SLM Corp. (SLM, Financial) filed Quarterly Report for the period ended 2010-09-30.
Slm Corp. has a market cap of $6.16 billion; its shares were traded at around $12.68 with a P/E ratio of 8.23 and P/S ratio of 1.29. Slm Corp. had an annual average earning growth of 9.8% over the past 10 years.SLM is in the portfolios of Irving Kahn of Kahn Brothers & Company Inc., James Barrow of Barrow, Hanley, Mewhinney & Strauss, Brian Rogers of T Rowe Price Equity Income Fund, Dodge & Cox, Michael Price of MFP Investors LLC, Bruce Kovner of Caxton Associates, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Steven Cohen of SAC Capital Advisors, David Dreman of Dreman Value Management, Prem Watsa of Fairfax Financial Holdings, Inc., George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.
FFELP loans and administer the securitization trusts. The Company expects to be the primary beneficiary of these trusts and therefore expects to consolidate the trusts onto the Companys balance sheet at closing. In addition, the Company contracted the right to service approximately $1.1 billion of additional FFELP securitized assets from SLC. (The Company does not expect to consolidate the underlying trusts because it does not expect to be the primary beneficiary of these trusts.) In the aggregate, approximately $28 billion in FFELP loans are involved. The aggregate purchase price is expected to be approximately $1.1 billion and will be payable in cash at the closing of the transaction. The Company anticipates the closing to occur in the fourth quarter of 2010 subject to receipt of necessary approvals.
On January 1, 2010, upon the prospective adoption of topic updates to the FASBs ASC 810, Consolidation, the Company consolidated its off-balance sheet securitization trusts at their historical cost basis. As a result, the Company removed the $1.8 billion of Residual Interests (associated with its off-balance sheet securitization trusts as of December 31, 2009) from the consolidated balance sheet and the Company consolidated $35.0 billion of assets ($32.6 billion of which are student loans, net of a $550 million allowance for loan losses) and $34.4 billion of liabilities (primarily trust debt), which resulted in an approximate $750 million after-tax reduction of stockholders equity (recorded as a cumulative effect adjustment to retained earnings). After the adoption of topic updates to ASC 810, the Companys results of operations no longer reflect securitization servicing and Residual Interest revenue related to these securitization trusts, but instead report interest income, provisions for loan losses associated with the securitized assets and interest expense associated with the debt issued from the securitization trusts to third parties, consistent with the Companys accounting treatment of prior on-balance sheet securitization trusts. As of January 1, 2010, there are no longer differences between the Companys GAAP and Core Earnings presentation for securitization accounting. As a result, our Managed and on-balance sheet (GAAP) student loan portfolios are the same.
Management allocates capital on a Managed Basis. As a result, this accounting change did not affect managements view of capital adequacy for the Company. The Companys unsecured revolving credit facility and its asset-backed credit facilities contain two principal financial covenants related to tangible net worth and net revenue. The tangible net worth covenant requires the Company to maintain consolidated tangible net worth of at least $1.38 billion at all times. Consolidated tangible net worth as calculated for purposes of this covenant was $3.5 billion as of December 31, 2009. Upon adoption of topic updates to ASC 810 on January 1, 2010, consolidated tangible net worth as calculated for this covenant was $2.7 billion. Because the transition adjustment upon adoption of topic updates to ASC 810 is recorded through retained earnings, the net revenue covenant was not affected by the adoption of topic updates to ASC 810. The ongoing net revenue covenant will not be affected by ASC 810s impact on the Companys securitization trusts as the net revenue covenant treated all off-balance sheet trusts as on-balance sheet for purposes of calculating net revenue.
During the third quarter, as part of a broad-based assessment of possible changes to the Companys business following the passage of HCERA, the Company performed certain preliminary valuations which indicated there was possible impairment of goodwill and certain intangible assets in its Lending, Asset Performance Group (APG), Upromise and Guarantor Servicing reporting units. The Company identified certain events that occurred during third quarter 2010 that it determined were triggering events because they either resulted in lower expected future cash flows or because they provided indications that market participants would value the Companys reporting units below previous estimates of fair value (see Note 4, Goodwill and Acquired Intangible Assets, to the consolidated financial statements for a further discussion). Based upon these preliminary results, the Company performed a full goodwill impairment evaluation which resulted in a goodwill impairment of $402 million in its APG reporting unit, $140 million in its Upromise reporting unit and $62 million in its Guarantor Servicing reporting unit. In addition, as part of this analysis, the Company determined that certain intangible assets were also impaired. As a result, the Company recorded $56 million in intangible asset write-downs in the third quarter. In connection with managements assessment of possible changes to the Companys business, the Company is planning to redefine its operating segments and revise its reportable segments presentation in the fourth quarter of 2010, once certain decisions have been finalized with respect to how management will view the business on a going-forward basis.
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Slm Corp. has a market cap of $6.16 billion; its shares were traded at around $12.68 with a P/E ratio of 8.23 and P/S ratio of 1.29. Slm Corp. had an annual average earning growth of 9.8% over the past 10 years.SLM is in the portfolios of Irving Kahn of Kahn Brothers & Company Inc., James Barrow of Barrow, Hanley, Mewhinney & Strauss, Brian Rogers of T Rowe Price Equity Income Fund, Dodge & Cox, Michael Price of MFP Investors LLC, Bruce Kovner of Caxton Associates, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Steven Cohen of SAC Capital Advisors, David Dreman of Dreman Value Management, Prem Watsa of Fairfax Financial Holdings, Inc., George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
On October 11, 2010, the Company sold to the Department of Education (ED) approximately $20.4 billion face amount of loans as part of the Loan Purchase Commitment Program (Purchase Program) (see LIQUIDITY AND CAPITAL RESOURCES ED Funding Programs). Outstanding debt of $20.3 billion has been paid down related to the Loan Purchase Participation Program (the Participation Program) in connection with this loan sale. The Company is servicing approximately 3.3 million accounts ($42 billion of loans) under the ED Servicing Contract after the sale of these loans.FFELP loans and administer the securitization trusts. The Company expects to be the primary beneficiary of these trusts and therefore expects to consolidate the trusts onto the Companys balance sheet at closing. In addition, the Company contracted the right to service approximately $1.1 billion of additional FFELP securitized assets from SLC. (The Company does not expect to consolidate the underlying trusts because it does not expect to be the primary beneficiary of these trusts.) In the aggregate, approximately $28 billion in FFELP loans are involved. The aggregate purchase price is expected to be approximately $1.1 billion and will be payable in cash at the closing of the transaction. The Company anticipates the closing to occur in the fourth quarter of 2010 subject to receipt of necessary approvals.
On January 1, 2010, upon the prospective adoption of topic updates to the FASBs ASC 810, Consolidation, the Company consolidated its off-balance sheet securitization trusts at their historical cost basis. As a result, the Company removed the $1.8 billion of Residual Interests (associated with its off-balance sheet securitization trusts as of December 31, 2009) from the consolidated balance sheet and the Company consolidated $35.0 billion of assets ($32.6 billion of which are student loans, net of a $550 million allowance for loan losses) and $34.4 billion of liabilities (primarily trust debt), which resulted in an approximate $750 million after-tax reduction of stockholders equity (recorded as a cumulative effect adjustment to retained earnings). After the adoption of topic updates to ASC 810, the Companys results of operations no longer reflect securitization servicing and Residual Interest revenue related to these securitization trusts, but instead report interest income, provisions for loan losses associated with the securitized assets and interest expense associated with the debt issued from the securitization trusts to third parties, consistent with the Companys accounting treatment of prior on-balance sheet securitization trusts. As of January 1, 2010, there are no longer differences between the Companys GAAP and Core Earnings presentation for securitization accounting. As a result, our Managed and on-balance sheet (GAAP) student loan portfolios are the same.
Management allocates capital on a Managed Basis. As a result, this accounting change did not affect managements view of capital adequacy for the Company. The Companys unsecured revolving credit facility and its asset-backed credit facilities contain two principal financial covenants related to tangible net worth and net revenue. The tangible net worth covenant requires the Company to maintain consolidated tangible net worth of at least $1.38 billion at all times. Consolidated tangible net worth as calculated for purposes of this covenant was $3.5 billion as of December 31, 2009. Upon adoption of topic updates to ASC 810 on January 1, 2010, consolidated tangible net worth as calculated for this covenant was $2.7 billion. Because the transition adjustment upon adoption of topic updates to ASC 810 is recorded through retained earnings, the net revenue covenant was not affected by the adoption of topic updates to ASC 810. The ongoing net revenue covenant will not be affected by ASC 810s impact on the Companys securitization trusts as the net revenue covenant treated all off-balance sheet trusts as on-balance sheet for purposes of calculating net revenue.
During the third quarter, as part of a broad-based assessment of possible changes to the Companys business following the passage of HCERA, the Company performed certain preliminary valuations which indicated there was possible impairment of goodwill and certain intangible assets in its Lending, Asset Performance Group (APG), Upromise and Guarantor Servicing reporting units. The Company identified certain events that occurred during third quarter 2010 that it determined were triggering events because they either resulted in lower expected future cash flows or because they provided indications that market participants would value the Companys reporting units below previous estimates of fair value (see Note 4, Goodwill and Acquired Intangible Assets, to the consolidated financial statements for a further discussion). Based upon these preliminary results, the Company performed a full goodwill impairment evaluation which resulted in a goodwill impairment of $402 million in its APG reporting unit, $140 million in its Upromise reporting unit and $62 million in its Guarantor Servicing reporting unit. In addition, as part of this analysis, the Company determined that certain intangible assets were also impaired. As a result, the Company recorded $56 million in intangible asset write-downs in the third quarter. In connection with managements assessment of possible changes to the Companys business, the Company is planning to redefine its operating segments and revise its reportable segments presentation in the fourth quarter of 2010, once certain decisions have been finalized with respect to how management will view the business on a going-forward basis.
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