The following discussion may contain forward-looking statements regarding us, our business, prospects and our results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission ("SEC") and in our other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise interested parties of the risks and factors that may affect our business.

The interim financial statements filed on this Form 10-Q and the discussions contained herein should be read in conjunction with the annual financial statements and notes included in our Form 10-K for the year ended December 31, 2011, as filed with the SEC, which includes audited consolidated financial statements for our three fiscal years ended December 31, 2011.

General

We are a leading provider of diversified career-oriented post-secondary education. We offer recent high school graduates and working adults degree and diploma programs in five areas of study: health sciences, automotive technology, skilled trades, business and information technology and hospitality services. Each area of study is specifically designed to appeal to and meet the educational objectives of our student population, while also satisfying the criteria established by industry and employers. The resulting diversification limits dependence on any one industry for enrollment growth or placement opportunities and broadens potential opportunities for introducing new programs. As of March 31, 2012, we enrolled 19,118 students at our 46 campuses across 17 states. Our campuses primarily attract students from their local communities and surrounding areas, although our five destination campuses attract students from across the United States, and in some cases, from abroad.

Critical Accounting Policies and Estimates

Our discussions of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, bad debts, fixed assets, goodwill and other intangible assets, income taxes and certain accruals and contingencies. Actual results could differ from those estimates. The critical accounting policies discussed herein are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not result in significant management judgment in the application of such principles. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result from the result derived from the application of our critical accounting policies. We believe that the following accounting policies are most critical to us in that they represent the primary areas where financial information is subject to the application of management's estimates, assumptions and judgment in the preparation of our consolidated financial statements.

Revenue recognition. Revenues are derived primarily from programs taught at our schools. Tuition revenues, textbook sales and one-time fees, such as nonrefundable application fees and course material fees, are recognized on a straight-line basis over the length of the applicable program, which is the period of time from a student's start date through his or her graduation date, including internships or externships that take place prior to graduation. If a student withdraws from a program prior to a specified date, any paid but unearned tuition is refunded. Refunds are calculated and paid in accordance with federal, state and accrediting agency standards. Other revenues, such as tool sales and contract training revenues, are recognized as goods are delivered or services are performed. On an individual student basis, tuition earned in excess of cash received is recorded as accounts receivable, and cash received in excess of tuition earned is recorded as unearned tuition.

Allowance for uncollectible accounts. Based upon our experience and judgment and economic trends impacting our business, we establish an allowance for uncollectible accounts with respect to tuition receivables. We use an internal group of collectors, augmented by third-party collectors as deemed appropriate, in our collection efforts. In establishing our allowance for uncollectible accounts, we consider, among other things, a student's status (in-school or out-of-school), whether or not additional financial aid funding will be collected from Title IV Programs or other sources, whether or not a student is currently making payments and overall collection history. Changes in trends in any of these areas may impact the allowance for uncollectible accounts. The receivable balances of withdrawn students with delinquent obligations are reserved based on our collection history. Although we believe that our reserves are adequate, if the financial condition of our students deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be necessary, which will result in increased selling, general and administrative expenses in the period such determination is made.

Our bad debt expense as a percentage of revenues for the three months ended March 31, 2012 and 2011 was 3.5% and 4.6%, respectively. Our exposure to changes in our bad debt expense could impact our operations. A 1% increase in our bad debt expense as a percentage of revenues for the three months ended March 31, 2012 and 2011 would have resulted in an increase in bad debt expense of $1.0 million and $1.5 million, respectively.

We do not believe that there is any direct correlation between tuition increases, the credit we extend to students and our loan commitments. Our loan commitments to our students are made on a student-by-student basis and are predominantly a function of the specific student's financial condition. We only extend credit to the extent there is a financing gap between the tuition charged for the program and the amount of grants, loans and parental loans each student receives. Each student's funding requirements are unique. Factors that determine the amount of aid available to a student are student status (whether they are dependent or independent students), Pell Grants awarded, Plus loans awarded or denied to parents and family contributions. As a result, it is extremely difficult to predict the number of students that will need us to extend credit to them. Our tuition increases have ranged historically from 3% to 5% annually and have not meaningfully impacted overall funding requirements, since the amount of financial aid funding available to students in recent years has increased at greater rates than our tuition increases.

Because a substantial portion of our revenue is derived from Title IV programs, any legislative or regulatory action that significantly reduces the funding available under Title IV programs or the ability of our students, schools, or educational programs to participate in Title IV programs could have a material effect on our ability to realize our receivables.

Goodwill. We test our goodwill for impairment annually, or whenever events or changes in circumstances indicate an impairment may have occurred, by comparing its fair value to its carrying value. Impairment may result from, among other things, deterioration in the performance of the acquired business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of the acquired business, and a variety of other circumstances. If we determine that impairment has occurred, we are required to record a write-down of the carrying value and charge the impairment as an operating expense in the period the determination is made. In evaluating the recoverability of the carrying value of goodwill and other indefinite-lived intangible assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the acquired assets. Changes in strategy or market conditions could significantly impact these judgments in the future and require an adjustment to the recorded balances.

Goodwill represents a significant portion of our total assets. As of March 31, 2012, goodwill represented approximately $97.4 million, or 27.3%, of our total assets.

We test our goodwill for impairment using a two-step approach. The first step is conducted utilizing the multiple of earnings approach and comparing the carrying value of our reporting units to their implied fair value. If necessary, the second step is conducted utilizing a discounted cash flow approach and comparing the carrying value of our reporting units to their estimated fair value.

At December 31, 2011, we tested our goodwill for impairment and determined we did not have an impairment. No events have occurred since that evaluation took place that would have required retesting.

Bonus costs. We accrue the estimated cost of our bonus programs using current financial and statistical information as compared to target financial achievements and key performance objectives. Although our recorded liability for bonuses is based on our best estimate of the obligation, actual results could differ and require adjustment of the recorded balance.

Effect of Inflation

Inflation has not had a material effect on our operations.

Results of Operations

Certain reported amounts in our analysis have been rounded for presentation
purposes.

The following table sets forth selected consolidated statements of operations
data as a percentage of revenues for each of the periods indicated:

                                         Three Months Ended
                                              March 31,
                                          2012          2011
Revenue                                     100.0 %      100.0 %
Costs and expenses:
Educational services and facilities          49.4 %       40.6 %
Selling, general and administrative          54.4 %       46.7 %
Total costs and expenses                    103.8 %       87.3 %
Operating (loss) income                      -3.8 %       12.7 %
Interest expense, net                        -1.3 %       -0.7 %
(Loss) income before income taxes            -5.1 %       12.0 %
(Benefit) provision for income taxes         -2.2 %        4.9 %
Net (loss) income                            -2.9 %        7.1 %

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

Revenue. Revenue decreased by $40.5 million, or 27.9%, to $104.9 million for the quarter ended March 31, 2012 from $145.4 million for the quarter ended March 31, 2011. The decrease was primarily attributable to a 31.2% decrease in average student population, which decreased to 19,572 for the quarter ended March 31, 2012 from 28,449 for the quarter ended March 31, 2011, partially offset by a 4.9% increase in average revenue per student.

The decrease in average student population was primarily due to adjustments in our business model to be better aligned with the Department of Education, or DOE's, increased emphasis on student outcomes and our efforts to comply with the 90/10 rule and cohort default rates. As part of these measures, we implemented a more selective student enrollment policy to ensure that we enroll students who demonstrate a strong ability to achieve successful student outcomes, including higher graduation and repayment rates and lower student debt levels. We also restructured certain programs and altered program offerings at some of our campuses, which resulted in lower financial aid funding availability and higher student cash contributions. We believe these changes coupled with the current economic conditions, are resulting in an increase in the number of potential students hesitant to take on debt and thus not enrolling in our schools. This has resulted in a significant decline in student starts and average student population.

Average revenue per student increased 4.9% for the quarter ended March 31, 2012 from the quarter ended March 31, 2011, primarily from tuition increases that averaged 3% during the quarter and from changes to some of our program offerings, which shortened the delivery time of these programs and slightly accelerated revenue. For a general discussion of trends in our student enrollment, see "Seasonality and Trends" below.

Educational services and facilities expense. Our educational services and facilities expense decreased by $7.2 million, or 12.2%, to $51.8 million for the quarter ended March 31, 2012 from $59.0 million for the quarter ended March 31, 2011. This decrease in educational services and facilities expense was due to a $5.5 million, or 16.7%, decrease in instructional expenses, a $1.2 million, or 18.4%, decrease in books and tools expense, and a $0.6 million, or 2.8%, decrease in facilities expense.

The decrease in instructional expenses was primarily due to a reduction in the number of instructors at most of our campuses resulting from a lower student population. The decrease in books and tools expense was attributable to a decline in average student population of approximately 8,900 for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011. We began 2012 with approximately 10,000, or 34.3%, fewer students than we had on January 1, 2011. Facilities expense primarily decreased due to lower rent expense as a result of the relocation of our Denver campus, as well as a decrease in repairs and maintenance expenditures at our campuses.

Our education expenses contain a high fixed cost component and are not as leverageable as some of our other expenses. As our student population decreases, we typically experience reductions in average class size and, therefore, are not always able to align these expenses with the corresponding drop in population.

We strive to align our expenses throughout the year to our student population. As our population increases or decreases, we align our personnel and our expenses to the extent possible to meet the needs of our existing population.

As a result of the foregoing, educational services and facilities expenses, as a percentage of revenue, increased to 49.4% for the quarter ended March 31, 2012 from 40.6% for the quarter ended March 31, 2011.

Selling, general and administrative expense. Our selling, general and administrative expense for the quarter ended March 31, 2012 was $57.2 million, a decrease of $10.7 million, or 15.8%, from $67.9 million for the quarter ended March 31, 2011. The decrease in our selling, general and administrative expense was primarily due to a $4.1 million, or 11.8%, decrease in administrative expenses, a $5.6 million, or 21.1%, decrease in sales and marketing expenses and a $1.0 million, or 15.3%, decrease in student services expenses.

The decrease in administrative expenses was primarily due to a $3.1 million reduction in bad debt expense.

Our bad debt expense as a percentage of revenue was 3.5% for the quarter ended March 31, 2012 as compared to 4.6% for the quarter ended March 31, 2011. The reduction in bad debt as a percentage of revenue was due to a decrease in outstanding balances of our students, primarily due to lower revenue for the period.

As of March 31, 2012, we had outstanding loan commitments to our students of $28.8 million as compared to $26.4 million at December 31, 2011. Loan commitments, net of interest that would be due on the loans through maturity, were $21.4 million at March 31, 2012 as compared to $20.2 million at December 31, 2011. The increase in loan commitment during the year is attributable to changes we made to certain programs resulting in higher financing gaps for our students to better enable us to comply with the 90/10 Rule.

The decrease in sales and marketing expenses during the quarter ended March 31, 2012 was primarily due to a $4.9 million reduction in marketing expenses and a decrease in the number of admissions representatives.

Student services expenses decreased due to a reduction in the number of financial aid employees as we aligned our cost structure to our student population. As a percentage of revenues, selling, general and administrative expense for the quarter ended March 31, 2012 increased to 54.4% from 46.7% for the quarter ended March 31, 2011.

Net interest expense. Our net interest expense for the quarter ended March 31, 2012 was $1.3 million, an increase of $0.2 million from $1.1 million for the quarter ended March 31, 2011. This increase was attributed to the acceleration of deferred financing costs associated with our expiring credit facility.

Income taxes. Our benefit for income taxes for the quarter ended March 31, 2012 was $2.3 million, or 43.4% of pretax loss, compared to a provision for income taxes of $7.0 million, or 40.5%, of pretax income for the quarter ended March 31, 2011. The effective tax rate increase was due to the effect of nondeductible permanent items.

Liquidity and Capital Resources

Our primary capital requirements are for facility maintenance and expansion,
acquisitions and the development of new programs.  Our principal sources of
liquidity have been cash provided by operating activities and borrowings under
our $115 million credit facility (the "2009 Credit Facility").

The following chart summarizes the principal elements of our cash flows (in
thousands):

                                              Three Months Ended
                                                   March 31,
                                              2012          2011
Net cash provided by operating activities   $   5,677     $  15,039
Net cash used in investing activities          (2,687 )     (11,511 )
Net cash used in financing activities          (1,908 )     (25,859 )

At March 31, 2012, we had cash and cash equivalents of $27.6 million, representing an increase of approximately $1.1 million as compared to $26.5 million as of December 31, 2011. Historically, we have financed our operating activities and organic growth primarily through cash generated from operations. We have financed acquisitions primarily through borrowings under our 2009 Credit Facility and cash generated from operations. We currently anticipate that we will be able to meet both our short-term cash needs, as well as our need to fund operations and meet our obligations beyond the next twelve months with cash generated by operations, existing cash balances and, if necessary, borrowings under our new 2012 Credit Facility (as defined below). In addition, we may also consider accessing the financial markets in the future as a source of liquidity for capital requirements, acquisitions and general corporate purposes to the extent such requirements are not satisfied by cash on hand, borrowings under our credit facility or operating cash flows. However, we cannot assure you that we will be able to raise additional capital on favorable terms, if at all. At March 31, 2012, we had net borrowings available under our 2009 Credit Facility of approximately $113.4 million, including a $23.4 million sub-limit on letters of credit. As of March 31, 2012, we had no amounts outstanding under our 2009 Credit Facility. As of March 31, 2012, we had outstanding letters of credit aggregating $1.6 million which is primarily comprised of letters of credit for the DOE matters and security deposits in connection with certain of our real estate leases. On April 5, 2012, the Company, as borrower, and certain of its wholly-owned subsidiaries, as guarantors, entered into a secured revolving credit agreement (the "2012 Credit Agreement") with a syndicate of four lenders led by Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, for an aggregate principal amount of up to $85 million (the "2012 Credit Facility"). The 2009 Credit Facility was terminated concurrently with the effective date of the 2012 Credit Agreement. Refer to Note 10 for further discussion of the 2012 Credit Agreement.

Our primary source of cash is tuition collected from our students. Most students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses. The largest of these programs are Title IV Programs which represented approximately 84% of our cash receipts relating to revenues in 2011. Students must apply for a new loan for each academic period. Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders in two disbursements for each academic year. The first disbursement is usually received approximately 31 days after the start of a student's academic year and the second disbursement is typically received at the beginning of the sixteenth week from the start of the student's academic year. Certain types of grants and other funding are not subject to a 30-day delay. Our diploma/certificate programs range from 22 to 112 weeks, our associate's degree programs range from 48 to 123 weeks, and our bachelor's degree programs range from 132 to 284 weeks. In certain instances, if a student withdraws from a program prior to a specified date, any paid but unearned tuition or prorated Title IV financial aid is refunded according to state and federal regulations.

As a result of the significance of the Title IV funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on our ability to be able to receive Title IV funds would have a significant impact on our operations and our financial condition. See "Risk Factors" in Item 1A, included in our Annual Report on Form 10-K for the year ended December 31, 2011.

Operating Activities

Net cash provided by operating activities was $5.7 million for the three months ended March 31, 2012 as compared to $15.0 million for three months ended March 31, 2011. The $9.4 million decrease in net cash provided by operating activities primarily resulted from a reduction in net income, which was partially offset by other working capital items. Net income decreased from $10.4 million for the three months ended March 31, 2011 a net loss of $3.1 million for the three months ended March 31, 2012.

Investing Activities

Net cash used in investing activities decreased by $8.8 million to $2.7 million for the three months ended March 31, 2012 from $11.5 million for the three months ended March 31, 2011. The decrease was primarily attributable to a $9.1 million reduction in cash used for capital expenditures for the three months ended March 31, 2012 compared to the three months ended March 31, 2011. Our 2012 capital expenditures mainly resulted from leasehold improvements and facility expansions as well as investments in campuses, classroom furniture and shop technology.

We currently lease a majority of our campuses. We own our campuses in Grand Prairie, Texas; West Palm Beach, Florida; Nashville, Tennessee; Cincinnati (Tri-County), Ohio; Suffield, Connecticut; and Denver, Colorado. Although our current growth strategy is to continue our organic growth, strategic acquisitions of operations will be considered. To the extent that these potential strategic acquisitions are large enough to require financing beyond available cash from operations and borrowings under our credit facilities, we may incur additional debt and/or issue additional debt or equity securities.

Capital expenditures are expected to range from 4% to 5% of revenues in 2012 and we expect to fund these capital expenditures with cash generated from operating activities and, if necessary, with borrowings under our credit facility.

Financing Activities

Net cash used in financing activities decreased by $24.0 million to $1.9 million for the three months ended March 31, 2012 from $25.9 million for the three months ended March 31, 2011. This decrease was primarily attributable to our payments on borrowings of $20.0 million during 2011 and a reduction in dividends paid of $4.0 million for the three months ended March 31, 2012 compared to the three months ended March 31, 2011.

On December 1, 2009, we, as borrower, and all of our wholly-owned subsidiaries, as guarantors, entered into the 2009 Credit Agreement with a syndicate of seven lenders led by Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, for an aggregate principal amount of up to $115 million. On April 5, 2012, we entered into the 2012 Credit Agreement. The 2009 Credit Facility was terminated concurrently with the effective date of the 2012 Credit Agreement, April 5, 2012. Refer to Note 10 for further discussion of the 2012 Credit Agreement.

Amounts borrowed as revolving loans under the 2009 Credit Facility bore interest, at our option, at either (i) an interest rate based on LIBOR and adjusted for any reserve percentage obligations under Federal Reserve Bank regulations, or the "Euro Dollar Rate," for specified interest periods or (ii) the Base Rate (as defined in the 2009 Credit Agreement), in each case, plus an applicable margin rate as determined under the 2009 Credit Agreement. The "Base Rate," as defined under the 2009 Credit Agreement, is the highest of (a) the prime rate, (b) the Federal Funds rate plus 0.50% and (c) a daily rate equal to one-month of the Euro Dollar Rate plus 1.0%. Under the 2009 Credit Agreement, the margin interest rate is subject to adjustment within a range of 1.50% to 3.25% based upon changes in our consolidated leverage ratio and depending on whether we have chosen the Euro Dollar Rate or the Base Rate option. Swing line loans will bear interest at the Base Rate plus the applicable margin rate. Letters of credit will require a fee equal to the applicable margin rate multiplied by the daily amount available to be drawn under each issued letter of credit plus a fronting fee of 0.125% of the amount available to be drawn and customary issuance, presentation, amendment and other processing fees associated with letters of credit. At March 31, 2012, we had outstanding letters of credit aggregating $1.6 million which is primarily comprised of letters of credit for the DOE matters and security deposits in connection with certain of our real estate leases.

. . .