INVESTMENT IN AFFILIATES:

EEG, Inc.

As of September 30, 2014, the Company's ownership interest in EEG, Inc. (EEG) was 54.6% and the carrying amount of the Company's investment in EEG was $28.8 million. During the three months ended September 30, 2014 and 2013, the Company recorded $0.4 and $1.0 million, respectively, of equity earnings related to its investment in EEG. The exposure to loss related to the Company’s involvement with EEG is the carrying value of the investment.

The Company utilized consolidation of variable interest entities guidance to determine whether or not its investment in EEG was a variable interest entity (VIE), and if so, whether the Company was the primary beneficiary of the VIE. The Company concluded that EEG was not a VIE based on the fact that EEG had sufficient equity at risk. The Company accounts for EEG as an equity investment under the voting interest model, as the Company has granted the other shareholder of EEG an irrevocable proxy to vote a certain number of the Company’s shares such that the other shareholder of EEG has voting control of 51.0% of EEG’s common stock, as well as the right to appoint four of the five members of EEG’s Board of Directors.

Based on EEG's annual goodwill impairment assessment performed during the fourth quarter of fiscal year 2014, the Company's portion of EEG's estimated fair value exceeds carrying value of its investment by approximately 10%. Any meaningful underperformance against plan or reduced outlook by EEG, changes to the carrying value of EEG or erosion in valuations of the for-profit secondary educational market could lead to other than temporary impairments of the Company's investment in EEG. In addition, EEG may be required to record non-cash impairment charges related to long-lived assets or establish valuation allowances against certain of its deferred tax assets and our share of such non-cash impairment charges or valuation allowances could be material to the Company's consolidated balance sheet and results of operations. If EEG records a full valuation allowance on its deferred tax assets, our share of the expense would be $7.6 million.

The table below presents the summarized Statement of Operations information for EEG:



	For the Three Months Ended September 30,
	2014		2013
(Unaudited)	(Dollars in thousands)
Gross revenues	$	40,593	$	43,965
Gross profit	11,370		14,912
Operating income	479		2,904
Net income	442		1,938

MY Style

During the three months ended September 30, 2013, MY Style’s parent company, Yamano Holding Corporation (Yamano), redeemed its Class A Preferred Stock for $1.0 million. During fiscal year 2011, the Company had estimated the fair value of the Yamano Class A Preferred Stock to be negligible and recorded an other than temporary non-cash impairment. The Company reported the gain associated with Yamano's redemption within equity in income of affiliated companies, net of income taxes, on the unaudited Condensed Consolidated Statement of Operations.