2. Restatement of Consolidated 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 and nine months ended September 30, 2010 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 and nine months ended September 30, 2010.


	Three Months Ended						Nine Months Ended
	September 30, 2010						September 30, 2010
	As Reported			As Restated			As Reported			As Restated
Net revenue	$	98,946		$	98,946		$	285,794		$	285,594
Costs and expenses:
Instructional costs and services		42,070			45,717			120,472			133,409
Selling and promotional		28,103			28,103			83,955			83,955
General and administrative		6,608			6,608			18,888			18,888
Exit costs		27			27			232			232

Total costs and expenses		76,808			80,455			223,547			236,484

Operating income		22,138			18,491			62,247			49,110
Net interest expense		(143	)		(143	)		(551	)		(551	)

Income before income taxes		21,995			18,348			61,696			48,559
Income tax expense		9,077			7,606			24,902			19,603

Net income	$	12,918		$	10,742		$	36,794		$	28,956

Earnings per share:
Basic income per share(1)	$	0.28		$	0.23		$	0.80		$	0.63

Diluted income per share(1)	$	0.28		$	0.23		$	0.79		$	0.62

Basic weighted average shares outstanding		45,746			45,746			45,715			45,715

Diluted weighted average shares outstanding		46,351			46,351			46,413			46,413


(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 statement of cash flows.


	Nine Months Ended
	September 30, 2010
	As Reported			As Restated
Net income	$	36,794		$	28,956
Provision for bad debts		16,347			29,283
Deferred income taxes		(4,163	)		(9,461	)
Changes in accounts receivable		(39,280	)		(39,080	)
Net cash provided by operating activities		80,534			80,534