2.	Restatement and Revision of Previously Issued Unaudited Financial Statements

Restatement of 2013 Unaudited Financial Statements. In February 2014, we commenced a review of the accounting for a variable interest that we held in the PEAKS Trust, a VIE. We engaged significant internal and external resources to perform the Supplemental Procedures. As a result of the review and the Supplemental Procedures, on June 18, 2014, the Audit Committee of our Board of Directors determined that we should have consolidated the PEAKS Trust in our consolidated financial statements beginning on February 28, 2013. February 28, 2013 was the first date that we had the substantive unilateral right to remove the servicer of the PEAKS Trust Student Loans, as described further below.

We had previously concluded that we were not required to consolidate the PEAKS Trust in our consolidated financial statements, because we believed we did not have the power to direct the activities of the PEAKS Trust that most significantly impact its economic performance and, therefore, believed we were not the primary beneficiary of the PEAKS Trust. We determined that the activities of the PEAKS Trust that most significantly impact its economic performance involve the servicing of the PEAKS Trust Student Loans. We determined that February 28, 2013 was the first date that we could have exercised our right to terminate the servicing agreement that governs the servicing activities of the PEAKS Trust Student Loans (the “PEAKS Servicing Agreement”), due to the failure of the entity that performs those servicing activities for the PEAKS Trust Student Loans on behalf of the PEAKS Trust to meet certain performance criteria specified in the PEAKS Servicing Agreement. As a result of this analysis, we concluded that we became the primary beneficiary of the PEAKS Trust on February 28, 2013, which was the first date that we had the power to direct the activities of the PEAKS Trust that most significantly impact the economic performance of the PEAKS Trust.

As a result of our determination that we should have consolidated the PEAKS Trust in our consolidated financial statements beginning on February 28, 2013, we concluded that we needed to restate the unaudited condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for each of the fiscal quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, and that those previously-issued financial statements should no longer be relied upon. See Note 8 – Variable Interest Entities, for a further discussion of the Consolidation.

In addition, we corrected certain unrelated, immaterial errors as part of the restatement of the unaudited condensed consolidated financial statements in this Amended Filing. These immaterial errors related to:

•

the reassessment of the recognition of revenue with respect to students who withdrew from a program of study in the three and six months ended June 30, 2013, which, resulted in adjustments to the amount of revenue, the provision for doubtful accounts (which is included in student services and administrative expenses) and accounts receivable, net recorded in those periods;

•

the calculation of the contingent loss for a risk sharing agreement (the “2009 RSA”) that we entered into on February 20, 2009 with an unaffiliated entity (the “2009 Entity”) in connection with other agreements to create a program that made private education loans available to our students to help pay the students’ cost of education that financial aid from federal, state and other sources did not cover (the “2009 Loan Program”), which resulted in adjustments to the loss from loan program guarantees and other liabilities as of and for the three and six months ended June 30, 2013;

•

the classification of the 2009 RSA contingent liability, which resulted in an increase to other current liabilities and a decrease to other liabilities as of June 30, 2013; and

•

the classification of funds held for students from federal student financial aid programs under Title IV (“Title IV Programs”) of the Higher Education Act of 1965, as amended (the “HEA”) that result in a credit balance on a student’s account, which resulted in an increase to restricted cash and a decrease to cash and cash equivalents as of June 30, 2013.

Our restated condensed consolidated financial statements as of and for the three and six months ended June 30, 2013 reflect the correction of those errors in the period in which they arose. The amounts related to the correction of these immaterial errors are shown in the Other Adjustments column in the tables below.

Our Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Shareholders’ Equity as of June 30, 2013, December 31, 2012 and June 30, 2012 also reflect the cumulative corrections related to:

•

the reassessment of the recognition of revenue with respect to students who withdrew from a program of study in prior periods;

•

the contingent loss for the 2009 RSA;

•

the reclassification of funds held for students from Title IV Programs that result in a credit balance on a student’s account as restricted cash; and

•

the reclassification of amounts related to the vesting of restricted stock units (“RSUs”) from retained earnings to capital surplus in prior periods.

The amounts related to the correction of these immaterial errors are shown in the Other Adjustments column in the tables below.

In addition, we reclassified legal and other investigation costs, which were previously recorded in cost of educational services and in student services and administrative expenses, to a separate line in our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2013. The amounts of those reclassifications are shown in the Reclassifications column in the applicable tables below.

A reconciliation of previously reported amounts to the restated, corrected and reclassified amounts is set forth in the tables below. Amounts shown in the Consolidation of PEAKS Trust column include the financial results of the PEAKS Trust and the amounts that were eliminated from our financial statements as a result of the Consolidation.

The following table sets forth the effect of the Consolidation and correction of errors on the affected line items on our Condensed Consolidated Balance Sheet as of June 30, 2013:


	As of June 30, 2013
	As Previously Reported		Consolidation of PEAKS Trust			Other Adjustments			As Restated
Condensed Consolidated Balance Sheet Data:
Cash and cash equivalents	$	185,408	$	0		$	(2,840	)	$	182,568
Restricted cash		776		2,203			2,840			5,819
Accounts receivable, net		123,076		0			2,851			125,927
PEAKS Trust student loans, less allowance for loan losses		0		7,307			0			7,307
Deferred income taxes		29,131		39,084			0			68,215
Total current assets		358,179		48,821			2,851			409,851
PEAKS Trust student loans, excluding current portion, less allowance for loan losses		0		101,375			0			101,375
Deferred income taxes		52,759		(8,981	)		1,489			45,267
Other assets		39,440		(7,450	)^(a)		0			31,990
Total assets		629,473		133,765			4,340			767,578
Current portion of PEAKS Trust senior debt		0		102,695			0			102,695
Other current liabilities		41,521		(21,510	)^(a)		23,166	^(b)		43,177
Total current liabilities		245,350		81,185			23,166			349,701
PEAKS Trust senior debt, excluding current portion		0		124,983			0			124,983
Other liabilities		84,191		(22,796	)^(a)		(18,187	)^(b)		43,208
Total liabilities		449,541		183,372			4,979			637,892
Capital surplus		204,731		0			(9,590	)		195,141
Retained earnings		1,011,061		(49,607	)		8,951			970,405
Total shareholders’ equity		179,932		(49,607	)		(639	)		129,686
Total liabilities and shareholders’ equity		629,473		133,765			4,340			767,578

^(a)	Includes amounts that were eliminated from our consolidated financial statements as a result of the Consolidation, primarily the contingent liability and estimated recoveries associated with payments made under the PEAKS Guarantee.

^(b)	These amounts represent the increase to the contingent loss associated with the 2009 RSA and the reclassification, from long-term to current, that portion expected to be paid within 12 months of June 30, 2013.

The following table sets forth the effect of the Consolidation, correction of errors and reclassifications in our Condensed Consolidated Statement of Income for the three months ended June 30, 2013:


	Three Months Ended June 30, 2013
	As Previously Reported			Consolidation of PEAKS Trust			Other Adjustments			Reclassi- fications			As Restated
Condensed Consolidated Statement of Income Data:
Revenue	$	259,936		$	4,104		$	(3,581	)	$	0		$	260,459
Costs and expenses:
Cost of educational services		123,828			0			0			(287	)		123,541
Student services and administrative expenses		100,903			1,559			(4,201	)		74			98,335
Legal and other investigation costs		0			0			0			213			213
Provision for PEAKS Trust student loan losses		0			4,319			0			0			4,319

Total costs and expenses		224,731			5,878			(4,201	)		0			226,408

Operating income (loss)		35,205			(1,774	)		620			0			34,051
(Loss) on consolidation of PEAKS Trust		0			0			0			0			0
Interest income		172			(147	)		0			0			25
Interest (expense)		(1,113	)		(6,256	)		0			0			(7,369	)

Income (loss) before provision for income taxes		34,264			(8,177	)		620			0			26,707
Provision (benefit) for income taxes		13,405			(7,141	)		239			0			6,503

Net income (loss)	$	20,859		$	(1,036	)	$	381		$	0		$	20,204

Earnings per share:
Basic	$	0.89											$	0.86
Diluted	$	0.89											$	0.86
Weighted average shares outstanding:
Basic		23,414												23,414
Diluted		23,550												23,550

The following table sets forth the effect of the Consolidation, correction of errors and reclassifications in our Condensed Consolidated Statement of Income for the six months ended June 30, 2013:


	Six Months Ended June 30, 2013
	As Previously Reported			Consolidation of PEAKS Trust			Other Adjustments			Reclass- ifications			As Restated
Condensed Consolidated Statement of Income Data:
Revenue	$	547,647		$	5,464		$	(7,590	)	$	0		$	545,521
Costs and expenses:
Cost of educational services		249,049			0			0			(1,332	)		247,717
Student services and administrative expenses		207,185			2,078			(8,826	)		(381	)		200,056
Legal and other investigation costs		0			0			0			1,713			1,713
Loss related to loan program guarantees		3,464			0			339			0			3,803
Provision for PEAKS Trust student loan losses		0			4,319			0			0			4,319

Total costs and expenses		459,698			6,397			(8,487	)		0			457,608

Operating income (loss)		87,949			(933	)		897			0			87,913
(Loss) on consolidation of PEAKS Trust		0			(73,248	)		0			0			(73,248	)
Interest income		206			(147	)		0			0			59
Interest (expense)		(2,265	)		(8,678	)		0			0			(10,943	)

Income (loss) before provision for income taxes		85,890			(83,006	)		897			0			3,781
Provision (benefit) for income taxes		33,901			(33,399	)		347			0			849

Net income (loss)	$	51,989		$	(49,607	)	$	550		$	0		$	2,932

Earnings per share:
Basic	$	2.22											$	0.13
Diluted	$	2.21											$	0.12
Weighted average shares outstanding:
Basic		23,406												23,406
Diluted		23,516												23,516

The following table sets forth the effect of the Consolidation and correction of errors on the affected line items in our Condensed Consolidated Statement of Comprehensive Income for the three months ended June 30, 2013:


	Three Months Ended June 30, 2013
	As Previously Reported		Consolidation of PEAKS Trust			Other Adjustments		As Restated
Condensed Consolidated Statement of Comprehensive Income Data:
Net income (loss)	$	20,859	$	(1,036	)	$	381	$	20,204
Comprehensive income		20,907		(1,036	)		381		20,252


	Six Months Ended June 30, 2013
	As Previously Reported		Consolidation of PEAKS Trust			Other Adjustments		As Restated
Condensed Consolidated Statement of Comprehensive Income Data:
Net income (loss)	$	51,989	$	(49,607	)	$	550	$	2,932
Comprehensive income		52,132		(49,607	)		550		3,075

The following table sets forth the effect of the Consolidation and correction of errors on the affected line items in our Condensed Consolidated Statement of Cash Flows for the three months ended June 30, 2013:


	Three Months Ended June 30, 2013
	As Previously Reported			Consolidation of PEAKS Trust			Other Adjustments			As Restated
Condensed Consolidated Statement of Cash Flows Data:
Net income (loss)	$	20,859		$	(1,036	)	$	381		$	20,204
Provision for doubtful accounts		19,038			0			(4,114	)		14,924
Deferred income taxes		3,123			(1,639	)		0			1,484
Accretion of discount on PEAKS Trust student loans		0			(4,104	)		0			(4,104	)
Accretion of discount on PEAKS Trust senior debt		0			1,381			0			1,381
Provision for PEAKS Trust student loan losses		0			4,319			0			4,319
Restricted cash		(57	)		397			534			874
Accounts receivable		(38,037	)		0			3,494			(34,543	)
PEAKS Trust student loans		0			3,392			0			3,392
Other operating assets and liabilities		(311	)		(2,049	)		239			(2,121	)
Net cash flows from operating activities		7,607			661			534			8,802
Repayment of PEAKS Trust senior debt		0			(661	)		0			(661	)
Net cash flows from financing activities		(30,003	)		(661	)		0			(30,664	)

The following table sets forth the effect of the Consolidation and correction of errors on the affected line items in our Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2013:


	Six Months Ended June 30, 2013
	As Previously Reported			Consolidation of PEAKS Trust			Other Adjustments			As Restated
Condensed Consolidated Statement of Cash Flows Data:
Net income (loss)	$	51,989		$	(49,607	)	$	550		$	2,932
Provision for doubtful accounts		38,923			0			(8,694	)		30,229
Deferred income taxes		16,334			(26,902	)		(3,331	)		(13,899	)
Accretion of discount on PEAKS Trust student loans		0			(5,464	)		0			(5,464	)
Accretion of discount on PEAKS Trust senior debt		0			2,033			0			2,033
Provision for PEAKS Trust student loan losses		0			4,319			0			4,319
Loss on consolidation of PEAKS Trust		0			73,248			0			73,248
Restricted cash		(175	)		(500	)		37			(638	)
Accounts receivable		(84,686	)		0			7,458			(77,228	)
PEAKS Trust student loans		0			4,579			0			4,579
Other operating assets and liabilities		(11,004	)		(509	)		3,482			(8,032	)
Net cash flows from operating activities		(35,811	)		661			0			(35,113	)
Repayment of PEAKS Trust senior debt		0			(661	)		0			(661	)
Net cash flows from financing activities		(20,371	)		(661	)		0			(21,032	)

The following table sets forth the effect of the Consolidation and correction of errors on the affected line items in our Condensed Consolidated Statement of Shareholders’ Equity for the six months ended June 30, 2013:


	Six Months Ended June 30, 2013
	As Previously Reported		Consolidation of PEAKS Trust			Other Adjustments			As Restated
Condensed Consolidated Statement of Shareholders’ Equity Data:
Net income (loss)	$	51,989	$	(49,607	)	$	550		$	2,932
Balance as of June 30, 2013		179,932		(49,607	)		(639	)		129,686

Revision of 2012 Financial Statements. In connection with the performance of the Supplemental Procedures, we also identified corrections to our 2012 financial statements related to:

•

the recognition of revenue with respect to students who withdrew from a program of study; and

•

the calculation of the contingent loss for the 2009 RSA.

We evaluated the cumulative impact of those items on prior periods under the guidance in ASC 250, “Accounting Changes and Error Corrections” (“ASC 250”), relating to SEC Staff Accounting Bulletin (“SAB”) No. 99, “Materiality.” We also evaluated the impact of correcting those items through an adjustment to our financial statements for the three and six months ended June 30, 2013 and fiscal year ended December 31, 2013. We concluded, based on the guidance in ASC 250 relating to SAB No. 108, “Considering the Effects of Prior Year Misstatement when Quantifying Misstatements in Current Year Financial Statements,” that the correction of those items in our 2012 fiscal year would not be material, but would be material if corrected out-of-period in our 2013 fiscal year. As a result, we have revised our unaudited condensed consolidated financial statements as of and for the three months and year to date ended March 31, 2012, June 30, 2012 and September 30, 2012 and our audited consolidated financial statements as of and for the fiscal year ended December 31, 2012 to reflect the correction of those items that should have been recognized in those periods. The amounts of the corrections as of June 30, 2012 and December 31, 2012 and for the three and six months ended June 30, 2012 are shown in the Revisions column in the tables below.

Our revised Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Shareholders’ Equity as of June 30, 2012 and December 31, 2012 also reflect the correction of the classification of amounts related to the vesting of RSUs from retained earnings to capital surplus. The amounts of these corrections related to our Condensed Consolidated Balance Sheets were not material and are shown in the Revisions column in the tables below. The December 31, 2011 amounts presented in our Condensed Consolidated Statement of Shareholders’ Equity reflect an adjustment to increase retained earnings by $5,366 and decrease capital surplus by $5,366 for the cumulative effect of the classification of the vesting of RSUs. We also increased retained earnings as of December 31, 2011 in our Condensed Consolidated Statement of Shareholders’ Equity by $306 for the cumulative effect of the adjustments for the recognition of revenue with respect to students who withdrew from a program of study in prior periods.

We also corrected the classification of funds held for students from Title IV Programs that result in a credit balance on a student’s account to include those amounts in restricted cash on our Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2012. The amounts of these corrections were not material and are shown in the Revisions column in the tables below.

We also corrected the classification of losses related to loan program guarantees, which were previously recorded as reductions to revenue in our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2012 to report those amounts on a separate line. The amount of that correction is shown in the Revisions column in the tables below.

In addition, we reclassified legal and other investigation costs, which were previously recorded in cost of educational services and in student services and administrative expenses, to a separate line in our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2012. The amounts of those reclassifications are shown in the Reclassifications column in the applicable tables below.

The following tables set forth the effect of the revisions on the affected line items on our Condensed Consolidated Balance Sheets as of the dates indicated.


	As of June 30, 2012
	As Previously Reported		Revisions			As Revised
Condensed Consolidated Balance Sheet Data:
Cash and cash equivalents	$	167,234	$	(6,036	)	$	161,198
Restricted cash		751		6,036			6,787
Accounts receivable, net		73,675		1,372			75,047
Total current assets		273,090		1,372			274,462
Deferred income taxes		36,016		638			36,654
Total assets		556,641		2,010			558,651
Other current liabilities		19,454		13,637			33,091
Total current liabilities		247,815		13,637			261,452
Other liabilities		74,615		(11,446	)		63,169
Total liabilities		472,430		2,191			474,621
Capital surplus		198,812		(9,545	)		189,267
Retained earnings		925,781		9,364			935,145
Total shareholders’ equity		84,211		(181	)		84,030
Total liabilities and shareholders’ equity		556,641		2,010			558,651


	As of December 31, 2012
	As Previously Reported		Revisions			As Revised
Condensed Consolidated Balance Sheet Data:
Cash and cash equivalents	$	246,342	$	(2,877	)	$	243,465
Restricted cash		601		2,877			3,478
Accounts receivable, net		77,313		1,615			78,928
Total current assets		384,965		1,615			386,580
Deferred income taxes		56,112		1,359			57,471
Total assets		672,230		2,974			675,204
Other current liabilities		86,722		20,074			106,796
Total current liabilities		306,949		20,074			327,023
Other liabilities		98,327		(15,911	)		82,416
Total liabilities		545,276		4,163			549,439
Capital surplus		206,703		(9,590	)		197,113
Retained earnings		959,072		8,401			967,473
Total shareholders’ equity		126,954		(1,189	)		125,765
Total liabilities and shareholders’ equity		672,230		2,974			675,204

The following tables set forth the effect of the revisions and reclassifications on the affected line items in our Condensed Consolidated Statements of Income for the periods indicated.


	Three Months Ended June 30, 2012
	As Previously Reported		Revisions			Reclassifications			As Revised and Reclassified
Condensed Consolidated Statement of Income Data:
Revenue	$	329,825	$	(1,764	)	$	0		$	328,061
Cost of educational services		140,940		0			(873	)		140,067
Student services and administrative expenses		111,467		(5,572	)		0			105,895
Legal and other investigation costs		0		0			873			873
Loss related to loan program guarantees		0		3,906			0			3,906
Total costs and expenses		252,407		(1,666	)		0			250,741
Income before provision for income taxes		76,666		(98	)		0			76,568
Provision for income taxes		30,664		(37	)		0			30,627
Net income		46,002		(61	)		0			45,941
Earnings per share:
Basic	$	1.97							$	1.96
Diluted	$	1.96							$	1.95


	Six Months Ended June 30, 2012
	As Previously Reported		Revisions			Reclassifications			As Revised and Reclassified
Condensed Consolidated Statement of Income Data:
Revenue	$	671,619	$	(4,349	)	$	0		$	667,270
Cost of educational services		275,881		0			(873	)		275,008
Student services and administrative expenses		217,733		(10,519	)		0			207,214
Legal and other investigation costs		0		0			873			873
Loss related to loan program guarantees		0		6,960			0			6,960
Total costs and expenses		493,614		(3,559	)		0			490,055
Income before provision for income taxes		177,387		(790	)		0			176,597
Provision for income taxes		70,314		(303	)		0			70,011
Net income		107,073		(487	)		0			106,586
Earnings per share:
Basic	$	4.39							$	4.37
Diluted	$	4.36							$	4.34

The following tables set forth the effect of the revisions on the affected line items in our Condensed Consolidated Statements of Comprehensive Income for the periods indicated.


	Three Months Ended June 30, 2012
	As Previously Reported		Revisions			As Revised
Condensed Consolidated Statement of Comprehensive Income Data:
Net income	$	46,002	$	(61	)	$	45,941
Comprehensive income		46,171		(61	)		46,110


	Six Months Ended June 30, 2012
	As Previously Reported		Revisions			As Revised
Condensed Consolidated Statement of Comprehensive Income Data:
Net income	$	107,073	$	(487	)	$	106,586
Comprehensive income		107,405		(487	)		106,918

The following table sets forth the effect of the revisions on the affected line items in our Condensed Consolidated Statement of Cash Flows for the three months ended June 30, 2012.


	Three Months Ended June 30, 2012
	As Previously Reported			Revisions			As Revised
Condensed Consolidated Statement of Cash Flows Data:
Net income	$	46,002		$	(61	)	$	45,941
Provision for doubtful accounts		19,006			(5,572	)		13,434
Deferred income taxes		(6,334	)		(156	)		(6,490	)
Restricted cash		372			470			842
Accounts receivable		(38,270	)		5,264			(33,006	)
Other operating assets and liabilities		(15,400	)		525			(14,875	)
Net cash flows from operating activities		(38,296	)		470			(37,826	)

The following table sets forth the effect of the revisions on the affected line items in our Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2012.


	Six Months Ended June 30, 2012
	As Previously Reported			Revisions			As Revised
Condensed Consolidated Statement of Cash Flows Data:
Net income	$	107,073		$	(487	)	$	106,586
Provision for doubtful accounts		34,607			(10,599	)		24,008
Deferred income taxes		(10,076	)		(638	)		(10,714	)
Restricted cash		1,377			(892	)		485
Accounts receivable		(60,176	)		9,649			(50,527	)
Other operating assets and liabilities		6,766			1,995			8,761
Net cash flows from operating activities		(950	)		(892	)		(1,842	)

The revisions had an effect on capital surplus, retained earnings and total shareholders’ equity as of June 30, 2012 and December 31, 2012, as reported in our Condensed Consolidated Statements of Shareholders’ Equity, and that effect is shown in the Condensed Consolidated Balance Sheet Data tables above. The revisions had an effect on net income for the six months ended June 30, 2012 and six months ended December 31, 2012, as reported in our Condensed Consolidated Statements of Shareholders’ Equity. The effect of the revisions on net income for the six months ended June 30, 2012, as reported in our Condensed Consolidated Statements of Shareholders’ Equity, is shown in the Condensed Consolidated Statement of Income Data table above. Net income for the six months ended December 31, 2012, as reported in our Condensed Consolidated Statements of Shareholders’ Equity, decreased $1,008 as a result of the revisions.