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)
JANUARY 23, 2008
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
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 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On January 23, 2008, Nelnet, Inc. (the "Company") announced via
press release a plan to further reduce operating expenses related to its
student loan origination and related businesses as a result of the
ongoing disruption in the global credit markets, as discussed further
under Item 2.05 below. The ongoing disruption in the credit markets
negatively affected the Company's operating results during the fourth
quarter 2007. The substantial and sustained divergence of certain
interest rate indices related to the Company's student loan assets and
related debt instruments caused continued contraction in the Company's
student loan spread which compressed to 90 to 95 basis points during the
three month period ended December 31, 2007. The sustained disruption had
the largest impact on that portion of the portfolio funded in the
Company's commercial paper conduit facility (approximately $6 billion to
$7 billion), those loans funded using auction rate securities
(approximately $2 billion), and that portion of the Company's portfolio
that earns interest based on the 91-day Treasury Bill rate.
ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES.
On January 23, 2008, the Company announced via press release a
plan to further reduce operating expenses related to its student loan
origination and related businesses as a result of the ongoing disruption
in the global credit markets. As previously disclosed, the Company
reduced borrower benefits, costs of acquisition related to premiums, and
sales and marketing costs as a result of legislative changes related to
the passage of The College Cost Reduction and Access Act of 2007 in
September 2007.
The capital market disruption has continued into the first
quarter and in certain areas, has deteriorated since year end. Since the
Company cannot determine nor control the length or depth of the capital
market disruption, it plans to further reduce its direct and indirect
costs related to its asset generation activities and be more selective
in pursuing origination activity, in both the school and direct to
consumer channels. Accordingly, the Company plans to suspend
consolidation student loan originations and will continue to review the
viability of continuing to originate and hold other types of student
loans, particularly private loans. As a result of these items, the
Company could experience a decrease in origination volume compared to
historical periods.
Management has developed a restructuring plan related to its
asset generation and supporting businesses which reduces marketing,
sales, service, and related support costs through a reduction in
workforce of approximately 300 positions and realignment of certain
operating facilities. Subject to completion of the necessary legal
notices and requirements, implementation of the plan will begin
immediately and is expected to be substantially complete during the
second quarter of 2008.
The Company estimates that the total after-tax charge to earnings
associated with the restructuring plan will range between $15 million
and $17 million, consisting of approximately $4 million in severance
costs, up to $2 million in contract termination costs, and $9 million to
$11 million in non-cash charges related to the impairment of property
and equipment, intangible assets, and goodwill. The Company anticipates
that the after-tax charges to earnings will be incurred during the first
two quarters of 2008, of which greater than 90% will be incurred in the
first quarter.
As a result of this restructuring plan, the Company expects to
reduce operating expenses by $15 million to $20 million (before tax)
annually.
A copy of the Company's press release announcing the
restructuring plan is attached as Exhibit 99.1 to this report.
Information contained or incorporated in this report 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 the
pending and uncertain nature of the reported federal legislation
expected to significantly affect student loan programs, the uncertain
nature of estimated expenses that may be incurred and cost savings that
may result from the Company's restructuring plans, 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.
ITEM 2.06. MATERIAL IMPAIRMENTS.
The discussion of the financial impact as a result of the
Company's plan to reduce operating expenses related to its student loan
businesses as a result of the ongoing disruption in the global credit
markets under Item 2.05 above contains a discussion of impairments of
certain assets that are expected to be recognized by the Company during
the first quarter 2008. Such discussion is incorporated under this Item
2.06 by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits. The following exhibit is filed or furnished as part of
this report:
Exhibit
No. Description
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99.1 Press Release dated January 23, 2008 - "Nelnet Says Credit
Market Disruption Requires Changes to Student Loan Business"
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: January 24, 2008
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 January 23, 2008 - "Nelnet Says Credit Market
Disruption Requires Changes to Student Loan Business"