ITT Educational Services (NYSE: ESI) reported Q4 EPS of $0.44, $0.26 better than the analyst estimate of $0.18. Revenue for the quarter came in at $202.4 million versus the consensus estimate of $203.3 million.

Based on various assumptions, including the historical and projected performance and collection of the student loans held by the PEAKS Trust and the CUSO, the company reported that its current estimate of the payments it may have to make under the PEAKS guarantee and the CUSO risk sharing agreement (the "CUSO RSA"), in the aggregate, are approximately:

$27.7 million in 2016;
$13.1 million in 2017;
$13.4 million in 2018; and
$106.7 million in 2019 and later, which amount includes an approximately $9.7 million payment in 2020 under the PEAKS guarantee.

These estimated payment amounts are net of estimated aggregate recoveries of approximately $3.8 million under the CUSO RSA, which the company expects to offset against amounts due by it under the CUSO RSA over these periods. The company urges readers to review the company's Annual Report on Form 10-K for the year ended December 31, 2015 when it is filed with the SEC, which report will contain additional information regarding these estimated payment amounts, including the assumptions used, the estimates of the type of payments, regular or discharge, and estimated recoveries, under the CUSO RSA and the estimated different payment amounts if the assumptions regarding the forms of payments made under the CUSO RSA are not realized.

The company also announced that, based on its 2015 consolidated financial statements, it believes that its institutions' average composite score (a U.S. Department of Education ("ED") financial responsibility measurement) for 2015 was 2.2. An institution's composite score must be at least 1.5 for the institution to be deemed financially responsible by the ED without the need for further oversight. The ED, however, previously determined that the company's institutions are not financially responsible, and the 2015 composite score being above 1.5 will not alter that determination. The impact of the ED's determination that the company's institutions are not financially responsible is described in the company's periodic reports filed with the SEC.

In addition, the company reported that its Audit Committee has determined that the company did not properly account for a debt discount associated with the PEAKS Senior Debt that the company includes on its balance sheet in connection with its consolidation of the PEAKS Trust, a variable interest entity. As a result, the company will restate its unaudited condensed consolidated financial statements and related disclosures for each of the first three quarters in the years ended December 31, 2015 and 2014, and its audited consolidated financial statements and related disclosures for the year ended December 31, 2014.

In the previously-issued financial statements, the company erroneously accreted the discount associated with the PEAKS Senior Debt using the interest method based on the amounts and timing of the repayments that the company estimated at the time that the PEAKS Senior Debt was initially included in the company's consolidated financial statements. The company recently determined that the interest method should take into consideration actual repayments and updated projections for future repayments on the PEAKS Senior Debt to determine the interest rate used to calculate the amount of the debt discount recognized as interest expense in each period. The company will restate the financial statements noted above to reflect this adjustment to the interest rate used in the application of the interest method to the discount on the PEAKS Senior Debt in each affected period.

The effect on the company's consolidated financial statements of incorporating actual repayments and updated projections for future repayments on the PEAKS Senior Debt in the computation of the interest rate used when applying the interest method is to reduce the amount of the debt discount, increase the carrying value of the PEAKS Senior Debt and recognize interest expense in an earlier period than originally projected. This change does not increase the total amount of non-cash interest expense that will be reported from the accretion of the discount on the PEAKS Senior Debt, but instead changes the timing of the recognition of that expense through the maturity date. This change has no effect on the company's cash and cash equivalents or liquidity; cash flows from operating activities, financing activities or investing activities; or projections of the company's future cash payment obligations under its private education loan program guarantees.

Attached as Schedule B to this release is a reconciliation of previously reported 2014 statement of operations amounts to the restated amounts.

The company also reported that it has entered into a limited waiver to its financing agreement with Cerberus, whereby Cerberus waives any default under the financing agreement that may have occurred in connection with the restatement. The company also believes that it has cured any breach of the documents under the PEAKS and CUSO private student loan programs that may have resulted from the restatement, by delivering amended and restated financial statements to the applicable parties under those programs. Further, the company has determined that the restatement does not have the effect of altering the company's compliance with its financial metric covenants under the financing agreement, the PEAKS documents or the CUSO documents in the periods covered by the restated financial statements.

The company is filing today with the SEC amendments to its previously-filed (i) Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014, September 30, 2014, March 31, 2015, June 30, 2015 and September 30, 2015; and (ii) Annual Report on Form 10-K for the year ended December 31, 2014. The company also expects to file tomorrow with the SEC its Annual Report on Form 10-K for the year ended December 31, 2015, and, as a result, it will have timely filed such report.

For earnings history and earnings-related data on ITT Educational Services (ESI) click here.