2. Restatement of Financial Statements

On November 3, 2011, the University determined that there was an error in the methodology it used to estimate its allowance for doubtful accounts and that its financial statements for the three months ended March 31, 2011 needed to be restated.

In recent periods, the University experienced a significant change in the composition of its receivable balances since its transition to the borrower-based financial aid model in the second quarter of 2010 in which the receivables due from former students had grown as a percentage of the total amount outstanding. However, the University’s historical process for estimating the allowance for doubtful accounts did not consider the disaggregation of receivable balances by student based on enrollment status. As a result, the growth in the inactive student receivables was not evident when making the allowance estimate in prior periods. As the University’s collection experience indicates that receivables from former students carry a higher risk, this disaggregated information should have been considered in determining the probability of loss within the University’s receivables. If such information had been evaluated, management would have increased the allowance for doubtful accounts to reflect the increased risk profile of the receivables in prior periods. Accordingly, the Audit Committee of the Board of Directors together with management, determined that, because management should have taken the additional steps necessary to develop the disaggregated information for use in the analysis of reserve requirements and resulting allowance for doubtful accounts, the financial statements for the fiscal year ended December 31, 2010 and for the quarters ended June 30, 2010, September 30, 2010, March 31, 2011 and June 30, 2011 should be restated to correct the allowance for doubtful accounts.

The following table summarizes the unaudited quarterly results of operations as originally reported and as restated for the three months ended March 31, 2011.


	2011
	First Quarter			First Quarter
	As Reported			As Restated
Net revenue	$	101,709		$	101,709
Costs and expenses:
Instructional costs and services		45,830			48,875
Selling and promotional		29,832			29,832
General and administrative		6,832			6,832

Total costs and expenses		82,494			85,539

Operating income		19,215			16,170
Net interest expense		(75	)		(75	)

Income before income taxes		19,140			16,095
Income tax expense		7,842			6,614

Net income	$	11,298		$	9,481

Earnings per share:
Basic income per share(1)	$	0.25		$	0.21

Diluted income per share(1)	$	0.25		$	0.21

Basic weighted average shares outstanding		45,590			45,590

Diluted weighted average shares outstanding		46,089			46,089


(1)		The sum of quarterly income per share may not equal annual income per share due to rounding.

The following is a summary of the changes on the University’s balance sheet.


	As of March 31, 2011
	As Reported		As Restated
Accounts receivable, net of allowance for doubtful accounts of $13,169 (As Reported) and $31,366 (As Restated)		32,369		13,972
Deferred income taxes		9,143		16,563
Total current assets		128,286		117,309
Total assets		286,464		275,487
Accumulated earnings		71,278		60,302
Total stockholders’ equity		135,313		124,336
Total liabilities and stockholders’ equity		286,464		275,487

The following is a summary of the changes on the University’s statement of cash flows.


	Three Months Ended
	March 31, 2011
	As Reported		As Restated
Net income		11,298		9,481
Provision for bad debts		6,988		10,034
Deferred income taxes		1,004		(224	)
Net cash provided by operating activities		23,413		23,413