SOUTH 13TH STREET
SUITE 201
LINCOLN, NEBRASKA 68508
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 458-2370
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 8.01. Other Events.
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On December 22, 2006, Nelnet, Inc. issued a press release
announcing that the Government of Canada has notified EDULINX Canada
Corporation, a subsidiary of Nelnet, that the Government of Canada has
decided to award a competitive contract to provide financial and related
administrative 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.
Under its existing contract with the Government of Canada,
EDULINX provides services for student borrowers attending public
institutions. The Government of Canada is EDULINX's largest customer,
and as previously disclosed, this contract is currently scheduled to
expire on July 31, 2007 (the Government of Canada has the option to
extend the existing contract to March 31, 2008). As a result of this
decision, EDULINX will be required to transition the existing
direct-financed CSLP portfolio it services to the selected service
provider.
EDULINX's servicing revenue for the nine-months ended September
30, 2006 was $48.2 million (USD), of which $37.3 million (USD) was
earned under the CSLP contract. For the nine-months ended September 30,
2006, EDULINX contributed $3.7 million (USD), or $0.07 per share, to
Nelnet's consolidated net income earned under generally accepted
accounting principles ("GAAP").
In addition to evaluating the Company's GAAP-based financial
information, management also evaluates the Company on certain non-GAAP
performance measures referred to as base net income. Base net income as
defined by Nelnet is GAAP net income excluding derivative market value,
foreign currency, and put option adjustments, the amortization of
intangible assets, non-cash stock based compensation related to business
combinations, and variable-rate floor 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 a non-GAAP financial measure and may not be
comparable to similarly titled measures reported by other companies. The
Company's base net income presentation does not represent another
comprehensive basis of accounting. The difference between GAAP and base
net income related to EDULINX's operating results is due to the
amortization of certain EDULINX intangible assets.
EDULINX contributed $4.3 million (USD), or $0.08 per share, to
Nelnet's consolidated base net income for the nine-month period ended
September 30, 2006.
For the year ending December 31, 2006, the Company expects to
earn approximately $65 million (USD) of servicing revenue from EDULINX.
Of this amount, approximately $51 million (USD) is expected to be earned
under the CSLP contract. In addition, Nelnet expects that approximately
$5 million (USD), or $0.09 per share, and approximately $6 million
(USD), or $0.11 per share, of Nelnet's GAAP and base net income for
2006, respectively, will be contributed by EDULINX.
A copy of the press release is attached as an exhibit to this
Report.
Item 2.06. Material Impairments.
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As a result of the Government of Canada's decision to award the
contract to provide financial and related administrative services for
CSLP to another service provider as discussed in Item 8.01 above, Nelnet
concluded that an impairment charge for certain EDULINX assets,
including servicing software and hardware under development, intangible
assets, and goodwill, was required under GAAP. This determination was
made based upon the decision that Nelnet will no longer continue to
develop a servicing platform for EDULINX and a comparison of the
carrying amount of certain EDULINX intangible assets and goodwill with
their fair value. Accordingly, the Company currently estimates that it
will record a non-cash pre-tax impairment charge of $9 million (USD) to
$10 million (USD) during the fourth quarter of 2006. The actual amount
of the impairment charge recorded will not be known until the Company
has finalized its determination of certain servicing hardware and
software assets to be sold and prepared or obtained updated estimates.
Under the current contract between EDULINX and the Government of
Canada, EDULINX can earn performance incentive revenue if certain
performance levels are achieved (as defined in the servicing contract).
The current contract is for the period April 1, 2006 through July 31,
2007. Based on EDULINX achieving certain performance objectives through
December 31, 2006, the Company may recognize up to $5.0 million (USD)
during the fourth quarter of 2006 related to the incentives under this
contract. (This incentive revenue is not included in the 2006 revenue,
GAAP net income, and base net income estimated projections discussed
under Item 8.01 above). Additional incentive revenue could be recognized
by EDULINX over the remaining term of this contract.
Item 9.01. Financial Statements and Exhibits.
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(d) Exhibits. The following exhibit is filed as part of this
report:
Exhibit
No. Description
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99.1 Press release dated December 22, 2006 - "Nelnet Statement
Regarding Canadian Student Loan Contract"
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: December 22, 2006
NELNET, INC.
By: /s/ TERRY J. HEIMES
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Name: Terry J. Heimes
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release dated December 22, 2006 - "Nelnet Statement
Regarding Canadian Student Loan Contract"