10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________ 

FORM 10-Q

___________________________________________ 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                     to

Commission File Number: 001-34466

___________________________________________ 

EDUCATION MANAGEMENT CORPORATION

(Exact name of registrant as specified in its charter)

 ___________________________________________ 

Pennsylvania	25-1119571
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

210 Sixth Avenue, 33^rd Floor

Pittsburgh, PA, 15222

(412) 562-0900

(Address, including zip code and telephone number, of principal executive offices)

___________________________________________ 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):

Yes   ¨     No x

As of November 8, 2012, there were 124,500,658 shares of the registrant’s common stock outstanding.

Table of Contents

		PAGE
PART I — FINANCIAL INFORMATION
ITEM 1	FINANCIAL STATEMENTS	3
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4	CONTROLS AND PROCEDURES	43
PART II — OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	44
ITEM 1A	RISK FACTORS	44
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	44
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	44
ITEM 4	MINE SAFETY DISCLOSURES	44
ITEM 5	OTHER INFORMATION	44
ITEM 6	EXHIBITS INDEX	45
SIGNATURES		46

PART I

ITEM 1. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets	4
Consolidated Statements of Operations	5
Consolidated Statements of Comprehensive Income	6
Consolidated Statements of Cash Flows and Supplemental Cash Flow Information	7
Consolidated Statements of Shareholders’ Equity	8
Notes to Consolidated Financial Statements	9

3

EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30, 2012			June 30, 2012			September 30, 2011
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	211,956		$	191,008		$	465,492
Restricted cash	277,376			267,880			88,071
Total cash, cash equivalents and restricted cash	489,332			458,888			553,563
Student receivables net of allowances of $244,245, $230,587 and $198,950	229,847			198,411			202,523
Notes, advances and other receivables	30,856			22,174			31,057
Inventories	10,041			8,382			12,858
Deferred income taxes	102,668			102,668			76,804
Prepaid income taxes	15,789			6,796			10,021
Other current assets	40,856			40,399			47,286
Total current assets	919,389			837,718			934,112
Property and equipment, net (Note 4)	626,337			651,797			676,950
Other long-term assets (Note 6)	57,551			56,001			43,733
Intangible assets, net (Note 5)	329,658			330,029			461,342
Goodwill (Note 5)	963,550			963,550			2,581,999
Total assets	$	2,896,485		$	2,839,095		$	4,698,136
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt (Note 8)	$	12,076		$	12,076		$	12,076
Revolving credit facility (Note 8)	—			111,300			—
Accounts payable	30,168			54,834			34,395
Accrued liabilities (Note 7)	154,342			137,348			159,574
Unearned tuition	168,601			116,277			170,399
Advance payments	238,957			102,170			320,779
Total current liabilities	604,144			534,005			697,223
Long-term debt, less current portion (Note 8)	1,450,583			1,453,468			1,463,749
Deferred income taxes	110,053			111,767			215,481
Deferred rent	198,449			197,758			196,323
Other long-term liabilities	46,429			45,533			47,702
Shareholders’ equity:
Common stock, at par	1,434			1,434			1,432
Additional paid-in capital	1,781,345			1,777,732			1,764,848
Treasury stock	(328,605		)	(328,605		)	(274,234		)
(Accumulated deficit) Retained earnings	(949,053		)	(935,960		)	606,735
Accumulated other comprehensive loss	(18,294		)	(18,037		)	(21,123		)
Total shareholders’ equity	486,827			496,564			2,077,658
Total liabilities and shareholders’ equity	$	2,896,485		$	2,839,095		$	4,698,136

The accompanying notes are an integral part of these consolidated financial statements.

4

EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

	For the Three Months Ended September 30,
	2012			2011
Net revenues	$	609,564		$	682,095
Costs and expenses:
Educational services	381,296			374,447
General and administrative	174,492			197,757
Depreciation and amortization	44,145			38,888
Total costs and expenses	599,933			611,092
Income before interest and income taxes	9,631			71,003
Interest expense, net	31,452			26,888
(Loss) Income before income taxes	(21,821		)	44,115
Income tax (benefit) expense	(8,728		)	17,161
Net (loss) income	$	(13,093	)	$	26,954
(Loss) Earnings per share: (Note 2)
Basic	$	(0.11	)	$	0.21
Diluted	$	(0.11	)	$	0.21
Weighted average number of shares outstanding: (Note 2)
Basic	124,478			128,474
Diluted	124,478			129,715

The accompanying notes are an integral part of these consolidated financial statements.

5

EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands)

	For the Three Months Ended September 30,
	2012			2011
Net (loss) income	$	(13,093	)	$	26,954
Other comprehensive loss
Net change in interest rate swaps:
Periodic revaluation of interest rate swaps, net of tax benefit of $1,287 and $6,122	(2,182		)	(10,385		)
Reclassification adjustment for interest recognized in consolidated statement of operations, net of tax expense of $1,043 and $1,447	1,768			2,460
Net change in unrecognized loss on interest rate swaps, net of tax	(414		)	(7,925		)
Foreign currency translation gain (loss)	157			(1,008		)
Other comprehensive loss	(257		)	(8,933		)
Comprehensive (loss) income	$	(13,350	)	$	18,021

The accompanying notes are an integral part of these consolidated financial statements.

6

EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	For the Three Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net (loss) income	$	(13,093	)	$	26,954
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation and amortization of property and equipment	42,616			36,978
Amortization of intangible assets	1,529			1,910
Bad debt expense	48,931			35,130
Amortization of debt issuance costs	1,280			1,316
Share-based compensation	3,613			2,926
Non cash adjustments related to deferred rent	(3,622		)	(2,410		)
Changes in assets and liabilities:
Restricted cash	(9,496		)	(40,558		)
Receivables	(89,033		)	(95,813		)
Reimbursements for tenant improvements	1,202			6,980
Inventory	(1,654		)	(3,282		)
Other assets	(3,410		)	(217		)
Accounts payable	(21,896		)	(17,701		)
Accrued liabilities	10,624			29,894
Unearned tuition	52,324			30,249
Advance payments	136,662			208,951
Total adjustments	169,670			194,353
Net cash flows provided by operating activities	156,577			221,307
Cash flows from investing activities:
Expenditures for long-lived assets	(20,541		)	(20,198		)
Reimbursements for tenant improvements	(1,202		)	(6,980		)
Net cash flows used in investing activities	(21,743		)	(27,178		)
Cash flows from financing activities:
Payments under revolving credit facility	(111,300		)	(79,000		)
Issuance of common stock	—			75
Common stock repurchased for treasury	—			(49,702		)
Principal payments on long-term debt	(2,885		)	(3,025		)
Net cash flows used in financing activities	(114,185		)	(131,652		)
Effect of exchange rate changes on cash and cash equivalents	299			(209		)
Net change in cash and cash equivalents	20,948			62,268
Cash and cash equivalents, beginning of period	191,008			403,224
Cash and cash equivalents, end of period	$	211,956		$	465,492
Cash paid during the period for:
Interest (including swap settlement)	$	22,044		$	26,904
Income taxes, net of refunds	1,059			14,945
	As of September 30,
Noncash investing activities:	2012			2011
Capital expenditures in current liabilities	$	9,050		$	9,117

 The accompanying notes are an integral part of these consolidated financial statements.

7

EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Common Stock at Par Value (b)		Additional Paid-in Capital		Treasury Stock (b)			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Loss				Total
	(In thousands)
Balance at June 30, 2011	$	1,431	$	1,761,848	$	(226,926	)	$	579,781		$	(12,190	)		$	2,103,944
Exercise of stock options including tax benefit	3		2,594		—			—			—				2,597
Share-based compensation	—		13,290		—			—			—				13,290
Common stock repurchased for treasury	—		—		(101,679		)	—			—				(101,679		)
Net income	—		—		—			(1,515,741		)	—				(1,515,741		)
Other comprehensive income	—		—		—			—			(5,847		)		(5,847		)
Balance at June 30, 2012	1,434		1,777,732		(328,605		)	(935,960		)	(18,037		)	(a)	496,564
(Unaudited)
Share-based compensation	—		3,613		—			—			—				3,613
Net loss	—		—		—			(13,093		)	—				(13,093		)
Other comprehensive loss	—		—		—			—			(257		)		(257		)
Balance at September 30, 2012	$	1,434	$	1,781,345	$	(328,605	)	$	(949,053	)	$	(18,294	)	(a)	$	486,827

(a) The balance in accumulated other comprehensive loss at September 30, 2012, June 30, 2012 and September 30, 2011 was comprised of $18.1 million, $17.6 million and $20.4 million of cumulative unrealized losses on interest rate swaps, net of tax, respectively and $0.2 million, $0.4 million and $0.7 million of a cumulative foreign currency translation loss, respectively.

(b) There were 600,000,000 authorized shares of par value $0.01 common stock at September 30, 2012, June 30, 2012 and September 30, 2011. Common stock outstanding and treasury stock balances and activity were as follows for the periods indicated.

	Treasury	Net outstanding
Balance at June 30, 2011	13,333,972	129,811,749
Repurchased for treasury	5,568,168	(5,568,168	)
Issued for stock-based compensation plans	—	234,226
Balance at June 30, 2012 (1)	18,902,140	124,477,807

(1)There was no activity affecting common stock and treasury stock balances during the quarter ended September 30, 2012.

The accompanying notes are an integral part of these consolidated financial statements.

8

1. BASIS OF PRESENTATION

Basis of presentation

The accompanying unaudited consolidated financial statements of Education Management Corporation ("EDMC" and, together with its subsidiaries, the "Company") have been prepared by the Company’s management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States for annual financial statements. The unaudited consolidated financial statements included herein contain all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position of the Company as of September 30, 2012 and 2011, and its statements of operations, comprehensive income and cash flows for the three months ended September 30, 2012 and 2011. The statements of operations for the three months ended September 30, 2012 and 2011 are not necessarily indicative of the results to be expected for future periods. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012 (the “Annual Report on Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”). The accompanying consolidated balance sheet at June 30, 2012 has been derived from the consolidated audited balance sheet included in the Annual Report on Form 10-K.

Description of Business

The Company is among the largest providers of post-secondary education in North America, with approximately 132,000 enrolled students as of October 2012. The Company offers campus-based education through four different education systems and through online platforms at three of the four education systems, or through a combination of both. These four education systems coincide with the Company's reportable segments and include The Art Institutes, Argosy University, Brown Mackie Colleges and South University. Refer to Note 14, "Segment Reporting" for additional information.

The Company is committed to offering quality academic programs and strives to improve the learning experience for its students. The curriculum is designed with a strong emphasis on applied career-oriented content and is primarily taught by faculty members who possess practical and relevant professional experience in their respective fields.

Ownership

On June 1, 2006, EDMC was acquired by a consortium of private equity investment funds led by Providence Equity Partners, Goldman Sachs Capital Partners and Leeds Equity Partners (collectively, the “Sponsors”). The acquisition was accomplished through the merger of EM Acquisition Corporation into EDMC, with EDMC surviving the merger (the "Transaction").

The acquisition of EDMC was financed by equity invested by the Sponsors and other investors, cash on hand, borrowings under a new senior secured credit facility by wholly-owned subsidiary Education Management LLC (“EM LLC”) and the issuance by EM LLC and Education Management Finance Corp. (a wholly-owned subsidiary of EM LLC) of $375.0 million of 8.75% senior notes due on June 1, 2014 (the "Senior Notes") and $385.0 million of 10.25% senior subordinated notes originally due in 2016 (the “Senior Subordinated Notes”). The Company repurchased all of the Senior Subordinated Notes in a series of transactions completed in fiscal 2010 and 2011. Refer to Note 8, "Short-Term and Long-Term Debt" for additional information.

In October 2009, EDMC completed an initial public offering of 23.0 million shares of its common stock, $0.01 par value per share ("Common Stock"), at a per share price of $18.00 (the "Initial Public Offering"). The Sponsors did not sell any of their shares in connection with the Initial Public Offering.

In June 2010, EDMC's Board of Directors approved a stock repurchase program that permits EDMC to purchase shares of its Common Stock in the open market, in privately negotiated transactions, through accelerated repurchase programs or in structured share repurchase programs. From the inception of the repurchase program through September 30, 2012, EDMC repurchased approximately 18.9 million shares of Common Stock under the program for a total cost of approximately $328.6 million. The Company did not make any purchases under the program during the fiscal quarter ended September 30, 2012. At September 30, 2012, approximately $46.4 million remained available for share purchases under the stock repurchase program, which expires on December 31, 2012.

9

Seasonality

The Company’s quarterly net revenues and income fluctuate primarily as a result of the pattern of student enrollments, and its first fiscal quarter is typically its lowest revenue recognition quarter of the fiscal year due to student vacations.

Reclassifications

Certain reclassifications of prior year data have been made to conform to the September 30, 2012 presentation. These reclassifications did not materially change any of the previously reported amounts.

2. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed using the weighted average number of shares outstanding during the period. The Company uses the treasury stock method to compute diluted EPS, which assumes that restricted stock is converted into common stock and that outstanding stock options are exercised and the resulting proceeds are used to acquire shares of common stock at its average market price during the reporting period.

Basic and diluted EPS were calculated as follows (in thousands, except per share amounts):

	For the Three Months Ended September 30,
	2012			2011
Net (loss) income	$	(13,093	)	$	26,954
Weighted average number of shares outstanding:
Basic	124,478			128,474
Effect of stock-based awards	—			1,241
Diluted	124,478			129,715
(Loss) Earnings per share:
Basic	$	(0.11	)	$	0.21
Diluted	$	(0.11	)	$	0.21

All of the Company's 8.0 million options to purchase shares of Common Stock at September 30, 2012 were excluded from the computation of diluted EPS because the Company recorded a net loss. Time-based options to purchase another 1.6 million shares of Common Stock were also excluded from the computation of diluted EPS for the quarter ended September 30, 2011 because the effect of applying the treasury stock method would have been antidilutive. In addition, and as further described in Note 3, “Share-Based Compensation,” the Company has determined that all of its outstanding performance-based stock options (2.0 million options) are contingently issuable; therefore, they were not included in the diluted EPS calculation for any period presented.

3. SHARE-BASED COMPENSATION

2012 Omnibus Long-Term Incentive Plan

Effective in September 2012, the Company adopted the Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (the “2012 Omnibus Plan”), which may be used to issue stock options, stock-option appreciation rights, restricted stock, restricted stock units and other forms of long-term incentive compensation. On September 13, 2012, the Company granted options to purchase 8,254,667 shares of Common Stock under the 2012 Omnibus Plan in connection with the Option Exchange described below. At September 30, 2012, 8,645,333 shares of Common Stock remain reserved for issuance under the 2012 Omnibus Plan.

2009 Omnibus Long-Term Incentive Plan and 2006 Stock Option Plan

In August 2006, the Company adopted the 2006 Stock Option Plan (the "2006 Plan") for executive management and key personnel. Under the 2006 Plan, certain of the Company's employees were granted a combination of time-based and performance-based options to purchase Common Stock. In April 2009, the Company adopted the Education Management Corporation Omnibus Long-Term Incentive Plan (the "2009 Omnibus Plan"), which became effective upon the completion of the Initial Public Offering and provided for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units and other forms of long-term incentive compensation. As a result of the adoption of the 2009 Omnibus Plan, the 2006 Stock Option Plan was frozen, such than no further awards were granted under that plan. Likewise, the 2009 Omnibus

10

Plan was frozen in connection with the adoption of the 2012 Omnibus Plan. However, stock options granted under the 2006 Stock Option Plan and the 2009 Omnibus Plan that were not surrendered for exchange in the Option Exchange described below remain subject to the terms and conditions of the 2006 Stock Option Plan or the 2009 Omnibus Plan, as applicable.

Option Exchange

In August 2012, the Company's Board of Directors authorized a program (the "Option Exchange") to allow eligible option holders the opportunity to exchange their existing EDMC stock options for replacement options having an exercise price of $3.59 per share, which was the closing price for a share of the Company's Common Stock on the NASDAQ on September 13, 2012, the date on which the offer expired. Campus presidents and directors who participated in the Option Exchange received a new option grant, based on seniority, which vests in four equal annual installments beginning on the first anniversary of the grant date and expires on the tenth anniversary of the grant date. Campus presidents and directors who elected to not participate in the Option Exchange retained their existing stock options and received a new grant of options to purchase a smaller number of shares than they would have received had they participated in the Option Exchange. The new option grant has similar vesting and expiration terms as options received by campus presidents and directors who participated in the Option Exchange. All other employees who participated in the Option Exchange received a fixed number of new options, calculated on the basis of a set exchange ratio corresponding to the grant date and exercise price of the options that they surrendered for exchange. The vesting terms of the new option grants remained subject to the original vesting schedule of the corresponding options that were surrendered for exchange, provided that none of the replacement options vest before September 13, 2013, except under certain specific circumstances described in the 2012 Omnibus Plan and/or the Stock Option Agreements under which the replacement stock options were granted, including but not limited to a change in control of EDMC.

In connection with the Option Exchange, the Company granted approximately 6.3 million time-based and approximately 2.0 million performance-based replacement options in return for a cancellation of approximately 8.5 million time-based and approximately 3.1 million performance-based options. The Option Exchange was accounted for as a modification of the original awards. Consequently, incremental value to the option holders was calculated using a Black-Scholes-Merton pricing model by taking the value of all time-based options on September 13, 2013 using the original option award terms and comparing that to the value of the modified time-based options using the new option award terms on September 13, 2013. Because the original awards had exercise prices well in excess of the price of a share of Common Stock on the modification date, the Company used a lattice model to determine the expected life to use in the Black-Scholes-Merton model. The modification of the original awards resulted in $2.2 million of incremental compensation expense, net of expected forfeitures. The incremental compensation cost will be recognized over the remaining period of time through which the relevant option holder must remain employed by the Company in order for all of the options included in the option grant to vest, which is referred to as the "service period" of the awards, and which ranges from one year to four years. Because the relevant performance conditions are not probable of being met at September 30, 2012, the Company continues to defer the recognition of any expense on its outstanding performance-based stock options.

Below is a summary of the key assumptions used in determining the incremental compensation cost associated with the time-based replacement options granted in connection with the Option Exchange:

Replacement options:
Number of options	6,300,075
Volatility	80-87%
Expected term	2.94-6.25 yrs
Fair value per option	$1.87-$2.53
Canceled options:
Number of options	8,525,171
Volatility	78-87%
Expected term	2.25-7.67 yrs
Fair value per option	$0.78-$1.97

11

Other Share-Based Compensation Activity

The Company recognized $3.6 million and $2.9 million of share-based compensation expense during the quarters ended September 30, 2012 and 2011, respectively. None of the share-based compensation expense related to the Company’s performance-based stock options.

On August 14, 2012, the Company granted 1.1 million time-based stock options that vest 25% per year over a four year service period. The options, which have an exercise price of $3.20 per share and a contractual life of ten years from the date of grant, will result in compensation expense of $2.5 million over a four year period.

No stock options were exercised during the quarter ended September 30, 2012. Net of estimated forfeitures, the Company had $29.4 million of unrecognized compensation cost relating to time-based stock options and $4.5 million of unrecognized compensation cost related to performance-based stock options at September 30, 2012.

Long-Term Incentive Compensation Plan

In fiscal 2007, EDMC adopted the Long-Term Incentive Compensation Plan (the “LTIC Plan”). The LTIC Plan consists of a bonus pool that is valued based on returns to Providence Equity Partners and Goldman Sachs Capital Partners in connection with a change in control of EDMC. Out of a total of 1,000,000 authorized units, approximately 469,000 units were outstanding under the LTIC Plan at September 30, 2012. Each unit represents the right to receive a payment based on the value of the bonus pool. Because the contingent future events that would result in value to the unit-holders are less than probable, no compensation expense has been recognized by the Company during any of the periods following the Transaction. The plan is being accounted for as an equity-based plan because the units may be settled in stock or cash at the Company’s discretion, and it is the Company’s intent to settle any future payment out of the LTIC Plan by issuing Common Stock. The total amount of unrecognized compensation cost over the vesting periods of all units, net of estimated forfeitures, is approximately $1.7 million at September 30, 2012.

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following amounts (in thousands):

Asset Class	September 30, 2012			June 30, 2012			September 30, 2011
Land	$	16,725		$	16,712		$	16,699
Buildings and improvements	75,206			74,783			71,563
Leasehold improvements and capitalized lease costs	556,902			545,646			529,096
Furniture and equipment	158,800			158,464			149,427
Technology and other equipment	309,989			307,511			280,780
Software	86,876			86,810			72,102
Library books	43,028			42,706			40,125
Construction in progress	17,985			21,725			15,532
Total	1,265,511			1,254,357			1,175,324
Less accumulated depreciation	(639,174		)	(602,560		)	(498,374		)
Property and equipment, net	$	626,337		$	651,797		$	676,950

Depreciation and amortization expense related to property and equipment was $42.6 million and $37.0 million, respectively, for the three months ended September 30, 2012 and 2011. Included in these amounts is amortization expense on software assets of $8.5 million in the current quarter, which includes $4.6 million in accelerated amortization resulting from the write off of a software asset that no longer had a useful life, and $3.6 million in the prior year quarter.

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

In connection with the Transaction, property, equipment, intangible assets other than goodwill and other assets and liabilities were recorded at fair value. The excess of the amount paid to acquire the Company at the time of the Transaction over the fair values of these net assets represented the intrinsic value of the Company beyond its tangible and identifiable intangible net assets and was assigned to goodwill. In connection with the Transaction, the Company recorded approximately

12

$2.6 billion of goodwill, which was allocated among its four reporting units: The Art Institutes, Argosy University, Brown Mackie Colleges and South University.

Goodwill is evaluated annually on April 1 for impairment and on an interim basis if events or changes in circumstances between annual tests indicate that goodwill might be impaired. A significant amount of judgment is involved in determining whether an indicator of impairment has occurred between annual impairment tests. These indicators include, but are not limited to, adverse changes in recent forecasts of operating results or market capitalization, updated business plans and regulatory and legal developments. As a result of interim impairment tests conducted as of March 31, 2012 and June 30, 2012, the Company recorded goodwill impairment charges of $1.12 billion, $155.9 million, $254.6 million and $84.9 million at The Art Institutes, Argosy University, Brown Mackie Colleges and South University, respectively, during the fiscal year ended June 30, 2012.

Because no interim impairment indicators were identified during the quarter ended September 30, 2012, the goodwill balance did not change between June 30, 2012 and September 30, 2012. The following table reflects changes to the Company's goodwill balance during fiscal 2012 (in thousands).

	Balance at June 30, 2011		Impairment Charge			Balance at June 30, 2012
The Art Institutes	$	1,984,688	$	(1,123,069	)	$	861,619
Argosy University	219,350		(155,905		)	63,445
Brown Mackie Colleges	254,561		(254,561		)	—
South University	123,400		(84,914		)	38,486
Total goodwill	$	2,581,999	$	(1,618,449	)	$	963,550

Intangible Assets

In addition to the goodwill impairment charges noted above, the Company also performed an impairment analysis with respect to indefinite-lived intangible assets at June 30, 2012 and recorded a $128.3 million impairment charge related to indefinite-lived intangible assets. The charge consisted of a $112.0 million impairment of the tradename of The Art Institutes and a $16.3 million impairment of the licensing, accreditation and Title IV program assets recorded at The Art Institutes and Argosy University. There were no triggering events during the quarter ended September 30, 2012 that would have required the Company to perform an interim impairment evaluation of these assets.

Intangible assets other than goodwill consisted of the following amounts (in thousands):

	September 30, 2012					June 30, 2012					September 30, 2011
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Tradename-Art Institute	$	218,000	$	—		$	218,000	$	—		$	330,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			112,179		—
Curriculum and programs	39,845		(29,412		)	38,702		(28,541		)	36,074		(24,872		)
Student contracts, applications and relationships	39,511		(36,548		)	39,511		(36,270		)	39,511		(35,437		)
Favorable leases and other	19,441		(17,041		)	19,424		(16,659		)	19,410		(15,523		)
Total intangible assets	$	412,659	$	(83,001	)	$	411,499	$	(81,470	)	$	537,174	$	(75,832	)

Tradenames are often considered to have useful lives similar to that of the overall business, which generally means such assets are assigned an indefinite life for accounting purposes. State licenses and accreditations of the Company’s schools as well as their eligibility for Title IV program participation are periodically renewed in cycles ranging from every year to up to every ten years depending upon government and accreditation regulations. Because the Company considers these renewal processes to be a routine aspect of the overall business these assets are assigned indefinite lives.

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Amortization of intangible assets was $1.5 million and $1.9 million for the three months ended September 30, 2012 and 2011, respectively. Total estimated amortization of the Company’s intangible assets for each of the years ending June 30, 2013 through 2017 and thereafter is as follows at September 30, 2012 (in thousands):

Fiscal years	Amortization Expense
2013 (remainder)	$	5,390
2014	5,222
2015	2,989
2016	1,292
2017	308
Thereafter	595

6. OTHER LONG-TERM ASSETS

Other long-term assets consisted of the following (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
Student receivables, net of allowances of $18,797, $14,602 and $7,317	$	22,429	$	20,163	$	10,452
Deferred financing fees	13,641		14,768		14,195
Deferred compensation	12,393		12,164		10,101
Other	9,088		8,906		8,985
Total other long-term assets	$	57,551	$	56,001	$	43,733

Student receivables, net of allowance, relates to the extension of credit to students for amounts due beyond one year. Beginning in fiscal 2011, the Company extended the repayment period for financing made available to students to include periods of up to 42 months beyond graduation. This extension of credit to students helps fund the difference between total tuition and fees and the amount covered by various sources of financial aid, including amounts awarded under Title IV programs, private loans and cash payments by students. Out-of-school balances are reserved for at a higher rate than in-school balances. The Company's non-current receivable balances were as follows (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
In-school	$	28,364	$	24,354	$	11,735
Out-of-school	12,862		10,411		6,034
Gross non-current student receivables	$	41,226	$	34,765	$	17,769

The Company's current and non-current allowance for doubtful accounts and loan loss reserves were as follows (in thousands):

Balance June 30, 2011	$	199,357
Bad debt expense	163,926
Amounts written off	(113,001		)
Balance June 30, 2012	250,282
Bad debt expense	48,931
Amounts written off	(36,171		)
Balance September 30, 2012	$	263,042

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These amounts are recorded within student receivables, net and other long-term assets on the consolidated balance sheets. When certain criteria are met, which is generally when receivables age past the due date by more than four months and internal collection measures have been taken without success, the accounts of former students are placed with an outside collection agency. Student accounts that are in collection are reserved for at higher rates than accounts for students who are in school and are written off after repeated collection attempts have been unsuccessful.

7. ACCRUED LIABILITIES

Accrued liabilities consisted of the following amounts (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
Payroll and related taxes	$	48,731	$	50,291	$	50,768
Capital expenditures	4,254		5,624		5,897
Advertising	25,815		24,837		28,681
Interest	11,660		3,296		10,969
Benefits	16,060		14,014		12,571
Other	47,822		39,286		50,688
Total accrued liabilities	$	154,342	$	137,348	$	159,574

During the quarter ended September 30, 2012, the Company implemented a restructuring plan at several locations to improve operational efficiencies and recorded a related charge of $9.1 million in education services and general and administrative expense. The restructuring charge consisted of $7.5 million related to employee severance costs, primarily at The Art Institutes reportable segment, and a lease abandonment charge of $1.6 million at one of the Company's operations offices. The majority of these costs will be paid through December 31, 2012.

8. SHORT-TERM AND LONG-TERM DEBT

U.S. Department of Education Letters of Credit

The Company had outstanding letters of credit of $417.2 million at September 30, 2012, the largest of which is issued to the U.S. Department of Education, which requires that the Company maintain a letter of credit due to its failure to satisfy certain regulatory financial ratios after giving effect to the Transaction. The amount of this letter of credit was $414.5 million at September 30, 2012, which equals 15% of the total Title IV aid received by students attending the Company’s institutions during fiscal 2011. During fiscal 2012, the Company entered into two cash secured letter of credit facilities pursuant to which the lenders agreed to issue letters of credit at any time to the U.S. Department of Education in an aggregate face amount of up to $200.0 million. The Company's obligations with respect to such letters of credit are secured by liens in favor of the lenders on certain of the Company's cash deposits, which must total at least 105% of the aggregate face amount of any outstanding letters of credit. The two facilities, one of which provides for letters of credit in an aggregate face amount of up to $150.0 million and one of which provides for letters of credit of an aggregate face amount of up to $50.0 million, mature on November 30, 2013 and March 9, 2014, respectively, or earlier if the existing revolving credit facility is terminated. The Company can elect to provide the letter of credit to the U.S. Department of Education using any combination of the cash secured letter of credit lines and the revolving credit facility. 

On September 30, 2012, in order to fund its current letter of credit obligation to the U.S. Department of Education, the Company utilized $214.5 million of letter of credit capacity under its revolving credit facility and all $200.0 million of capacity under the cash secured letter of credit facilities, in connection with which the Company classifies $210.0 million as restricted cash to satisfy the 105% collateralization requirement. Any reduction in the usage of the cash secured letter of credit lines will reduce the amount of cash that is classified as restricted cash on the balance sheet.

Senior Secured Credit Facilities

On March 30, 2012, the Company completed a refinancing of the then-outstanding $348.6 million portion of the $1.1 billion term loan under its senior secured credit facility that was due to expire in June 2013 by replacing it with $350.0 million of new term debt under the same credit agreement. The $350.0 million term loan, which was issued with an original issue discount at 97.0% accrues interest at a rate equal to the greater of LIBOR or 1.25% plus a margin of 7.0%. The term loan will mature in March 2018, but the maturity accelerates to March 1, 2014 in the event that the Senior Notes are not repaid in full or extended, renewed or refinanced on or prior to that date. It is prepayable at any time; however, there are substantial penalties if

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it is prepaid prior to March 30, 2014. There were no changes to the revolving credit facility or the then-remaining $746.6 million of other term loan debt due in June 2016 as a result of the refinancing. In connection with the refinancing, the Company capitalized $2.2 million of third party costs as deferred financing fees within other long-term assets, of which $0.7 million was paid to an affiliate of one of the Sponsors. Additionally, the Company capitalized a $3.6 million discount as a reduction to long-term debt. These capitalized fees are being charged to interest expense over the life of the debt through the maturity date.

On December 7, 2010, the Company entered into an agreement to extend the maturity date on an aggregate of $758.7 million of then-outstanding amounts under the term loan from June 1, 2013 to June 1, 2016 at an interest rate of LIBOR + 4.00%. In addition, lenders providing $328.3 million in total commitments under the revolving credit facility extended those commitments from June 1, 2012 to June 1, 2015 at an interest rate of LIBOR + 4.00% or the prime rate, as defined in the credit facility, plus a margin of 3.0%. The Company capitalized $2.1 million of third party costs as a result of the refinancing.

The lenders also approved other amendments to the senior secured credit facilities, including a springing maturity of March 1, 2014 for the term loan and accelerated termination of the commitments under the revolving credit facility in the event that the Company does not refinance, extend or pay in full the Senior Notes on or prior to March 1, 2014, an increase to the covenant basket amount for capital expenditures and certain restricted payments and the ability to use cash to collateralize letters of credit.

Short-Term Debt

There were $111.3 million of borrowings outstanding under the $328.3 million revolving credit facility at June 30, 2012. These borrowings were repaid in full on July 2, 2012. There were no borrowings outstanding under the revolving credit facility at September 30, 2012 and 2011. After adjusting for outstanding letters of credit, which decrease availability under the revolving credit facility, the Company had $111.1 million of remaining borrowing capacity under the revolving credit facility at September 30, 2012.

The interest rate on amounts outstanding under the revolving credit facility at June 30, 2012 was 6.25%, which is equal to the prime rate, as defined under the credit facility, plus a margin of 3.00%. The applicable margin for borrowings under the revolving credit facility can change depending on the Company's leverage ratios and credit ratings. The Company is obligated to pay a per annum commitment fee on undrawn amounts under the revolving credit facility, which is currently 0.375% and varies based on certain leverage ratios. The revolving credit facility is secured by certain of the Company’s assets and is subject to the Company’s satisfaction of certain covenants and financial ratios, which are described in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Covenant Compliance."

Long-Term Debt

The Company’s long-term debt consisted of the following amounts (in thousands):

	September 30, 2012			June 30, 2012			September 30, 2011
Senior secured term loan facility, due in June 2013	$	—		$	—		$	349,562
Senior secured term loan facility, due in June 2016	742,518			744,539			750,603
Senior secured term loan facility, due in March 2018, net of discount of$3,355 and $3,508	344,750			345,545			—
Senior notes due in June 2014	375,000			375,000			375,000
Other	391			460			660
Total long-term debt	1,462,659			1,465,544			1,475,825
Less current portion	(12,076		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,450,583		$	1,453,468		$	1,463,749

The interest rate on the senior secured term loan facility due in June 2013, which equaled three-month LIBOR plus a margin of 1.75%, was 2.13% at September 30, 2011.

The interest rate on the senior secured term loan facility due in June 2016, which equals three-month LIBOR plus a margin of 4.00%, was 4.38%, 4.50% and 4.38% at September 30, 2012, June 30, 2012 and September 30, 2011, respectively.

The interest rate on the senior secured term loan facility due in March 2018, which equals the greater of three-month LIBOR or 1.25%, plus a margin of 7.0%, was 8.25% at September 30, 2012 and June 30, 2012, respectively.

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9. DERIVATIVE INSTRUMENTS

The Company has historically utilized interest rate swap agreements, which are contractual agreements to exchange payments based on underlying interest rates, to manage the floating rate portion of its term debt. In April 2011, the Company entered into three interest rate swap agreements for an aggregate notional amount of $950.0 million, each of which became effective on July 1, 2011. One swap agreement is for a notional amount of $325.0 million and effectively fixes future interest payments at a maximum rate of 9.44% through June 1, 2013. The other two swap agreements, one of which was entered into with an affiliate of one of the Sponsors, are for notional amounts of $312.5 million each and effectively fix future interest payments at a rate of 6.26% through June 1, 2015.

The fair values of the interest rate swap liabilities were $30.6 million, $30.1 million and $32.4 million at September 30, 2012, June 30, 2012 and September 30, 2011, respectively, and were recorded in other long-term liabilities on the accompanying consolidated balance sheets.

On March 30, 2012, the Company replaced $348.6 million of its term loan with a new $350.0 million term loan, as described in Note 8. Because the interest payable on the new term loan is based on the higher of LIBOR or 1.25% (rather than strictly the prevailing LIBOR) plus a margin of 7.0%, the $325.0 million interest rate swap does not qualify for cash flow hedge accounting treatment as of the date of this refinancing. As a result, changes in the fair value of this interest rate swap are being recorded as interest expense in the period incurred. The Company recorded a $0.4 million revaluation loss through interest expense during the three months ended September 30, 2012 related to this interest rate swap.

The refinancing of the term loan did not impact the Company's other two swap agreements for notional amounts of $312.5 million each. Consequently, at September 30, 2012, there was a cumulative unrealized loss of $18.1 million, net of tax, related to these interest rate swaps included in accumulated other comprehensive loss on the Company’s accompanying consolidated balance sheet. This loss would be immediately recognized in the consolidated statement of operations if these instruments fail to meet certain cash flow hedge requirements.

Over the next twelve months, the Company estimates approximately $7.5 million, net of tax, will be reclassified from accumulated other comprehensive loss to the consolidated statement of operations based on current interest rates and underlying debt obligations at September 30, 2012.

The Company used “level two” inputs to value its interest rate swaps. These inputs are defined as other than quoted prices in active markets that are either directly or indirectly observable. The application of level two inputs includes obtaining quotes from counterparties, which are based on LIBOR forward curves, and assessing non-performance risk based upon published market data.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The Company uses a fair value hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level One - Quoted prices for identical instruments in active markets.

Level Two - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations for which all significant inputs are observable market data.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity.

In some cases, the inputs used to measure fair value may meet the definition of more than one level of fair value hierarchy. The lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.

The following table presents the carrying amount and fair value of the interest rate swap liability, which is measured at fair value on a recurring basis, and the fair value of the Company's debt, which is recorded at carrying value (in thousands):

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	September 30, 2012						June 30, 2012						September 30, 2011
	Carrying Value		Level 1		Level 2		Carrying Value		Level 1		Level 2		Carrying Value		Level 1		Level 2
Recurring:
Interest rate swap liability	$	30,557	$	—	$	30,557	$	30,114	$	—	$	30,114	$	32,407	$	—	$	32,407
Disclosure only:
Variable rate debt	1,087,268		—		928,421		1,090,084		—		980,477		1,103,127		—		1,085,768
Fixed rate debt	375,391		296,641		—		375,460		341,710		—		375,723		383,223		—

Derivative financial instruments are carried at fair value, which is based on the framework discussed in Note 9. As a result of the goodwill and indefinite-lived intangible asset impairments recorded during fiscal 2012, goodwill, the tradename for The Art Institutes and the licensing, accreditation and Title IV program participation assets were measured at fair value as of June 30, 2012 on a non-recurring basis using "Level-Three" inputs. The fair value of the Company’s debt was based on each instrument’s trading value at the dates presented. The fair values of cash and cash equivalents, restricted cash, students receivable, notes receivable, the revolving credit facility, accounts payable and accrued expenses approximate carrying values.

11. INCOME TAXES

The Company uses the asset and liability method to account for income taxes. Under this method, deferred tax assets and liabilities result from (i) temporary differences in the recognition of income and expense for financial and federal income tax reporting requirements, and (ii) differences between the recorded value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred tax assets should be reduced by a valuation allowance if, based upon the weight of the available evidence, it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. Future realization of deferred tax assets ultimately depends upon the existence of sufficient taxable income of the appropriate character in either the carry back or carry forward period under applicable tax law.

The Company assesses the realizability of its deferred tax assets on a quarterly basis by considering the relative impact of all available evidence, both positive and negative, to determine whether, based upon the weight of that evidence a valuation allowance is needed. This evaluation requires the use of considerable judgment and estimates that are subject to change.

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Excluding deferred tax liabilities related to indefinite-lived intangible assets, which are not scheduled to reverse, the Company is in a net deferred tax asset position at September 30, 2012.

The Company incurred cumulative losses before taxes in the three most recent fiscal years ended June 30, 2012 due to goodwill and indefinite-lived asset impairment charges recorded in fiscal 2012 described in Note 5, "Goodwill and Intangible Assets." However, the Company had income before taxes in both fiscal 2010 and 2011, and excluding the non-deductible goodwill impairment charge incurred in fiscal 2012, the Company would have had income before taxes in fiscal 2012 and for the three year period ended June 30, 2012. The Company has sufficient taxable income in the carry back period to realize the benefit of its deferred tax assets. Additionally, the Company has consistently generated taxable income in the past and reasonably expects to generate sufficient taxable income in the future to realize the benefit of its deferred tax assets. Therefore, the Company believes it is more-likely-than-not that it will realize the benefit of its deferred tax assets and, as such, no valuation allowance is required except as disclosed in Part II, Item 8 "Financial Statements and Supplementary Data", Note 11, "Income Taxes" of the June 30, 2012 Annual Report on Form 10-K with respect to certain state deferred tax assets.

The Company's effective tax rate was 40.0% for the three months ended September 30, 2012 and 38.9% for the three months ended September 30, 2011. The effective tax rates differed from the combined federal and state statutory rates due to valuation allowances, expenses that are non-deductible for tax purposes, and accounting related to uncertain tax positions. There have been no material adjustments to liabilities relating to uncertain tax positions since the last annual disclosure for the fiscal year ended June 30, 2012.

12. CONTINGENCIES

Qui Tam Matters

Washington v. Education Management Corporation. On May 3, 2011, a qui tam action captioned United States of America, and the States of California, Florida, Illinois, Indiana, Massachusetts, Minnesota, Montana, New Jersey, New Mexico, New York and Tennessee, and the District of Columbia, each ex rel. Lynntoya Washington and Michael T. Mahoney v. Education Management Corporation, et al. (“Washington”) filed under the federal False Claims Act in April 2007 was unsealed due to the U.S. Department of Justice's decision to intervene in the case. Five of the states listed in the caption joined the case based on qui tam actions filed under their respective False Claims Acts. The Court granted the Company's motion to dismiss the District of Columbia from the case and denied the Commonwealth of Kentucky's motion to intervene in the case under its consumer protection laws.

The case, which is pending in U.S. District Court for the Western District of Pennsylvania, relates to whether the Company's compensation plans for admission representatives violated the Higher Education Act, as amended (“HEA”), and U.S. Department of Education regulations prohibiting an institution participating in Title IV programs from providing any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments to any person or entity engaged in any student recruitment or admissions activity during the period of July 1, 2003 through June 30, 2011. The complaint was initially filed by a former admissions representative at The Art Institute of Pittsburgh Online Division and a former director of training at EDMC Online Higher Education and asserts the relators are entitled to recover treble the amount of actual damages allegedly sustained by the federal government as a result of the alleged activity, plus civil monetary penalties. The complaint does not specify the amount of damages sought but claims that the Company and/or students attending the Company's schools received over $11 billion in funds from participation in Title IV programs and state financial aid programs during the period of alleged wrongdoing.

On May 11, 2012, the Court ruled on the Company's motion to dismiss case for failure to state a claim upon which relief can be granted, dismissing the claims that the design of the Company's compensation plan for admissions representatives violated the incentive compensation rule and allowing the allegations that the plan as implemented violated the rule and common law claims to continue to discovery.

The Company believes the case to be without merit and intends to vigorously defend itself.

Sobek v. Education Management Corporation. On March 13, 2012, a qui tam action captioned United States of America, ex rel. Jason Sobek v. Education Management Corporation, et al. filed under the federal False Claims Act on January 28, 2010 was unsealed after the U.S. Department of Justice declined to intervene in the case at this time. The case, which is pending in the U.S. District Court for the Western District of Pennsylvania, alleges that the defendants violated the U.S. Department of Education's regulation prohibiting institutions from making substantial misrepresentations to prospective students, did not

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adequately track student academic progress and violated the U.S. Department of Education's prohibition on the payment of incentive compensation to admissions representatives. The complaint was filed by a former project associate director of admissions at EDMC Online Higher Education who worked for South University and asserts the relator is entitled to recover treble the amount of actual damages allegedly sustained by the federal government as a result of the alleged activity, plus civil monetary penalties. The complaint does not specify the amount of damages sought but claims that the Company's institutions were ineligible to participate in Title IV programs during the period of alleged wrongdoing.

On May 29, 2012, the Company filed a motion to dismiss the case with prejudice for failure to state a claim upon which relief can be granted. The Company believes the remaining claims in the case to be without merit and intends to vigorously defend itself. On October 22, 2012, the magistrate judge assigned to the case issued a Report and Recommendation on the Company's motion to dismiss, which recommends that the Court dismiss with prejudice claims related to incentive compensation, program costs and the withholding of amounts due to the government and allow claims related to satisfactory academic progress, job placement statistics and programmatic accreditation to continue. The Report and Recommendation is not binding on the federal district judge assigned to the case. The Company has until November 9, 2012 to file objections to the Report and Recommendation with the Court.

Shareholder Derivative Lawsuits

Oklahoma Law Enforcement Retirement System v. Nelson. On May 21, 2012, a shareholder derivative class action captioned Oklahoma Law Enforcement Retirement System v. Todd S. Nelson, et al. was filed against the directors of the Company in state court located in Pittsburgh, Pennsylvania. The Company is named as a nominal defendant in the case. The complaint alleges that the defendants violated their fiduciary obligations to the Company's shareholders due to the Company's violation of the U.S. Department of Education's prohibition on paying incentive compensation to admissions representatives, engaging in improper recruiting tactics in violation of Title IV of the HEA and accrediting agency standards, falsification of job placement data for graduates of its schools and failure to satisfy the U.S. Department of Education's financial responsibility standards. The Company previously received two demand letters from the plaintiff which were investigated by a Special Litigation Committee of the Board of Directors and found to be without merit. The Company filed a motion to dismiss the case with prejudice on August 13, 2012. In response, the plaintiffs filed an amended complaint making substantially the same allegations as the initial complaint on September 27, 2012. The Company and the director defendants filed a motion to dismiss the amended complaint on October 17, 2012. The Company believes that the claims are without merit and intends to vigorously defend itself.

Bushansky v. Nelson. On August 3, 2012, a shareholder derivative class action captioned Stephen Bushansky v. Todd S. Nelson, et al. was filed against certain of the directors of the Company in the U.S. District Court for the Western District of Pennsylvania. The Company is named as a nominal defendant in the case. The complaint alleges that the defendants violated their fiduciary obligations to the Company's shareholders due to the Company's use of improper recruiting, enrollment admission and financial aid practices and violation of the U.S. Department of Education's prohibition on the payment of incentive compensation to admissions representatives. The Company previously received a demand letter from the plaintiff which was investigated by a Special Litigation Committee of the Board of Directors and found to be without merit. The Company and the named director defendants filed a motion to dismiss the case on October 19, 2012. The Company believes that the claims set forth in the complaint are without merit and intends to vigorously defend itself.

Buirkle APA Program Accreditation Lawsuit

In August 2009, a petition was filed in the District Court for Dallas County, Texas in the case of Capalbo et al. v. Argosy Education Group, Inc. University, Education Management LLC, Education Management Corporation and Marilyn Powell-Kissinger by 15 former students in the Clinical Psychology program offered by the Dallas campus of Argosy University. In September 2009, the defendants removed the case to the United States District Court for the Northern District of Texas, Dallas division. The case was remandedto state court in November 2009 by agreement after the plaintiffs amended their pleadings to specify their allegations and agreed to dismiss Dr. Powell-Kissinger as a defendant. The plaintiffs filed an amended petition in state court in January 2010 captioned Buirkle et al. v. Argosy Education Group, Inc., Education Management LLC and Education Management Corporation and included three new plaintiffs. The petition alleges that, prior to the plaintiffs' enrollment and/or while the plaintiffs were enrolled in the program, the defendants violated the Texas Deceptive Trade Practices and Consumer Protection Act and made material misrepresentations regarding the importance of accreditation of the program by the Commission on Accreditation of the American Psychological Association, the status of the application of the Dallas campus for such accreditation, the availability of loan repayment options for the plaintiffs, and the quantity and quality of the plaintiffs' career options. Plaintiffs seek unspecified monetary compensatory and punitive damages. In March 2010, claims filed by three of the plaintiffs who signed arbitration agreements with Argosy University were compelled to binding arbitration. The remainder of the state court action was stayed pending the resolution of the three arbitrations.

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In May 2010, those three plaintiffs and a fourth former student in the Clinical Psychology program offered by the Dallas campus of Argosy University filed a demand for arbitration. Also in May 2010, three additional former students in the Clinical Psychology program offered by the Dallas campus of Argosy University filed a new action in the District Court for Dallas County, Texas in the case of Adibian et al. v. Argosy Education Group, Inc., Education Management LLC, and Education Management Corporation alleging the same claims made in the Buirkle lawsuit. The defendants filed a motion to stay the new action pending the resolution of the arbitration proceedings. Prior to the hearing on the motion, plaintiffs filed a notice of non-suit without prejudice. On August 9, 2012, the Court entered joint notice of nonsuit dismissing the plaintiffs' claims under the Texas Deceptive Trade Practices Act with prejudice. In October 2012, the Company entered into settlement agreements with six of the plaintiffs, including all four plaintiffs scheduled for binding arbitration, for the payment by the Company of an immaterial amount in settlement. The remaining 13 plaintiffs will pursue their common law fraud cases in state court.

The Company believes the claims in the lawsuits and the arbitrations to be without merit and intends to vigorously defend itself.

State Attorney General Investigations

In September 2012, the Company received a subpoena from the State of Colorado Attorney General's office requesting documents and detailed information for the period of January 1, 2006 through the present. The subpoena is primarily focused on the programs offered by the College of Psychology and Behavioral Sciences at the Denver, Colorado campus of Argosy University. Argosy University also received in September 2012 demand letters from an attorney representing three former students in the Doctorate of Counseling Psychology program alleging that the students were unable to find internships necessary to complete the program in Denver, Colorado and that the campus claimed that the program would lead to licensure in Colorado, among other things. The Company intends to cooperate with the Attorney General's investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In August 2011, the Company received a subpoena from the Attorney General of the State of New York requesting documents and detailed information for the time period of January 1, 2000 through the present. The Art Institute of New York City is the Company's only school located in New York though the subpoena also addresses fully online students who reside in the State. The subpoena is primarily related to the Company's compensation of admissions representatives and recruiting activities. The relators in the Washington qui tam case filed the complaint under the State of New York's False Claims Act though the state has not announced an intention to intervene in the matter. The Company intends to cooperate with the investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In December 2010, the Company received a subpoena from the Office of Consumer Protection of the Attorney General of the Commonwealth of Kentucky requesting documents and detailed information for the time period of January 1, 2008 through December 31, 2010. The Company has three Brown Mackie College locations in Kentucky. The Kentucky Attorney General announced an investigation of the business practices of private sector post-secondary schools and that subpoenas were issued to six private sector colleges that do business in Kentucky in connection with the investigation. The Company intends to continue to cooperate with the investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In October 2010, Argosy University received a subpoena from the Florida Attorney General's office seeking a wide range of documents related to the Company's institutions, including the nine institutions located in Florida, from January 2, 2006 to the present. The Florida Attorney General has announced that it is investigating potential misrepresentations in recruitment, financial aid and other areas. The Company is cooperating with the investigation, but has also filed a suit to quash or limit the subpoena and to protect information sought that constitutes proprietary or trade secret information. The Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In June 2007, The New England Institute of Art (“NEIA”) received a civil investigative demand letter from the Massachusetts State Attorney General requesting information in connection with the Attorney General's review of alleged submissions of false claims by NEIA to the Commonwealth of Massachusetts and alleged unfair and deceptive student lending and marketing practices engaged in by the school. In February 2008, the Attorney General informed NEIA that it does not plan to further pursue its investigation of deceptive marketing practices. In June and August of 2011, the Company provided the Attorney General with additional information related to the false claims investigation. NEIA intends to fully cooperate with the Attorney General in connection with its continuing investigation.

City of San Francisco

In December 2011, the Company received a letter from the City Attorney of the City of San Francisco, California requesting information related to student recruitment and indebtedness, including recruiting practices and job placement reporting, among other issues, by The Art Institute of San Francisco and the seven other Art Institutes located in California. 

21

The Company intends to cooperate with the investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

Other Matters

The Company is a defendant in certain other legal proceedings arising out of the conduct of its business. In the opinion of management, based upon an investigation of these claims and discussion with legal counsel, the ultimate outcome of such other legal proceedings, individually and in the aggregate, is not expected to have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

13. GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION

On June 1, 2006, in connection with the Transaction, EM LLC and Education Management Finance Corp. issued the Senior Notes. The Senior Notes are fully and unconditionally guaranteed by all of EM LLC’s existing direct and indirect domestic restricted subsidiaries, other than any subsidiary that directly owns or operates a school, or has been formed for such purposes, and subsidiaries that have no material assets (collectively, the “Guarantors”). All other subsidiaries of EM LLC, either direct or indirect, do not guarantee the Senior Notes (“Non-Guarantors”).

In November 2009, the Company guaranteed the indebtedness of EM LLC and Education Management Finance Corp. (a wholly owned subsidiary of EM LLC) under the Senior Notes.

The following tables present the condensed consolidated financial position of EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries EDMC as of September 30, 2012, June 30, 2012 and September 30, 2011. The results of operations and comprehensive income (loss) for the three months ended September 30, 2012 and 2011 and the condensed statements of cash flows for the three months ended September 30, 2012 and 2011 are presented for EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and EDMC.

22

CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2012 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	152,499	$	148		$	6,106		$	—		$	158,753		$	53,203		$	—		$	211,956
Restricted cash	42,763		—			234,613			—			277,376			—			—			277,376
Student and other receivables, net	199		(681		)	261,182			—			260,700			3			—			260,703
Inventories	—		158			9,883			—			10,041			—			—			10,041
Other current assets	36,970		640			121,703			—			159,313			—			—			159,313
Total current assets	232,431		265			633,487			—			866,183			53,206			—			919,389
Property and equipment, net	66,174		7,541			552,622			—			626,337			—			—			626,337
Intercompany balances	722,172		(29,017		)	(795,285		)	—			(102,130		)	102,130			—			—
Other long-term assets	16,219		791			40,541			—			57,551			—			—			57,551
Investment in subsidiaries	852,712		—			—			(852,712		)	—			331,386			(331,386		)	—
Intangible assets, net	1,914		36			327,708			—			329,658			—			—			329,658
Goodwill	7,328		—			956,222			—			963,550			—			—			963,550
Total assets	$	1,898,950	$	(20,384	)	$	1,715,295		$	(852,712	)	$	2,741,149		$	486,722		$	(331,386	)	$	2,896,485
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,850	$	—		$	226		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	48,773		3,686			539,610			—			592,069			(1		)	—			592,068
Total current liabilities	60,623		3,686			539,836			—			604,145			(1		)	—			604,144
Long-term debt, less current portion	1,450,418		—			165			—			1,450,583			—			—			1,450,583
Other long-term liabilities	54,993		345			189,540			—			244,878			—			—			244,878
Deferred income taxes	1,530		515			108,112			—			110,157			(104		)	—			110,053
Total liabilities	1,567,564		4,546			837,653			—			2,409,763			(105		)	—			2,409,658
Total shareholders’ equity (deficit)	331,386		(24,930		)	877,642			(852,712		)	331,386			486,827			(331,386		)	486,827
Total liabilities and shareholders’ equity (deficit)	$	1,898,950	$	(20,384	)	$	1,715,295		$	(852,712	)	$	2,741,149		$	486,722		$	(331,386	)	$	2,896,485

23

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	(26,249	)	$	98		$	213,960		$	—		$	187,809		$	3,199		$	—		$	191,008
Restricted cash	42,931			—			224,949			—			267,880			—			—			267,880
Student and other receivables, net	4,149			153			216,284			—			220,586			(1		)	—			220,585
Inventories	—			159			8,223			—			8,382			—			—			8,382
Other current assets	35,543			660			113,660			—			149,863			—			—			149,863
Total current assets	56,374			1,070			777,076			—			834,520			3,198			—			837,718
Property and equipment, net	72,279			7,846			571,672			—			651,797			—			—			651,797
Intercompany balances	1,059,102			(26,456		)	(1,181,164		)	—			(148,518		)	148,518			—			—
Other long-term assets	15,276			—			40,724			—			56,000			1			—			56,001
Investment in subsidiaries	826,651			—			—			(826,651		)	—			344,742			(344,742		)	—
Intangible assets, net	2,031			39			327,959			—			330,029			—			—			330,029
Goodwill	7,328			—			956,222			—			963,550			—			—			963,550
Total assets	$	2,039,041		$	(17,501	)	$	1,492,489		$	(826,651	)	$	2,687,378		$	496,459		$	(344,742	)	$	2,839,095
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt and revolving credit facility	$	123,150		$	—		$	226		$	—		$	123,376		$	—		$	—		$	123,376
Other current liabilities	63,935			8,319			338,378			—			410,632			(3		)	—			410,629
Total current liabilities	187,085			8,319			338,604			—			534,008			(3		)	—			534,005
Long-term debt, less current portion	1,453,234			—			234			—			1,453,468			—			—			1,453,468
Other long-term liabilities	52,450			374			190,465			—			243,289			2			—			243,291
Deferred income taxes	1,530			515			109,826			—			111,871			(104		)	—			111,767
Total liabilities	1,694,299			9,208			639,129			—			2,342,636			(105		)	—			2,342,531
Total shareholders’ equity (deficit)	344,742			(26,709		)	853,360			(826,651		)	344,742			496,564			(344,742		)	496,564
Total liabilities and shareholders’ equity (deficit)	$	2,039,041		$	(17,501	)	$	1,492,489		$	(826,651	)	$	2,687,378		$	496,459		$	(344,742	)	$	2,839,095

24

CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2011 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	409,755	$	123		$	5,395		$	—		$	415,273		$	50,219		$	—		$	465,492
Restricted cash	53,789		—			34,282			—			88,071			—			—			88,071
Student and other receivables, net	3,800		104			229,676			—			233,580			—			—			233,580
Inventories	—		117			12,741			—			12,858			—			—			12,858
Other current assets	23,941		577			109,593			—			134,111			—			—			134,111
Total current assets	491,285		921			391,687			—			883,893			50,219			—			934,112
Property and equipment, net	68,175		8,296			600,479			—			676,950			—			—			676,950
Intercompany balances	648,992		(30,427		)	(761,641		)	—			(143,076		)	143,076			—			—
Other long-term assets	48,614		—			(4,883		)	—			43,731			2			—			43,733
Investment in subsidiaries	2,236,963		—			—			(2,236,963		)	—			1,884,235			(1,884,235		)	—
Intangible assets, net	2,183		48			459,111			—			461,342			—			—			461,342
Goodwill	7,328		—			2,574,671			—			2,581,999			—			—			2,581,999
Total assets	$	3,503,540	$	(21,162	)	$	3,259,424		$	(2,236,963	)	$	4,504,839		$	2,077,532		$	(1,884,235	)	$	4,698,136
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	9,871	$	—		$	2,205		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	87,725		2,954			594,470			—			685,149			(2		)	—			685,147
Total current liabilities	97,596		2,954			596,675			—			697,225			(2		)	—			697,223
Long-term debt, less current portion	1,465,294		—			(1,545		)	—			1,463,749			—			—			1,463,749
Other long-term liabilities	55,169		444			188,412			—			244,025			—			—			244,025
Deferred income taxes	1,246		265			214,094			—			215,605			(124		)	—			215,481
Total liabilities	1,619,305		3,663			997,636			—			2,620,604			(126		)	—			2,620,478
Total shareholders’ equity (deficit)	1,884,235		(24,825		)	2,261,788			(2,236,963		)	1,884,235			2,077,658			(1,884,235		)	2,077,658
Total liabilities and shareholders’ equity (deficit)	$	3,503,540	$	(21,162	)	$	3,259,424		$	(2,236,963	)	$	4,504,839		$	2,077,532		$	(1,884,235	)	$	4,698,136

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CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	2,421		$	607,143	$	—		$	609,564		$	—		$	—		$	609,564
Costs and expenses:
Educational services	34,800			2,645			343,851		—			381,296			—			—			381,296
General and administrative	(11,578		)	(3,339		)	189,409		—			174,492			—			—			174,492
Depreciation and amortization	11,598			151			32,396		—			44,145			—			—			44,145
Total costs and expenses	34,820			(543		)	565,656		—			599,933			—			—			599,933
Income (loss) before interest and income taxes	(34,820		)	2,964			41,487		—			9,631			—			—			9,631
Interest (income) expense, net	30,859			—			599		—			31,458			(6		)	—			31,452
Equity in earnings of subsidiaries	(26,317		)	—			—		26,317			—			13,099			(13,099		)	—
Income (loss) before income taxes	(39,362		)	2,964			40,888		(26,317		)	(21,827		)	(13,093		)	13,099			(21,821		)
Income tax expense (benefit)	(26,263		)	1,185			16,350		—			(8,728		)	—			—			(8,728		)
Net (loss) income	$	(13,099	)	$	1,779		$	24,538	$	(26,317	)	$	(13,099	)	$	(13,093	)	$	13,099		$	(13,093	)
Net change in unrecognized loss on interest rate swaps, net of tax	$	(414	)	$	—		$	—	$	—		$	(414	)	$	(414	)	$	414		$	(414	)
Foreign currency translation gain	157			—			157		(157		)	157			157			(157		)	157
Other comprehensive (loss) income	(257		)	—			157		(157		)	(257		)	(257		)	257			(257		)
Comprehensive (loss) income	$	(13,356	)	$	1,779		$	24,695	$	(26,474	)	$	(13,356	)	$	(13,350	)	$	13,356		$	(13,350	)

26

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2011 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	3,004		$	679,091		$	—		$	682,095		$	—		$	—		$	682,095
Costs and expenses:
Educational services	20,121			2,949			351,377			—			374,447			—			—			374,447
General and administrative	(19,214		)	(369		)	217,283			—			197,700			57			—			197,757
Depreciation and amortization	6,442			102			32,344			—			38,888			—			—			38,888
Total costs and expenses	7,349			2,682			601,004			—			611,035			57			—			611,092
Income (loss) before interest and income taxes	(7,349		)	322			78,087			—			71,060			(57		)	—			71,003
Interest (income) expense, net	26,226			—			663			—			26,889			(1		)	—			26,888
Equity in earnings of subsidiaries	(47,541		)	—			—			47,541			—			(27,010		)	27,010			—
Income before income taxes	13,966			322			77,424			(47,541		)	44,171			26,954			(27,010		)	44,115
Income tax expense (benefit)	(13,044		)	125			30,080			—			17,161			—			—			17,161
Net income	$	27,010		$	197		$	47,344		$	(47,541	)	$	27,010		$	26,954		$	(27,010	)	$	26,954
Net change in unrecognized loss on interest rate swaps, net of tax	$	(7,925	)	$	—		$	—		$	—		$	(7,925	)	$	(7,925	)	$	7,925		$	(7,925	)
Foreign currency translation gain	(1,008		)	—			(1,008		)	1,008			(1,008		)	(1,008		)	1,008			(1,008		)
Other comprehensive loss	(8,933		)	—			(1,008		)	1,008			(8,933		)	(8,933		)	8,933			(8,933		)
Comprehensive income	$	18,077		$	197		$	46,336		$	(46,533	)	$	18,077		$	18,021		$	(18,077	)	$	18,021

27

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Months Ended September 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC		EDMC Consolidated
Net cash flows provided by (used in) operations	$	(51,934	)	$	(2,629	)	$	211,136		$	156,573		$	4	$	156,577
Cash flows from investing activities:
Expenditures for long-lived assets	(2,170		)	(248		)	(18,123		)	(20,541		)	—		(20,541		)
Other investing activities	(375		)	—			(827		)	(1,202		)	—		(1,202		)
Net cash flows used in investing activities	(2,545		)	(248		)	(18,950		)	(21,743		)	—		(21,743		)
Cash flows from financing activities:
Net repayments of debt and other	(114,116		)	—			(69		)	(114,185		)	—		(114,185		)
Intercompany transactions	347,343			2,927			(400,270		)	(50,000		)	50,000		—
Net cash flows provided by (used in) financing activities	233,227			2,927			(400,339		)	(164,185		)	50,000		(114,185		)
Effect of exchange rate changes on cash and cash equivalents	—			—			299			299			—		299
Decrease in cash and cash equivalents	178,748			50			(207,854		)	(29,056		)	50,004		20,948
Beginning cash and cash equivalents	(26,249		)	98			213,960			187,809			3,199		191,008
Ending cash and cash equivalents	$	152,499		$	148		$	6,106		$	158,753		$	53,203	$	211,956

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Months Ended September 30, 2011 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(49,467	)	$	(215	)	$	270,903		$	221,221		$	86		$	221,307
Cash flows from investing activities
Expenditures for long-lived assets	(2,020		)	(246		)	(17,932		)	(20,198		)	—			(20,198		)
Other investing activities	—			—			(6,980		)	(6,980		)	—			(6,980		)
Net cash flows used in investing activities	(2,020		)	(246		)	(24,912		)	(27,178		)	—			(27,178		)
Cash flows from financing activities
Net repayments of debt	(81,962		)	—			(63		)	(82,025		)	—			(82,025		)
Common stock repurchased and stock option exercises	—			—			—			—			(49,627		)	(49,627		)
Intercompany transactions	560,020			314			(609,961		)	(49,627		)	49,627			—
Net cash flows provided by (used in) financing activities	478,058			314			(610,024		)	(131,652		)	—			(131,652		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(209		)	(209		)	—			(209		)
Increase (decrease) in cash and cash equivalents	426,571			(147		)	(364,242		)	62,182			86			62,268
Beginning cash and cash equivalents	(16,816		)	270			369,637			353,091			50,133			403,224
Ending cash and cash equivalents	$	409,755		$	123		$	5,395		$	415,273		$	50,219		$	465,492

28

14. SEGMENT REPORTING

The Company's principal business is providing post-secondary education. The Company manages its operations through four reportable segments: The Art Institutes; Argosy University; Brown Mackie Colleges; and South University. A summary of each reportable segment is detailed below.

The Art Institutes. The Art Institutes focus on applied arts in creative professions such as media arts and animation, graphic design, culinary arts, interior design, web site development, digital filmmaking and video production, fashion design and marketing and game art and design. The Art Institutes offer Associate's, Bachelor's and Master's degree programs, as well as selective non-degree diploma programs. Students pursue their degrees through local campuses, fully online programs through The Art Institute of Pittsburgh and blended formats, which combine campus-based and online education. At September 30, 2012, there were 51 Art Institutes campuses in 25 U.S. states and in Canada included in this reportable segment. As of October 2012, students enrolled at The Art Institutes represented approximately 54% of the Company's total enrollments.

Argosy University. Argosy University offers academic programs in psychology and behavioral sciences, business, education and health sciences disciplines. Argosy University offers Doctoral, Master's and undergraduate degrees through local campuses, fully online programs and blended formats. Argosy's academic programs focus on graduate students seeking advanced credentials as a prerequisite to initial licensing, career advancement and/or structured pay increases. At September 30, 2012, there were 20 Argosy University campuses in 13 U.S. states included in this reportable segment. As of October 2012, students enrolled at Argosy University represented approximately 19% of the Company's total enrollments. This segment includes Western State College of Law, which offers Juris Doctor degrees, and the Ventura Group, which provides courses and materials for post-graduate licensure examinations in the human services fields and continuing education courses for K-12 educators.

Brown Mackie Colleges. Brown Mackie Colleges offer flexible Associate's and non-degree diploma programs that enable students to develop skills for entry-level positions in high demand vocational specialties and Bachelor's degree programs that assist students to advance within the workplace. Brown Mackie Colleges offer programs in growing fields such as medical assisting, criminal justice, nursing, business, legal support and information technology. At September 30, 2012, there were 28 Brown Mackie College campuses in 15 U.S. states included in this reportable segment. As of October 2012, students enrolled at Brown Mackie Colleges represented approximately 13% of the Company's total enrollments.

South University. South University offers academic programs in health sciences and business disciplines, including business administration, criminal justice, nursing, information technology, psychology, pharmacy and medical assisting. South University offers Doctoral, Master's, Bachelor's and Associate's degrees through local campuses, fully online programs and blended formats. At September 30, 2012, there were 11 South University campuses in nine U.S. states included in this reportable segment. As of October 2012, students enrolled at South University represented approximately 14% of the Company's total enrollments.

EBITDA excluding certain expenses, the measure used by the chief operating decision maker to evaluate segment performance and allocate resources, is defined as net income before interest expense, net, provision for income taxes, depreciation and amortization and certain expenses presented below. EBITDA excluding certain expenses is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA excluding certain expenses is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Management believes EBITDA excluding certain expenses is helpful in highlighting trends because EBITDA excluding certain expenses excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, this presentation of EBITDA excluding certain expenses may not be comparable to similarly titled measures of other companies. Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate and other,” which primarily includes unallocated corporate activity. A reconciliation of EBITDA excluding certain expenses by reportable segment to consolidated income before income taxes along with other summary financial information by reportable segment is presented below (in thousands):

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	For the Three Months Ended September 30,
	2012			2011
Net revenues:
The Art Institutes	$	380,139		$	428,900
Argosy University	81,920			98,143
Brown Mackie Colleges	73,972			80,923
South University	73,533			74,129
Total EDMC	$	609,564		$	682,095
EBITDA excluding certain expenses:
The Art Institutes	$	67,926		$	110,318
Argosy University	1,193			10,234
Brown Mackie Colleges	10,595			17,583
South University	6,313			164
Corporate and other	(23,106		)	(21,741		)
Total EDMC	62,921			116,558
Reconciliation to consolidated (loss) income before income taxes:
Restructuring (A)	9,145			6,667
Depreciation and amortization	44,145			38,888
Net interest expense	31,452			26,888
(Loss) income before income taxes	$	(21,821	)	$	44,115

(A) Refer to Note 7, "Accrued Liabilities" for more information on the current period charge. The prior year period includes a $5.2 million employee severance charge and a $1.5 million lease termination charge.

Assets: (B)	September 30, 2012		June 30, 2012		September 30, 2011
The Art Institutes	$	1,782,747	$	1,804,221	$	2,997,038
Argosy University	274,711		298,037		384,504
Brown Mackie Colleges	187,153		268,694		412,624
South University	194,754		241,982		180,904
Corporate and other	457,120		226,161		723,066
Total EDMC	$	2,896,485	$	2,839,095	$	4,698,136

(B) Excludes inter-company activity.

15. SUBSEQUENT EVENTS

In October 2012, the Company completed three sale-leaseback transactions with unrelated third parties for total proceeds of $36.9 million. The Company signed leases at these locations for periods ranging from three to 15 years.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Key Trends, Developments and Challenges

The following developments and trends present opportunities, challenges and risks to our business:

• U.S. Department of Education Program Integrity Regulations have negatively impacted our financial results and will likely impact future results.

As described in greater detail in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Trends, Developments and Challenges” in our Annual Report on Form 10-K, we believe that the U.S. Department of Education's Program Integrity Regulations have negatively impacted our business and will continue to do so in the future. These rules have required us to change certain of our business practices, incur additional costs of compliance and of developing and implementing changes in operations, and have affected student recruitment and enrollment, resulted in changes in or elimination of certain educational programs and have had other significant or material effects on our business.

With the exception of the gainful employment rule, these regulations became effecting on July 1, 2011. The gainful employment regulations were scheduled to go into effect July 1, 2012. However, on June 30, 2012 the U.S. District Court for the District of Columbia vacated the program level metrics and remanded them to the U.S. Department of Education for further action. The Court's decision is subject to appeal by the U.S. Department of Education and could be modified or reversed on appeal. Moreover, the U.S. Department of Education could take further action to address the Court's concerns regarding the regulations and obtain approval to enforce the regulations, or the U.S. Department of Education could issue new regulations regarding gainful employment. We cannot predict what steps the U.S. Department of Education will take in response to the Court's decision, how long those steps will take, or whether those steps will result in the U.S. Department of Education being able to enforce the gainful employment regulations or issuing new regulations.

We have implemented a number of initiatives to respond to the gainful employment rules, such as shorter programs and lowering the costs associated with a number of our programs and continue to do so despite the ruling in the APSCU case. However, certain of our programs will be unable to maintain eligibility to enroll students receiving Title IV funds or have restrictions placed upon program offerings as a result of not meeting prescribed metrics if the gainful employment regulations become effective in their current form. To the extent that our new programmatic offerings do not offset the loss of any of our current programs, the loss of students or restrictions on program eligibility could have a material adverse effect on our student population, business, financial condition, results of operations and cash flows.

• Changes in the availability of PLUS program loans contributed to a reduction in new student projections at The Art Institutes and are likely to adversely impact both continuing and new students in fiscal 2013 and beyond.

As described in greater detail in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Trends, Developments and Challenges” in our Annual Report on Form 10-K, recent changes in the availability of PLUS program loans have negatively impacted our business, particularly with respect to The Art Institutes, and will continue to do so in the future. During fiscal 2012 we believe that the U.S. Department of Education implemented more stringent underwriting criteria for PLUS program loans. While PLUS program loans for most of fiscal 2012 remained fairly consistent with fiscal 2011, students attending, or interested in attending, our schools experienced a significant decrease in PLUS loan approvals in the fourth quarter of fiscal 2012, and we expect this trend to continue through fiscal 2013.  For example, The Art Institutes experienced a 28% and 40% decrease in the number of students using PLUS program loans to fund a portion of their education expense in the fourth quarter of fiscal 2012 and first quarter of fiscal 2013, respectively, as compared to their respective prior year periods. This change in PLUS loan availability, along with continued economic pressures and a reluctance by parents to incur additional indebtedness, is expected to result in a significant decrease in the number of students using PLUS program loans to finance their education at our Art Institute schools, which will adversely impact the number of students attending those schools in the future.  Additionally, we have extended, and will continue to extend, a greater amount of credit for those Art Institute students who are denied PLUS program loans but who still enroll in school. We also increased the maximum length of payment plans from 36 months beyond graduation to 42 months beyond graduation effective in October 2012, which combined with increased lending activity will likely result in higher bad debt expense as a percentage of net revenues in future periods. For example, our bad debt expenses as a percentage of net revenues was 8.0% during the first quarter of fiscal 2013, as compared to 5.2% during the first quarter of fiscal 2012.

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• Investigations of private sector education institutions, student concerns over incurring debt and negative media have adversely impacted each of our reporting units.

As described in greater detail in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Trends, Developments and Challenges” in our Annual Report on Form 10-K, although we believe that there are a number of factors that should contribute to long-term demand for post-secondary education, recently the industry as a whole has been challenged by a number of factors, including the overall negative impact of the current political and economic climate. We and other private sector post-secondary education providers have been subject to increased regulatory scrutiny and litigation in recent years. Furthermore, the current economic climate has impacted the ability of many prospective students to make cash payments to fund their education, and recently there has been a significant amount of negative publicity surrounding the debt that many students incur to pay for a post-secondary education. We believe that the negative publicity surrounding student indebtedness, together with the inability of students to pay cash for their education and the effect of the numerous investigations of the private sector post-secondary industry, has led to a reluctance on the part of some prospective students to enroll in our schools.

• Declines in enrollment in fully online programs have adversely impacted the current financial results of The Art Institute of Pittsburgh, Argosy University and South University, and may impact our future results.

As described in greater detail in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Trends, Developments and Challenges” in our Annual Report on Form 10-K, we believe that the non-traditional students who comprise a significant portion of our online student population have been impacted more significantly by the prolonged nature of the current economic downturn.  Additionally, we believe that competition for fully online students has increased over the last several years and that, in general, interest in our programs has been adversely affected by the substantial negative media coverage of our business and industry. These external factors, as well as changes that we have made to our online academic programs, such as the shift to a non-term academic structure for our fully online programs at Argosy University and South University, have led to reduced growth and profitability.

• Potential changes to the 90/10 Rule could impact financial results in fiscal 2013 and beyond.

As described in greater detail in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Trends, Developments and Challenges” in our Annual Report on Form 10-K, various legislative proposals have been introduced in Congress that would heighten the requirements of the 90/10 Rule. If these proposed changes were adopted, we would have to make material changes to our business to remain eligible to participate in Title IV programs, which could materially and adversely affect our business. In addition, reductions in state-funded student financial aid programs also could adversely impact our compliance with the 90/10 Rule, because tuition revenue derived from such programs is included in the 10% portion of the rule calculation.

Due to the impact of the foregoing factors, our net revenues and average student population declined in fiscal 2012 and in the first quarter of fiscal 2013. Our average enrolled student body decreased from 145,500 during the quarter ended September 30, 2011 to 128,700 during the quarter ended September 30, 2012, and net revenues decreased from $682.1 million to $609.6 million during the same periods. Though we anticipate these factors will continue to impact us during the remainder of fiscal 2013, recently we have experienced several encouraging demand trends for our campus-based programs that we expect will result in sequential improvement in new student growth trends in the second half of fiscal 2013 for a number of our campus-based institutions.

    Additionally, our cash flow from operations declined during the first fiscal quarter of 2013 as compared to prior reporting periods. Specifically,cash flows provided by operating activities for the three months ended September 30, 2012 were $156.6 million compared to $221.3 million in the prior year quarter. In order to address future cash needs, in October 2012 we sold two school facilities and one housing building in sale leaseback transactions for net cash proceeds of approximately $36.9 million.  These proceeds will be recorded as a cash inflow from investing activities and will enhance our unrestricted cash position in the quarter ending December 31, 2012. We are also currently exploring opportunities to complete sale leaseback transactions for the other five buildings that we own.  In addition, through purchasing efficiencies, reprioritizing certain projects and the elimination of others, we believe we will be able to reduce our planned capital spending during fiscal 2013 to between 3.0% and 3.5% of net revenues, and we expect to open only two new school locations during fiscal 2013, depending on the timing of regulatory approvals.  The trends described above also have resulted in our business becoming less predictable, which we expect to remain the case for the foreseeable future.

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Results of Operations

The following table sets forth for the periods indicated the percentage relationship of certain statements of operations items to net revenues.

Amounts expressed as a percentage of net revenues

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended September 30,
	2012		2011
Net revenues	100.0	%	100.0	%
Costs and expenses:
Educational services	62.6	%	55.0	%
General and administrative	28.6	%	28.9	%
Depreciation and amortization	7.2	%	5.7	%
Total costs and expenses	98.4	%	89.6	%
Income before interest and taxes	1.6	%	10.4	%
Interest expense, net	5.2	%	3.9	%
(Loss) income before income taxes	(3.6	)%	6.5	%
Income tax (benefit) expense	(1.5	)%	2.5	%
Net (loss) income	(2.1	)%	4.0	%

Three Months Ended September 30, 2012 (current quarter) Compared with the Three Months Ended September 30, 2011 (prior year quarter)

All basis point changes are presented as a change in the percentage of net revenues in each period of comparison.

Net revenues

Our quarterly net revenues and income fluctuate primarily as a result of the pattern of student enrollments. Our first fiscal quarter is typically our lowest revenue recognition quarter due to student vacations.

The largest component of our net revenues is tuition collected from our students, which is presented in our statements of operations after deducting refunds, scholarships and other adjustments. The significant majority of our net revenues comes from various government-sponsored student finance programs. The two main drivers of our net revenues are average student population and tuition rates. Our average student population is calculated based on the number of continuing students attending our schools at the beginning of a period and the number of new students entering our schools during that period.

Net revenues consist primarily of tuition and fees, student housing fees, bookstore sales, restaurant sales in connection with culinary programs, workshop fees and sales of related study materials. The amount of tuition revenue received from students varies based on the average tuition charge per credit hour, average credit hours taken per student, type of program, specific curriculum and average student population. Bookstore and housing revenues are largely a function of the average student population.

Although we have not implemented any substantial tuition increases in recent years, total tuition and fees can exceed the amounts of financial aid available for students under all available government-sponsored aid, including Title IV programs. At the same time, the availability of private loans for students has declined significantly over the last several years. To address these concerns, we have increased the number of funding options available to our students and have extended the repayment period for some of the financing we make available to students to include periods of up to 42 months beyond graduation. This additional extension of credit has resulted in increases to bad debt expense and may result in higher bad debt expense as a percentage of our net revenues in future periods if students continue to utilize this funding source.

Net revenues decreased 10.6% to $609.6 million in the current quarter compared to $682.1 million in the prior year quarter due primarily to an 11.5% decrease, to 128,700 students, in average enrolled student body compared to the prior year quarter. These decreases were slightly offset by a 1.0% increase in overall revenue per student, due primarily to a greater proportion of campus-based students relative to our total student population.

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Educational services expense

Educational services expense consists primarily of costs related to the development, delivery and administration of our education programs. Major cost components are faculty compensation, salaries of administrative and student services staff, costs of educational materials, facility occupancy costs, bad debt expense and information systems costs.

Educational services expense increased by $6.8 million, or 1.8%, to $381.3 million in the current quarter. As a percentage of net revenues, educational services expense increased by 766 basis points. During the current quarter, we recognized $8.2 million of restructuring charges, which included employee severance and lease abandonment charges, at three of our four reportable segments and corporate offices. During the prior year quarter, we incurred a $1.5 million charge as a result of terminating a housing lease at one of our schools. These restructuring and lease termination expenses contributed to an increase in educational services expense of 114 basis points as a percentage of net revenues compared to the prior year quarter. After adjusting for these expenses, educational services expense increased by 652 basis points as a percentage of net revenues in the current quarter compared to the prior year quarter.

Bad debt expense was $48.9 million, or 8.0% of net revenues, in the current quarter compared to $35.1 million, or 5.2% of net revenues, in the prior year quarter, which represented an increase of 288 basis points. The increase in bad debt expense as a percentage of net revenues was primarily due to an increase in the extension of credit to our students largely attributable to the reduced PLUS loan availability explained above under "Key Trends, Developments and Challenges." Our extension of credit to students may continue to result in higher bad debt expense as a percentage of net revenues in future periods.

Salaries and benefits expenses increased 226 basis points as a percentage of net revenues compared to the prior year quarter. This increase was primarily due to decreases in average class size due to lower average student enrollment compared to the prior year quarter and the resulting loss of operating leverage. In addition, rent expense associated with school locations increased 109 basis points as a percentage of net revenues compared to the prior year quarter due to the loss of operating leverage. The remaining net increase of 29 basis points in the current quarter relates to other items, none of which was individually significant.

General and administrative expense

General and administrative expense consists of marketing and student admissions expenses and certain central staff departmental costs such as executive management, finance and accounting, legal, corporate development and other departments that do not provide direct services to our students.

General and administrative expense was $174.5 million in the current quarter, a decrease of 11.8% from $197.8 million in the prior year quarter. As a percentage of net revenues, general and administrative expense decreased by 37 basis points compared to the prior year quarter. During the current quarter, we recognized $0.9 million of restructuring costs at three of our four reportable segments and corporate offices related to employee severance. In the prior year quarter, we incurred employee severance costs of $5.2 million at two of our reportable segments and corporate offices. These restructuring expenses contributed to a decrease of 61 basis points in the current quarter compared to the prior quarter. After adjusting for these expenses, general and administrative expense increased by 24 basis points as a percentage of net revenues in the current quarter compared to the prior year quarter.

Salaries and benefits expense, excluding marketing and admissions personnel, increased by 78 basis points due primarily to a decrease in operating leverage due to lower student enrollment quarter over quarter. Marketing and admissions costs were 23.8% of net revenues in the current quarter compared to 24.2% of net revenues in the prior year quarter, a decrease of 43 basis points. The remaining net decrease of 11 basis points in the current quarter relates to other items, none of which was individually significant.

Depreciation and amortization

Depreciation and amortization on long-lived assets was $44.1 million in the current quarter compared to $38.9 million in the prior year quarter, an increase of 13.5%. During the current quarter, we recorded accelerated depreciation of $4.6 million primarily resulting from the write off of a software asset that no longer had a useful life. After adjusting for this charge, depreciation and amortization expense increased by 79 basis points in the current quarter as a percentage of net revenues primarily due to lower net revenues in the current quarter compared to the prior year quarter.

Interest expense, net

Net interest expense was $31.5 million in the current quarter, an increase of $4.6 million, or 17.0%, from the prior year quarter. The increase is due to a higher variable interest rate following the amendment to our senior secured credit facility in March 2012. Refer to Item 1, "Financial Statements", Note 8, "Short-Term and Long-Term Debt" for more information.

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Provision for income taxes

Our effective tax rate was 40.0% for the three months ended September 30, 2012 as compared to 38.9% for the same period in the prior year. The effective tax rates differed from the combined federal and state statutory rates due to valuation allowances, expenses that are non-deductible for tax purposes, and accounting related to uncertain tax positions.

As discussed in Item 1, "Financial Statements," Note 11, "Income Taxes," we have evaluated the realizability of our deferred tax assets based upon the weight of all available evidence, both positive and negative, and believe it is more-likely-than-not that we will realize the benefit of our deferred tax assets and, as such, no valuation allowance is required except as disclosed in Part II, Item 8 "Financial Statements and Supplementary Data," Note 11, "Income Taxes" of the Annual Report on Form 10-K with respect to certain state deferred tax assets.

Analysis of Operating Results by Reportable Segment

Each of the Company's schools provides student-centered education. Our schools are organized and managed to capitalize on recognized brands and align them with specific targeted markets based on field of study, employment opportunity, type of degree offering and student demographics, and our operations are organized into four corresponding reportable segments:

• The Art Institutes 

• Argosy University

• Brown Mackie Colleges

• South University

Student information by segment was as follows:

	As of October
	2012	2011
Student enrollment:
The Art Institutes	71,000	80,400
Argosy University	24,800	29,000
Brown Mackie Colleges	17,800	19,900
South University	18,400	21,900
Total EDMC	132,000	151,200
	For the Three Months Ended September 30,
New students:	2012	2011
The Art Institutes	17,000	19,800
Argosy University	5,900	7,200
Brown Mackie Colleges	5,000	5,400
South University	4,900	7,700
Total EDMC	32,800	40,100
	For the Three Months Ended September 30,
Average enrolled student body:	2012	2011
The Art Institutes	66,900	75,100
Argosy University	24,600	28,800
Brown Mackie Colleges	17,400	19,800
South University	19,800	21,800
Total EDMC	128,700	145,500

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EBITDA excluding certain expenses, the measure used by the chief operating decision maker to evaluate segment performance and allocate resources, is defined as net income before interest expense, net, provision for income taxes, depreciation and amortization and certain expenses. EBITDA excluding certain expenses is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA excluding certain expenses is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Management believes EBITDA excluding certain expenses is helpful in highlighting trends because EBITDA excluding certain expenses excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, this presentation of EBITDA excluding certain expenses may not be comparable to similarly titled measures of other companies. Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate and other,” which primarily includes unallocated corporate activity. Refer to Item 1, “Financial Statements,” Note 14, “Segments” for a reconciliation of EBITDA excluding certain expenses by reportable segment to consolidated income before income taxes.

Net revenues and EBITDA excluding certain expenses by segment were as follows for the three months ended September 30, 2012 and 2011 (in thousands):

	For the Three Months Ended September 30,
	2012			2011
Net revenues:
The Art Institutes	$	380,139		$	428,900
Argosy University	81,920			98,143
Brown Mackie Colleges	73,972			80,923
South University	73,533			74,129
Total EDMC	$	609,564		$	682,095
EBITDA excluding certain expenses: (1)
The Art Institutes	$	67,926		$	110,318
Argosy University	1,193			10,234
Brown Mackie Colleges	10,595			17,583
South University	6,313			164
Corporate and other (2)	(23,106		)	(21,741		)
Total EDMC	$	62,921		$	116,558

(1) EBITDA excluding certain expenses excludes restructuring and lease termination expenses detailed in Item 1 – “Financial Statements, Note 14, “Segments." Additionally, depreciation and amortization expense is excluded, which was as follows for The Art Institutes, Argosy University, Brown Mackie Colleges, South University and Corporate, respectively, for the three months ended September 30:

Fiscal 2013: $19.6 million, $4.3 million, $6.2 million, $3.2 million and $10.8 million

Fiscal 2012: $19.6 million, $4.5 million, $5.9 million, $3.0 million and $5.9 million

(2) Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate and Other,” which primarily includes unallocated corporate activity.

Three Months Ended September 30, 2012 (current quarter) Compared with the Three Months Ended September 30, 2011 (prior year quarter)

All basis point changes are presented as a change in the percentage of net revenues in each period of comparison.

The Art Institutes

Net revenues decreased by $48.8 million or 11.4%, to $380.1 million in the current quarter compared to the prior year quarter due primarily to a decrease in average enrolled student body of 11.1%, or approximately 8,200 students. In addition, new student enrollment in the current quarter decreased by 14.6% compared to the prior year quarter to approximately 17,000

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students. The decreases in average and new student enrollments were primarily the result of the factors described above under "Key Trends, Developments and Challenges."

The volume of applications for prospective students at The Art Institutes decreased on a year-over-year basis, due primarily to a decline in applications for fully online programs. Additionally, the rate at which students who completed an application and actually enrolled in one of our programs, which we refer to as our "start rate," declined for The Art Institutes compared to the prior year quarter. This decrease was primarily due to many of The Art Institutes' traditional-aged students having difficulty financing their education due to the decreased availability PLUS program loans described above under "Key Trends, Developments and Challenges."

These declines in enrollment and net revenues contributed to the $42.4 million decrease in EBITDA excluding certain expenses to $67.9 million at The Art Institutes in the current quarter compared to the prior year quarter. Operating expense decreases, which were driven by cost savings from reductions in staffing levels and lower advertising expenses, were partially offset by higher bad debt expense as a percentage of revenues, principally from the extension of credit to students enrolled at The Art Institutes due in part to the recent changes in the availability of PLUS program loans, as described above under "Key Trends, Developments and Challenges."

Argosy University

Net revenues decreased by $16.2 million, or 16.5%, to $81.9 million in the current quarter compared to the prior year quarter due primarily to a decrease in average enrolled student body of 14.4%, or approximately 4,200 students. In addition, new student enrollment in the current quarter compared to the prior year quarter decreased by 18.3% to approximately 5,900 students. The decreases in average and new student enrollments were primarily the result of the factors described above under "Key Trends, Developments and Challenges."

While application volume decreased in the first quarter of fiscal 2013 compared to same period in the prior year, Argosy University began to show some improving trends in application volume during the quarter. In addition, start rates increased for Argosy University in the current quarter compared to the prior year quarter.

The $16.2 million net revenue decline contributed to a $9.0 million decrease in EBITDA excluding certain expenses to $1.2 million at Argosy University in the current quarter compared to the prior year quarter. While operating expenses were higher as a percentage of net revenues compared to the prior year quarter, actual costs decreased compared to the prior year quarter, which was driven by cost savings from reductions in staffing levels and lower advertising expenses.

Brown Mackie Colleges

Net revenues decreased $7.0 million, or 8.6%, to $74.0 million in the current quarter compared to the prior year quarter due primarily to a decrease in average enrolled student body of 11.9%, or approximately 2,400 students. Partially offsetting the decrease in average student enrollment was a tuition rate increase of approximately 3% in the current quarter compared to the prior year quarter.

In addition, new student enrollment in the current quarter compared to the prior year quarter also decreased by 6.0% to approximately 5,000 students. The decreases in average and new student enrollments were primarily the result of the factors described above under "Key Trends, Developments and Challenges."

Application volume at Brown Mackie Colleges has continued to show improving trends over the last few quarters despite the first quarter of fiscal 2013 not quite reaching the same levels as the first quarter of fiscal 2012. Start rates also decreased slightly in the current quarter compared to the prior year quarter; however, student persistence has continued to improve over sequential quarters at Brown Mackie Colleges.

The above decreases in enrollment and net revenues resulted in the $7.0 million decrease in EBITDA excluding certain expenses to $10.6 million at Brown Mackie Colleges in the current quarter compared to the prior year quarter.

South University

Net revenues were $73.5 million in the current year quarter and $74.1 million in the prior year quarter, a decrease of $0.6 million. Average enrolled student body for the current quarter decreased by 9.1%, or approximately 2,000 students. Partially offsetting the decrease in average student enrollment was a tuition rate increase of approximately 3% in the current quarter compared to the prior year quarter.

In addition, new student enrollment in the current quarter decreased by 36.2% compared to the prior year quarter to approximately 4,900 students. The decreases in average and new student enrollments were primarily the result of fewer new students enrolling in South University's fully online programs. The decline in volume for our fully-online programs is being

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driven, in part, by changes we are implementing in our marketing efforts in order to more effectively attract students who we believe are more likely to apply, start and persist towards completion of their academic program.

Application volume for South University's campus-based programs increased slightly in the current quarter compared to the prior year quarter. However, we continue to see lower application volume for our fully-online programs at South University as a result of the marketing changes described above.

South University's EBITDA excluding certain expenses was $6.3 million in the current quarter compared to $0.2 million in the prior year quarter. The increase of $6.1 million in EBITDA excluding certain expenses quarter over quarter was primarily due to strategic changes initiated to our marketing efforts described above, which resulted in lower marketing and admissions expenses.

Liquidity and Funds of Capital Resources

We finance our operating activities primarily from cash generated from operations, and our primary source of cash is tuition collected from our students. Most of the students at our U.S. schools rely, at least in part, on financial assistance programs to pay for their education, the most significant of which are federal student aid programs under Title IV of the HEA. We believe that cash flow from operations, supplemented from time to time with borrowings under our revolving credit facility, will provide adequate funds for ongoing operations, planned capital expenditures and debt service during the next twelve months. 

Operating cash flows

Cash flows provided by operating activities for the three months ended September 30, 2012 were $156.6 million compared to $221.3 million in the prior year quarter. The decrease in operating cash flow was primarily the result of reduced operating performance. Operating cash flows were also negatively impacted by the growth in student accounts receivable from continued extension of credit of students, due primarily to the impact of PLUS loans.

The extent to which we extend credit to our students has increased over the last several years due to decreases in availability of private loans for students. We expect this trend to continue in the future as a result of decreased availability of PLUS program loans as described above under "Key Trends, Developments and Challenges." We extend credit to students to help fund the difference between our total tuition and fees and the amount covered by other sources, including amounts awarded under Title IV programs, private loans obtained by students, and cash payments by students. Beginning in fiscal 2011, we extended the repayment period for some of the financing we make available to students. This financing currently includes periods of up to 42 months beyond graduation. This additional extension of credit has contributed to the increase in bad debt expense as a percentage of our net revenues to 8.0% during the three months ended September 30, 2012 compared to 5.2% for the three months ended September 30, 2011. The total amount of receivables that extend beyond twelve months approximated $17.8 million at September 30, 2011 and $41.2 million at September 30, 2012. If students continue to utilize this funding source, our bad debt expense as a percentage of net revenues will likely continue to increase and our cash flow from operations will continue to decrease, due to delayed receipts of cash from students. Because the extended payment plans are not federal student loans, these plans do not directly affect our published federal student loan cohort default rates. However, these extended credit terms may have an indirect negative impact on the federal student loan cohort default rates because our students effectively may have more total debt upon graduation.

Our student receivables balance reaches a peak immediately after the billing of tuition and fees at the beginning of each academic period. We collect the majority of these receivables at or near the start of each academic period when we receive federal financial aid proceeds and cash payments from continuing students. Because the academic terms of our programs do not all coincide with our quarterly reporting periods, we may have quarterly fluctuations in cash receipts, reported net cash flow from operations, net accounts receivable, unearned tuition and advance payment balances. For the three months ended September 30, 2012, there were no significant changes to the start dates of academic terms in session as compared to the prior year period.

We accrued a total of $4.6 million as of September 30, 2012 for uncertain tax positions, excluding interest and the indirect benefits associated with state income taxes. We may be required to pay the amounts accrued in future periods if we are ultimately unsuccessful in defending these uncertain tax positions. However, we cannot reasonably predict at this time the future period in which these payments may occur, if at all.

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Direct Loan Programs and Private Student Loans

We collected the substantial majority of our consolidated net revenues during fiscal 2012 from the receipt by students of Title IV financial aid program funds. On a consolidated basis, cash received from students attending our institutions from Title IV programs represented approximately 73% of our total cash receipts during fiscal 2012. These receipts include $515.8 million of stipends, or receipts by students of financing in excess of tuition and fees paid to our institutions and disbursed to students to use for living and other expenses incurred while attending school, which are not included in our consolidated net revenue. For purposes of the 90/10 Rule, which tests receipts from Title IV programs on a cash basis and excludes certain receipts such as military aid, the percentage of revenues derived by our institutions from Title IV programs during fiscal 2012 ranged from approximately 56% to approximately 86%, with a weighted average of approximately 79%.

Our students' reliance on private loans has decreased substantially during the last three fiscal years due to the increased availability of federal aid and adverse market conditions for consumer student loans. While we are taking steps to address the private loan needs of our students, the consumer lending market could worsen. The inability of our students to finance their education could cause our student population to decrease, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Non-Term Academic Structure

Beginning in January 2011 and continuing into fiscal 2012, we transitioned the fully online programs offered by South University and Argosy University from a term-based academic structure, under which all students begin programs and are eligible to receive financial aid at periodic start dates pursuant to a calendar-based term system, to a non-term academic structure, under which each student may begin a program and be eligible to receive financial aid as they successfully progress throughout the year. For students attending fully online programs, we believe a non-term academic structure provides greater ease and flexibility by providing for rolling and flexible start dates. The non-term academic structure also assists in ensuring that students do not over borrow in the early years of a program, which could result in aggregate loan limits being exceeded prior to graduation. The move to a non-term academic structure also reduced the amount of stipends (i.e., living expenses) students are eligible to receive.

Under a non-term academic structure, Direct Loans and Pell grants are typically provided in two equal disbursements each academic year. The first disbursement is usually received during the first course of a payment period. The student’s second disbursement cannot be received until the student has successfully completed the courses that were previously funded. These factors, together with the timing of when students begin their programs, affect our operating cash flow. In a quarterly term-based Title IV program environment, disbursements are generally based on three academic terms per academic year, and institutions operating on this basis are generally allowed to draw most of a student’s financial aid at the start of a term as long as the student is enrolled at least as a half-time student. The majority of the cash received in a term-based environment is recorded as unrestricted cash and unearned tuition at the beginning of the term. However, in a non-term environment, Title IV draws are generally based on when a student takes a class, which results in higher restricted cash and advance payment balances than in a term-based environment. At September 30, 2012 and 2011, we recorded $37.0 million and $45.8 million, respectively, in restricted cash related to non-term disbursements.

Investing cash flows

Capital expenditures were $20.5 million, or 3.4% of net revenues, in the three months ended September 30, 2012, compared to $20.2 million, or 3.0% of net revenues, in the three months ended September 30, 2011. Reimbursements for tenant improvements represent cash received from lessors based on the terms of lease agreements to be used for leasehold improvements, which partially offset the outflows for capital expenditures. We lease most of our facilities under operating lease agreements. We anticipate that future commitments on existing leases will be satisfied from cash provided from operating activities. We also expect to extend the terms of leases that will expire in the near future or enter into similar long-term commitments for comparable space.

Financing cash flows

As a result of the Transaction, we are highly leveraged and our debt service requirements are significant. As of September 30, 2012, we had $1,462.7 million in aggregate indebtedness outstanding. The largest portion of our debt is a senior secured credit facility that we obtained in connection with the Transaction as well as our $375.0 million senior notes due in June 2014 (the “Senior Notes”). The senior secured credit facility currently consists of a $1.1 billion term loan and a $328.3 million revolving credit facility. Refer to Item 1 “Financial Statements," Note 8 “Short-Term and Long-Term Debt” for more information.

At September 30, 2012, we had issued an aggregate of $417.2 million in letters of credit, the majority of which are issued to the U.S. Department of Education, which requires us to maintain one or more letters of credit due to our failure to satisfy certain regulatory financial ratios after giving effect to the Transaction. The amount of the letter of credit requirement in

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favor of the U.S. Department of Education was $414.5 million at September 30, 2012, which equals 15% of the total Title IV aid received by students attending our institutions during fiscal 2011. In order to provide the total requisite letters of credit, we used all $200.0 million of capacity under our cash secured letter of credit facilities and $217.2 million of letter of credit capacity under the revolving credit facility. Because letters of credit outstanding under the revolving credit facility reduce the amount available for borrowing under the revolving credit facility, there was $111.1 million available under the revolving credit facility at September 30, 2012.

We borrowed $111.3 million under the revolving credit facility at June 30, 2012 in order to satisfy year-end regulatory financial ratios, which was repaid on July 2, 2012 from cash on hand at fiscal year-end. We did not borrow against the revolving credit facility at any other point during fiscal 2012 or in the first quarter of fiscal 2013.

In June 2010, our Board of Directors adopted a stock repurchase program that currently permits us to repurchase up to $375.0 million of our common stock through December 31, 2012. Pursuant to this program, we repurchased 18.9 million shares of our common stock at a total cost of $328.6 million through September 30, 2012. No shares were purchased during the three months ended September 30, 2012.

At September 30, 2012, total indebtedness outstanding under the Senior Notes issued by our subsidiary Education Management LLC (“EM LLC”), which EDMC has guaranteed, was $375.0 million. We do not expect the guarantee will adversely affect our liquidity within the next twelve months or restrict our ability to declare dividends or incur additional indebtedness in the future.

We may from time to time use cash on hand to retire or purchase our outstanding debt through open market transactions, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Regulatory Environment and Gainful Employment

In October 2010, the U.S. Department of Education issued new regulations pertaining to certain aspects of the administration of the Title IV programs, including, but not limited to state authorization; disclosure of information related to gainful employment; compensation for persons and entities engaged in certain aspects of recruiting, admissions and student financial aid; determination of attendance; and definition of credit hours. With minor exceptions, these regulations became effective July 1, 2011.

See Part I, Item 1 “Business — Student Financial Assistance — Program Integrity Regulations" of our June 30, 2012 Annual Report on Form 10-K.

Contingencies

Refer to Item 1 “Financial Statements,” Note 12 “Commitments and Contingencies."

New Accounting Standards Not Yet Adopted

None

Covenant Compliance

Under its senior secured credit facilities, our subsidiary, Education Management LLC, is required to satisfy a maximum total leverage ratio, a minimum interest coverage ratio and other financial conditions tests. As of September 30, 2012, it was in compliance with the financial and non-financial covenants. Its continued ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that it will meet those ratios and tests in the future.

Adjusted EBITDA is a non-GAAP measure used to determine our compliance with certain covenants contained in the indenture governing the Senior Notes and in the credit agreement governing our senior secured credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance under our senior secured credit facilities and the indenture governing the Senior Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financing covenants.

The breach of covenants in the credit agreement governing our senior secured credit facilities that are tied to ratios based on Adjusted EBITDA could result in a default under that agreement, in which case the lenders could elect to declare all borrowed amounts immediately due and payable. Any such acceleration also would result in a default under our indenture governing the Senior Notes. Additionally, under the credit agreement governing our senior secured credit facilities and the

40

indenture governing the Senior Notes, our subsidiaries’ ability to engage in activities, such as incurring additional indebtedness, making investments and paying dividends or other distributions, is also tied to ratios based on Adjusted EBITDA.

Adjusted EBITDA does not represent net income or cash flows from operations as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. In addition, unlike GAAP measures such as net income and earnings per share, Adjusted EBITDA does not reflect the impact of our obligations to make interest payments on our other debt service obligations, which have increased substantially as a result of the indebtedness incurred in June 2006 to finance the Transaction and related expenses. While Adjusted EBITDA and similar measures frequently are used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters that we may consider not to be indicative of our ongoing operations. In particular, the definition of Adjusted EBITDA in our senior credit facilities and the indenture governing the Senior Notes allows us to add back certain non-cash, extraordinary, unusual or non-recurring charges that are deducted in calculating net income. However, these are expenses that may recur, vary greatly and are difficult to predict. Further, our debt instruments require that Adjusted EBITDA be calculated for the most recent four fiscal quarters. As a result, the measure can be affected disproportionately by a particularly strong or weak quarter. Further, it may not be comparable to the measure for any subsequent twelve-month period or any complete fiscal year.

The following is a reconciliation of net income, which is a GAAP measure of operating results, to Adjusted EBITDA for Education Management LLC as defined in its debt agreements. The terms and related calculations are defined in the senior secured credit agreement (in millions).

	For the Twelve Month Period Ended September 30, 2012
Net loss	$	(1,555.7	)
Interest expense, net	114.9
Income tax benefit	(39.5		)
Depreciation and amortization	163.9
EBITDA	(1,316.4		)
Goodwill and indefinite-lived intangible assets impairments (1)	1,746.8
Loss on extinguishment of debt (2)	9.5
Severance and relocation	18.3
Non-cash compensation (3)	13.7
Other	6.9
Adjusted EBITDA - Covenant Compliance	$	478.8

(1) As a result of current and projected enrollment trends, as well as a decline in market capitalization, we performed two impairment reviews at all of our reporting units during fiscal 2012. These impairment reviews resulted in non-cash impairment charges at all of our reporting units, totaling $1.75 billion.

(2) In March 2012, we recorded a $9.5 million loss on extinguishment of debt in connection with the refinancing of $348.6 million of our $1.1 billion term loan.

(3) Represents non-cash expense for stock options and restricted stock.

Our covenant requirements and actual ratios for the year ended September 30, 2012 were as follows:

	Covenant Requirements	Actual Ratios
Senior secured credit facility
Adjusted EBITDA to Consolidated Interest Expense ratio	Minimum of 2.75x	4.16x
Consolidated Total Debt to Adjusted EBITDA ratio	Maximum of 3.50x	2.72x

Certain Risks and Uncertainties

Certain of the matters that we discuss in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which are based on information currently available to management, typically contain words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,”

41

“may,” “will,” “should,” “seeks,” “approximately” or “plans” or similar words and concern our strategy, plans or intentions. However, the absence of these or similar words does not mean that any particular statement is not forward-looking. All of the statements that we make relating to estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward looking statements. In addition, from time to time, we make forward-looking public statements concerning our expected future operations and performance and other developments. These and any other forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially and unpredictably from any future results, performance or achievements expressed or implied by such forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions, and we caution that it is very difficult to predict the impact of known factors, and impossible to anticipate all factors, that could affect our actual results.

Some of the factors that we believe could affect our results and that could cause actual results to differ materially from our expectations include, but are not limited to: the timing and magnitude of student enrollment and changes in student mix, including the relative proportions of on-ground and online students enrolled in our programs; changes in average registered credits taken by students; our ability to maintain eligibility to participate in Title IV programs; other changes in our students' ability to access federal and state financial aid, as well as private loans from third-party lenders; any difficulties we may face in opening new schools, growing our online academic programs and otherwise implementing our growth strategy; increased or unanticipated legal and regulatory costs; the results of program reviews and audits; changes in accreditation standards; the implementation of new operating procedures for our fully online programs; the implementation of program initiatives in response to, or as a result of further developments in, the litigation concerning the U.S. Department of Education's new gainful employment regulation; adjustments to our programmatic offerings to comply with the 90/10 rule;     our high degree of leverage and our ability to generate sufficient cash to service all of our debt obligations and other liquidity needs; other market and credit risks associated with the post-secondary education industry, adverse media coverage of the industry and overall condition of the industry; changes in the overall U.S. or global economy; disruptions or other changes in access to the credit and equity markets in the United States and worldwide; and the effects of war, terrorism, natural disasters or other catastrophic events.

The foregoing review of factors should not be construed as exhaustive. For a more detailed discussion of certain risk factors affecting the Company's risk profile, see, Part I, Item 1A, “Risk Factors,” in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012. The Company expressly disclaims any current intention to update any forward-looking statements contained in this report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes to our market risk since June 30, 2012. For discussion of our exposure to market risk, refer to our fiscal 2012 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

The Company, under the supervision and participation of its management, which include the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of its “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act. This evaluation was conducted as of the end of the period covered by this Form 10-Q. Based on that evaluation, our chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures are effective. Effective controls are designed to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These controls and procedures are designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation and other legal disputes in the ordinary course of business. Refer to Part I, Item 1, "Financial Statements," Note 12, "Commitments and Contingencies" of this Quarterly Report on Form 10-Q for information regarding certain legal proceedings, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A, "Risk Factors" of Part I of the Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.     MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6.EXHIBITS INDEX

Number	Document
10.1*†	Amendment to Employment Agreement, dated as of October 2, 2012, between Education Management Corporation and Edward H. West
10.2*†	Stock Option Agreement, dated as of October 2, 2012, between Education Management Corporation and Edward H. West
10.3†	Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 of Education Management Corporation filed on September 12, 2012)
10.4*†	Form of Executive Stock Option Agreement
10.5*†	Form of Non-Executive Stock Option Agreement
31.1*	Certification of Edward H. West required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Randall J. Killeen required by Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Edward H. West required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Randall J. Killeen required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

_______________

*Filed herewith.

† Management contract or compensatory plan or arrangement.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EDUCATION MANAGEMENT CORPORATION

/S/    RANDALL J. KILLEEN

Randall J. Killeen

Vice President and Acting Chief Financial Officer

Date: November 8, 2012

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EX-10.1

EXHIBIT 10.1

AMENDMENT TO EMPLOYMENT AGREEMENT

This AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of October 2, 2012 (the “Amendment”), is entered into by and between Education Management Corporation, a Pennsylvania corporation (together with its successors and assigns, the “Company”), and Edward H. West (the “Executive”).

WHEREAS, the Company and the Executive previously entered into an Employment Agreement dated as of June 1, 2006 (the “Agreement”);

WHEREAS, the Agreement may be amended from time to time in accordance with the provisions of Section 8.2 thereof; and

WHEREAS, the Company and the Executive wish to amend the Agreement, effective as of the date hereof.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valid consideration the sufficiency of which is acknowledged, the Executive and the Company hereby amend the Agreement, effective as of the date hereof, as follows:

1. Section 1.2 of the Agreement is deleted in its entirety and restated in full as follows:

1.2    Duties. During the Term, the Executive shall serve as the Company's Chief Executive Officer, and such other positions as officer or director of the Company and its affiliates as the Executive and the Board of directors of the Company (the “Board”) shall mutually agree from time to time. In such positions, the Executive shall perform such duties, functions and responsibilities during the Term commensurate with the Executive's positions. Subject to Section 1.3 below, the Executive shall have all authorities, duties and responsibilities customarily exercised by an individual serving in the foregoing positions at an entity of the size and nature of the Company; shall be assigned no duties or responsibilities that are materially inconsistent with, or that materially impair his ability to discharge, the foregoing duties and responsibilities; shall have such additional duties and responsibilities, consistent with the foregoing, as may be from time to time assigned to him; and in his capacity as Chief Executive Officer shall report solely and directly to the Board. During the Term, the Executive shall also serve as a member of the Board.

2. Section 2.1 is deleted in its entirety and restated in full as follows:

2.1    Salary. As compensation for the performance of the Executive's services hereunder, during the Term, the Company shall pay to the Executive a salary at an annual rate of five hundred sixty-eight thousand and seven dollars ($568,007), payable in accordance with the Company's standard payroll policies (the “Base Salary”); provided, effective July 1, 2013, the Executive's Base Salary shall be increased to eight hundred fifty thousand dollars ($850,000). The Base Salary will be reviewed annually and may be adjusted upward by the Board (or a committee thereof) in its discretion, based on competitive data and the Executive's performance.

1

3. Section 2.2(a) is deleted in its entirety and restated in full as follows:

2.2    Annual Bonus.

(a)    During the Term, the Executive will be eligible for an annual incentive bonus (the “Annual Bonus”) for each complete fiscal year occurring during the Term. The Executive's target bonus will be one hundred twenty-five percent (125%) of the Base Salary; provided, for purposes of this Section 2.2, for the fiscal year ending June 30, 2013 the Executive's “Base Salary” shall be deemed to be eight hundred fifty thousand dollars ($850,000) effective July 1, 2012. The actual Annual Bonus paid for any year will depend on meeting Company and individual performance standards established by the Board. The Annual Bonus will be paid in cash within seventy-five (75) days of the end of the fiscal year.

4. Section 2.3 is amended by adding after the last sentence thereof the following:

On or within thirty (30) days after the date hereof, the Company shall award to the Executive a stock option, pursuant to one or more award agreements, for an aggregate of 1,000,000 shares of the Company's Common Stock under one or more duly-adopted long-term incentive plans, having an exercise price equal to the fair market value of Company Common Stock as provided under the applicable plan when granted and have such vesting and other terms and conditions as are set forth in a form (or forms) of stock option agreement(s) provided to, and as agreed by, the Executive.

5. Section 3.2(a) of the Agreement is deleted in its entirety and restated in full as follows:

(a) Termination by the Company Other than for Cause; Termination by the Executive for Good Reason. If the Executive's employment hereunder is terminated by the Company during the Term other than for Cause, or by the Executive with Good Reason, in addition to the Accrued Amounts the Executive shall be entitled to a lump sum severance payment of (i) one and one-half (1.5) times (or three (3) times if (x) the Executive reasonably demonstrates that the termination is In Anticipation Of, or (y) occurring on or within two (2) years following, a “Change in Control” (as defined in the Company's 2006 Stock Option Plan (or successor long-term incentive plan))) the sum of the Executive's Base Salary plus the target Annual Bonus and (ii) a pro-rata Annual Bonus (determined by multiplying the actual Annual Bonus earned by the Executive for the fiscal year of termination (without regard for any exercise of negative discretion under the applicable annual bonus plan) by a fraction, the numerator of which is the number of days he was employed by the Company during such fiscal year and the denominator of which is the number of days in such fiscal year) (the “Pro-Rata Annual Bonus Payment”) ((i) and (ii), collectively the “Severance Payment”), subject to the provisions of the last sentence of Section 4.8 hereof. The Company's obligations to make the Severance Payment shall be conditioned upon the Executive's execution, delivery and non-revocation of a valid and enforceable general release of claims substantially in the form attached hereto as Exhibit C (the “Release”) within thirty (30) days of the date of termination. Subject to Section 3.2(e) and Section 8.13, the Severance Payment will be paid to the Executive as soon as practicable following the effectiveness of the Release. The Company shall also reimburse the Executive, on a monthly basis, for an amount of his COBRA premiums (for the duration of COBRA continuation coverage, not to exceed eighteen (18) months following termination of employment) equal to difference between (x) the amount of COBRA premium charged to the Executive minus (y) the amount of premium charged to actively employed senior executives for like coverage as that elected by the Executive.

2

6. Section 3.2(c) of the Agreement is deleted in its entirety and restated in full as follows:

(i)    Termination Due to Disability. Upon a determination that the Executive is Disabled, the Company may give notice to the Executive that it intends to replace him. If the Executive does not return to the performance of his duties on essentially a full-time basis within thirty (30) days after receiving such notice, the Company may replace the Executive without breaching this Agreement; provided, however, that this Agreement and the Executive's employment thereunder shall not terminate until the anniversary date of this Agreement next following the date that the Executive is determined to be Disabled. For the period from the date the Executive is determined to be Disabled through the earlier of such anniversary date or the date of the Executive's death (the “Disability Period”), the Company shall continue to provide the Executive all compensation and benefits provided for in Section 2; provided, however, that (x) the Company's obligation to pay the Executive's Base Salary shall be reduced by the amounts paid to the Executive under any long-term disability insurance plan sponsored or otherwise maintained by the Company (if any) and that in no event shall the total annual obligation of the Company under this Agreement to make Base Salary payments to the Executive during the Disability Period be greater than an amount equal to two-thirds (2/3) of the Executive's Base Salary, computed on a pro rata basis beginning with the date that the Executive is replaced in accordance with this Section 3.2(c)(i) and continuing until the expiration of the Disability Period and (y) the Executive's Annual Bonus due for fiscal year (or years) in which all or a portion of the Disability Period occurs shall not be reduced on account of the Executive's absence from active service due to his Disability from what otherwise may be earned and payable to him.

(ii)    Termination Due to Death. If the Executive's employment hereunder is terminated by reason of his death, the Company shall continue to pay the Executive's Base Salary at the rate in effect at the time of his death to such person or persons as the Executive shall have designated for that purpose in a notice filed with the Company, or, if no such person shall have been so designated, to his estate, for a period of six (6) months after the Executive's date of death. The Company also shall pay to such person(s) or estate (i) the amount of the Accrued Amounts and a Pro-Rata Annual Bonus Payment (except, for which purpose the Annual Bonus shall be deemed earned and payable at target) for the year of termination and (ii) an amount equal to one-twelfth (1/12) of the Executive's average Annual Bonus paid or payable to the Executive with respect to the most recent three (3) full fiscal years or, if greater, the most recent twelve (12)-month period (in each case, determined by annualizing the bonus paid or payable with respect to any partial fiscal year) that amount being payable in each of the six (6) months following the date of termination. Any amounts payable under this Section 3.2(c)(ii) shall be exclusive of and in addition to any payments which the Executive's widow, beneficiaries or estate may be entitled to receive pursuant to any pension plan, profit sharing plan, employee benefit plan, or life insurance policy maintained by the Company.

7. Section 3.2(d)(1) of the Agreement is deleted in its entirety and restated in full as follows:

(1) “Good Reason” shall mean the occurrence of any of the following events without either the Executive's prior written consent or full cure within thirty (30) days after he gives written notice to the Company describing the event and requesting cure: (i) any material diminution in the Executive's authorities, titles or offices, or the assignment to the Executive of duties that materially impair his ability to perform the duties normally assigned to an executive in the Executive's role at a corporation of the size and nature of the Company; (ii) any change in the reporting structure so that the Executive reports to someone other than to the Board; (iii) any failure to re-elect the Executive as a member of the Board; (iv) any relocation of the Company's principal office, or of the Executive's own principal place of employment, to a location more than fifty (50) miles from Pittsburgh,

3

Pennsylvania; (v) any material breach by the Company or any of its affiliates of any material obligation to the Executive; or (vi) any failure of the Company to obtain the assumption in writing of its obligation to perform this Employment Agreement by any successor to all or substantially all of the assets of the Company within fifteen (15) days after any merger, consolidation, sale or similar transaction, except where such assumption occurs by operation of law. If the Company fails to cure a Good Reason event during the thirty (30) day cure period, the Executive must terminate his employment within sixty (60) days after the expiration of such thirty (30) day period if such termination is to be treated as for Good Reason based on such uncured Good Reason event.

8. A new Section 8.13 is hereby added to the Agreement, to read as follows:

8.13 409A Compliance. Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of section 409A of the Internal Revenue Code of 1986, as amended. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with section 409A and if necessary, any such provision shall be deemed amended comply with Section 409A and the regulations thereunder. Further, for purposes of the limitations on nonqualified deferred compensation under section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A deferral election rules and the exclusion from section 409A for certain short-term deferral amounts. Any amounts payable solely on account of an involuntary separation from service of the Executive within the meaning of section 409A shall be excludible from the requirements of section 409A, either as involuntary separation pay or as short-term deferral amounts (e.g., amounts payable under the schedule prior to March 15 of the calendar year following the calendar year of involuntary separation) to the maximum possible extent. Any reimbursements or in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in this Agreement, (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit. Any severance payment to the Executive that is conditioned upon the execution and non-revocation of a release of claims shall be paid in the taxable year in which ends the maximum period of time that the Executive had to consider and revoke such release, regardless of when such release is actually executed.

9. The Company agrees to promptly pay all fees and charges of the Executive's attorneys reasonably incurred by the Executive in connection with the negotiation, preparation and execution of this Amendment and grants of stock options provided herein, up to a maximum of ten thousand dollars ($10,000).

10.Except as specifically modified herein, the Agreement shall remain in full force and effect in accordance with all of the terms and conditions thereof.

11.This Amendment may be executed in counterparts, all of which together shall comprise one and the same instrument.

[Signature page follows]

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IN WITNESS WHEREOF, the Parties have executed this Amendment to the Agreement as of the date first written above.

	EDUCATION MANAGEMENT CORPORATION
/s/ Edward H. West	By:	/s/ Randall J. Killeen
Edward H. West	Name:	Randall J. Killeen
	Title:	Vice President and Acting Chief Financial Officer

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EX-10.2

EXHIBIT 10.2

EDUCATION MANAGEMENT CORPORATION

EXECUTIVE STOCK OPTION AGREEMENT

THIS AGREEMENT (the “Agreement”), is entered into and made effective as of October 2, 2012 (the “Grant Date”), between Education Management Corporation, a Pennsylvania corporation (the “Company”), and the participant set forth on the signature page hereto (the “Grantee” and together with the Company, the “Parties”):

RECITALS:

WHEREAS, the Company has adopted the Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement to the extent set forth in Section 16 below. Capitalized terms not otherwise defined herein or by reference herein shall have the meanings given thereto in the Plan; and

WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Option to the Grantee pursuant to the Plan, the Employment Agreement between the Grantee and the Company (the “Parties”) (the “Employment Agreement”), and the terms set forth herein.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties agree as follows:

1.Grant of the Option. The Company hereby grants to the Grantee the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of the number of shares of the Company's Stock set forth on the signature page hereto (the “Shares”), subject to adjustment as set forth in the Plan. The Option Price shall be as set forth on the signature page hereto, which the Parties agree is not less than the Fair Market Value of a share of Stock as of the Grant Date. If designated on the signature page hereto as an Incentive Stock Option, this Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. Nevertheless, to the extent that the Option fails to meet the requirements of an “incentive stock option” under Section 422 of the Code, this Option shall be treated as a Non-qualified Stock Option. The grant of this Option is conditioned on the Grantee's acceptance of the provisions set forth in this Agreement within 60 days after the Agreement is presented to the Grantee for review.

2.Duration. Subject to the provisions of the Plan and this Agreement, the Grantee may exercise all or any part of the Vested Portion of the Option at any time prior to the tenth anniversary of the Grant Date (the “Expiration Date”). The Option may not be cancelled or forfeited without the Grantee's prior written consent prior to such Expiration Date, other than as expressly provided (x) in Section 15 of the Plan (relating to “Transactions”), or (y) in this Agreement.

3.Vesting.

(a)Subject solely to the provisions of Sections 3(b), 4(a), 4(b) and 4(c) below and Section 15 of the Plan, the Option shall vest and become exercisable with respect to an aggregate of

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twenty-five percent (25%) of the Shares originally subject to the Option on each of August 15, 2013 and the three successive anniversaries thereof. The portion of the Option which has become vested and exercisable as described in Sections 3(a) or 3(b) is hereinafter referred to as the “Vested Portion.” Notwithstanding the foregoing, the Committee may, in its discretion, accelerate vesting of the Option or extend the applicable exercise period subject to the terms and restrictions of the Plan.

(b)Notwithstanding the foregoing, one hundred percent (100%) of the Shares then subject to the Option shall be accelerated and become vested and exercisable immediately prior to, but subject to the consummation of, a Change in Control.

(c)If the Grantee's Service is terminated by the Company without Cause or by the Grantee for Good Reason (as defined in the Employment Agreement), the Option shall vest and become exercisable on the next anniversary of the Date of Grant with respect to twenty five percent (25%) of the Shares then subject to the Option. The remaining portion of the Option shall automatically be canceled without payment of any consideration therefor.

For purposes of this Section 3(c), and of the percentages set forth in it, Shares previously subject to the Option, and in respect of which the Option has already been exercised, shall be treated as still subject to the Option. If the Grantee's Service is terminated by the Company without Cause or by the Grantee for Good Reason, the Vested Portion of the Option (including that which continues to vest in accordance with this Section 3(c)) shall remain exercisable until the Expiration Date.

4.Effect of a Separation from Service.

(a)If the Grantee's Service is terminated by the Company for Cause, the Option shall, whether or not vested, automatically be canceled without payment of consideration therefor.

(b)If the Grantee's Service is terminated by the Grantee without Good Reason (as defined in the Employment Agreement) and not for death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the Expiration Date.

(c)If the Grantee's Service is terminated due to the Grantee's death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the Expiration Date.

5.Liquidity Restriction. Notwithstanding anything herein to the contrary, unless and until any of the Principal Stockholders sell a portion of their holdings of Common Stock (a “Liquidity Event”), the Grantee shall be restricted from selling any of the shares of Common Stock acquired through the exercise of the Vested Portion of the Option (the “Liquidity Restriction”). The foregoing Liquidity Restriction shall lapse upon the eighth (8th) anniversary of the Grant Date. Upon the occurrence of a Liquidity Event by one or more Principal Stockholders (prior to such eighth (8th) anniversary), the Liquidity Restriction shall lapse with respect to (i) the shares of Common Stock acquired pursuant to this Option, and (ii) any shares which may be acquired upon exercise of the Option on the date of such Liquidity Event or at any time thereafter, in the aggregate, in the same ratio that the number of shares of Common Stock sold in the Liquidity Event by the Principal Stockholders bears to the total number of shares of Common Stock owned by the Principal Stockholders as of the Grant Date. For the avoidance of doubt, the lapse of the Liquidity Restriction as to any unvested portion of the Option shall not accelerate

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vesting from the date that such portion otherwise vests hereunder. The Grantee shall remain subject to all notice and pre-clearance requirements that may be applicable under the Company's insider trading policy.

6.Exercise of Option.

(a)Subject to Section 2 and any electronic exercise methods implemented by the Company, any part of the Vested Portion of the Option may be exercised by delivering to the Company on any business day at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole shares of Stock only. Such notice shall specify the number of Shares for which the Option is being exercised (the “Purchased Shares”) and shall be accompanied by payment in full of the Option Price of the Purchased Shares in cash or by check or wire transfer; provided, however, that, in the sole discretion of the Committee, payment of such aggregate Option Price may instead be made, in whole or in part, by one or more of the following: (i) provided that the Company is not then contractually prohibited from permitting exercise in this fashion, the delivery to the Company of a certificate or certificates representing Stock, duly endorsed or accompanied by a duly executed stock power, which delivery effectively transfers to the Company good and valid title to such Stock, free and clear of any pledge, commitment, lien, claim or other encumbrance (such shares of Stock to be valued at their aggregate Fair Market Value on the date of such exercise), provided that if a certificate or certificates representing shares of Stock in excess of the amount required are delivered, a certificate (or other satisfactory evidence of ownership) representing the excess number of shares of Stock shall promptly be returned by the Company, (ii) a reduction in the number of Purchased Shares to be issued upon such exercise having a Fair Market Value on the date of exercise equal to the aggregate Option Price in respect of the Purchased Shares, provided that the Company is not then contractually prohibited from permitting exercise in this fashion, or (iii) other cashless exercise procedures approved by the Committee. The Grantee shall not have any rights to dividends or other rights of a stockholder with respect to Shares subject to the Option until the Grantee has given written notice of exercise of the Option, paid the Option Price in full for such Shares and, if applicable, has satisfied any other conditions pursuant to the Plan or this Agreement (including provisions for the payment of applicable withholding taxes, which provisions may be made in any of the ways in which the Option Price may be paid). Notwithstanding anything to the contrary contained in this Agreement or the Plan, for purposes of this Section 6(a), the Fair Market Value of a share of Stock shall, to the extent necessary to avoid incurring “additional tax,” interest or penalties under Section 409A of the Code, not be treated as greater than the “fair market value” of a share of Stock determined consistently with Section 409A of the Code and the regulations and guidance promulgated thereunder.

(b)Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and Federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange (collectively, the “Legal Requirements”) that the Committee shall in its sole discretion determine to be necessary or advisable, unless an exemption to such registration or qualification is available and satisfied. The Committee may establish additional procedures as it deems necessary or desirable in connection with the exercise of the Option or the issuance of any Shares upon such exercise to comply with any Legal Requirements, including suspending exercises of the Option and the tolling of any applicable exercise period and the Expiration Date during such suspension. Such procedures may include but are not limited to the establishment of limited periods during which the Option may be exercised or that following receipt of the notice of exercise, and prior to the completion of the exercise, the Grantee will be required to affirm the exercise of the Option following receipt of any disclosure deemed necessary or desirable by the Committee.

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(c)The Company shall, upon payment in accordance with Section 6(a) above of the Option Price for Purchased Shares, deliver such Purchased Shares as soon as reasonably practicable to the Grantee and pay all original issue and transfer taxes and all other fees and expenses incident to such delivery. All Shares delivered upon any exercise of the Option shall, when delivered, (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) be registered for sale, and for resale, under U.S. state and federal securities laws to the extent that other shares of Stock issued under the Plan are then so registered or qualified and (iii) be listed, or otherwise qualified, for trading on any securities exchange or securities market on which other shares of Stock issued under the Plan of the same class are then listed or qualified.

(d)In the event of the Grantee's death, the Vested Portion of the Option shall remain exercisable by the Grantee's executor or administrator, or the person or persons to whom the Grantee's rights under this Agreement shall pass by will or by the laws of descent and distribution, or the person or persons to whom such rights have passed under Section 11, as the case may be, to the extent set forth in Section 4 (and the term “Grantee” shall be deemed to include such heir or legatee or permitted transferee). Any such heir or legatee or permitted transferee of the Grantee shall take rights herein granted subject to the terms and conditions hereof.

7.Transactions. This Option shall be subject to the provisions of Section 15.1.2 of the Plan in the event of a Transaction.

8.Taxes

(a)If (i) the aggregate of all amounts and benefits due to the Grantee under this Option or under any other Company plan, program, agreement or arrangement would, if received by the Grantee in full and valued under Section 280G of the Code, constitute “parachute payments” as defined in and under Section 280G of the Code (collectively, “280G Benefits”), and if (ii) such aggregate 280G Benefits would, if reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, be less than the amount the Grantee would receive, after all taxes, if the Grantee received aggregate 280G Benefits equal (as valued under Section 280G of the Code) to only three times the Grantee's “base amount” as defined in and under Section 280G of the Code, less $1.00, then (iii) such 280G Benefits payable in cash, and/or such benefits under performance-vesting options, if any, in either case as the Grantee shall select shall (to the extent that the reduction of such 280G Benefits can achieve the intended result) be reduced or eliminated to the extent necessary so that the aggregate 280G Benefits received by the Grantee will not constitute “excess parachute payments” under Section 280G of the Code. The determinations with respect to this Section 8(a) shall be made by an independent auditor (the “Auditor”) paid by the Company. The Auditor shall be the Company's regular independent auditor.

(b)It is possible that after the determinations and selections made pursuant to Section 8(a) the Grantee will receive 280G Benefits that are, in the aggregate, either more or less than the amount provided under Section 7.1 (hereafter referred to as an “Excess Payment” or “Underpayment,” respectively). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then the Grantee shall promptly pay an amount equal to the Excess Payment to the Company, together with interest on such amount at the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of the Grantee's receipt of such Excess Payment until the date of such payment; provided, however, that the amount of the Excess Payment to be repaid by the Grantee will be reduced to the extent that the Auditor determines that any portion of the Excess Payment to be repaid will not be offset by a corresponding reduction in any applicable excise tax payable by the Grantee under

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Section 4999 of the Code by reason of such repayment of the Excess Payment. In the event that it is determined (x) by a court or (y) by the Auditor upon request by the Company or the Grantee, that an Underpayment has occurred, the Company shall promptly pay an amount equal to the Underpayment to the Grantee, together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Grantee had the provisions of Section 8.1 not been applied until the date of such payment and such payment will be deemed to have been made in accordance with the requirements of Treasury Regulation Section 1.409A‑3(g) to the extent that Section 409A of the Code would be applicable.

9.No Right to Continued Employment. The granting of the Option evidenced hereby and this Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Grantee and shall not lessen or affect the Company's or its Affiliates' right to terminate the Service of the Grantee.

10.Legend on Certificates. The certificates representing the Shares purchased by exercise of the Option shall be subject to such stop transfer orders and other restrictions as the Committee may reasonably deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions, provided, however, that any such legends shall be removed, promptly upon the Grantee's reasonable written request, to the extent that the grounds that supported requiring the legend no longer apply.

11.Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance otherwise than by will or by the laws of descent and distribution shall be void and unenforceable against the Company or any Affiliate; provided that the designation of one or more beneficiaries to whom the Option shall be transferred, in whole or in part, upon the death of the Grantee shall not constitute a prohibited assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

12.Withholding Taxes. Prior to the issuance of any Shares upon exercise of the Option, the Grantee shall be required to satisfy any applicable withholding taxes in respect of the Option in accordance with Section 6(a) above. Subject to the foregoing, the Grantee shall be solely responsible for the payment of all taxes relating to the payment or provision of any amounts or benefits hereunder. All amounts and benefits due to the Grantee under this Agreement are subject to Section 7 of the Employment Agreement.

13.Securities Laws. In connection with the acquisition of any Shares pursuant to the exercise of the Option, the Grantee will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with any Legal Requirements or with this Agreement.

14.Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Grantee at the address appearing in the personnel records of the Company for the Grantee or to either party hereto at such other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

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15.Choice of Law. This Agreement shall be governed by and construed in accordance with its express terms, and otherwise in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law, provided that the provisions set forth herein that are required to be governed by the Pennsylvania Business Corporation Law of 1988, as amended, shall be governed by the Pennsylvania Business Corporation Law of 1988, as amended.

16.Option Subject to Plan. By entering into this Agreement, the Grantee agrees and acknowledges that the Grantee has received and read a copy of the Plan. The Option is subject to the Plan to the extent that the Plan is not inconsistent with this Agreement. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of any inconsistency between (x) any term or provision of this Agreement or any other Company Arrangement (as defined in the Employment Agreement), other than the Employment Agreement, and (y) any term or provision of the Plan, the terms and provisions of the Plan will govern and prevail.

17.Electronic Signature; Multiple Counterparts. This Agreement may be signed by the Parties through an electronic acknowledgment of the terms and conditions set forth herein and may also be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The Company may sign the Agreement electronically prior to distribution to the Grantee. Signatures delivered by facsimile or other electronic means approved or recognized by the Committee shall be effective for all purposes.

[signature page follows]

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IN WITNESS WHEREOF, the Parties have executed this Executive Stock Option Agreement, effective as of the Grant Date.

EDUCATION MANAGEMENT CORPORATION

By:/s/ Randall J. Killeen            

Name: Randall J. Killeen

Title: Vice President and Acting

Chief Financial Officer

Agreed and acknowledged as

of the date first above written:

/s/ Edward H. West         

Edward H. West

Number of time-vesting Shares

subject to the Option: 1,000,000

Option Price:$3.03 per share

Type of Option:Non-qualified Stock Option

Grant Date:October 2, 2012

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EX-10.4

EXHIBIT 10.4

EDUCATION MANAGEMENT CORPORATION

EXECUTIVE STOCK OPTION AGREEMENT

THIS AGREEMENT (the “Agreement”), is made effective as of [__________], 20__ (the “Grant Date”), between Education Management Corporation, a Pennsylvania corporation (the “Company”), and the participant set forth on the signature page hereto (the “Grantee” and together with the Company, the “Parties”):

RECITALS:

WHEREAS, the Company has adopted the Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement to the extent set forth in Section 15 below. Capitalized terms not otherwise defined herein or by reference herein shall have the meanings given thereto in the Plan; and

WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Option to the Grantee pursuant to the Plan, the Employment Agreement between the Grantee and the Company (the “Parties”) (the “Employment Agreement”), and the terms set forth herein.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties agree as follows:

1.Grant of the Option. The Company hereby grants to the Grantee the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of the number of shares of the Company's Stock set forth on the signature page hereto (the “Shares”), subject to adjustment as set forth in the Plan. The Option Price shall be as set forth on the signature page hereto, which the Parties agree is not less than the Fair Market Value of a share of Stock as of the Grant Date. If designated on the signature page hereto as an Incentive Stock Option, this Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. Nevertheless, to the extent that the Option fails to meet the requirements of an “incentive stock option” under Section 422 of the Code, this Option shall be treated as a Non-qualified Stock Option. The grant of this Option is conditioned on the Grantee's acceptance of the provisions set forth in this Agreement within 60 days after the Agreement is presented to the Grantee for review

2.Duration. Subject to the provisions of the Plan and this Agreement, the Grantee may exercise all or any part of the Vested Portion of the Option at any time prior to the tenth anniversary of the Grant Date (the “Expiration Date”). The Option may not be cancelled or forfeited without the Grantee's prior written consent prior to such Expiration Date, other than as expressly provided (x) in Section 15 of the Plan (relating to “Transactions”), or (y) in this Agreement.

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1.Vesting.

(a)Subject solely to the provisions of Sections 3(b), 4(a), 4(b) and 4(c) below and Section 15 of the Plan, the Option shall vest and become exercisable on each anniversary of the Grant Date (beginning on the first anniversary of the Grant Date) with respect to an aggregate of twenty-five percent (25%) of the Shares originally subject to the Option; provided that the Grantee is employed by the Company as of each such vesting date. The portion of the Option which has become vested and exercisable as described in Sections 3(a) or 3(b) is hereinafter referred to as the “Vested Portion.” Notwithstanding the foregoing, the Committee may, in its discretion, accelerate vesting of the Option or extend the applicable exercise period subject to the terms and restrictions of the Plan.

(b)Notwithstanding the foregoing, one hundred percent (100%) of the Shares then subject to the Option shall be accelerated and become vested and exercisable immediately prior to, but subject to the consummation of, a Change in Control.

(c)If the Grantee's Service is terminated by the Company without Cause or by the Grantee for Good Reason (as defined in the Employment Agreement), the Option shall vest and become exercisable on the next anniversary of the Date of Grant with respect to twenty five percent (25%) of the Shares then subject to the Option. The remaining portion of the Option shall automatically be canceled without payment of any consideration therefor.

For purposes of this Section 3(c), and of the percentages set forth in it, Shares previously subject to the Option, and in respect of which the Option has already been exercised, shall be treated as still subject to the Option. If the Grantee's Service is terminated by the Company without Cause or by the Grantee for Good Reason, the Vested Portion of the Option (including that which continues to vest in accordance with this Section 3(c)) shall remain exercisable until the second anniversary of the date of termination of Service.

4.Effect of a Separation from Service.

a)If the Grantee's Service is terminated by the Company for Cause, the Option shall, whether or not vested, automatically be canceled without payment of consideration therefor.

(b)If the Grantee's Service is terminated by the Grantee without Good Reason (as defined in the Employment Agreement) and not for death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until ninety days following the date of termination of Employment.

(c)If the Grantee's Service is terminated due to the Grantee's death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until the first anniversary of the date of termination of Employment.

5. Exercise of Option.

(a)Subject to Section 2 and any electronic exercise methods implemented by the Company, any part of the Vested Portion of the Option may be exercised by delivering to the Company on any business day at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole shares of Stock only. Such notice shall specify the number of Shares for which the Option is being exercised (the “Purchased Shares”) and shall be accompanied by

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payment in full of the Option Price of the Purchased Shares in cash or by check or wire transfer; provided, however, that, in the sole discretion of the Committee, payment of such aggregate Option Price may instead be made, in whole or in part, by one or more of the following: (i) provided that the Company is not then contractually prohibited from permitting exercise in this fashion, the delivery to the Company of a certificate or certificates representing Stock, duly endorsed or accompanied by a duly executed stock power, which delivery effectively transfers to the Company good and valid title to such Stock, free and clear of any pledge, commitment, lien, claim or other encumbrance (such shares of Stock to be valued at their aggregate Fair Market Value on the date of such exercise), provided that if a certificate or certificates representing shares of Stock in excess of the amount required are delivered, a certificate (or other satisfactory evidence of ownership) representing the excess number of shares of Stock shall promptly be returned by the Company, (ii) a reduction in the number of Purchased Shares to be issued upon such exercise having a Fair Market Value on the date of exercise equal to the aggregate Option Price in respect of the Purchased Shares, provided that the Company is not then contractually prohibited from permitting exercise in this fashion, or (iii) other cashless exercise procedures approved by the Committee. The Grantee shall not have any rights to dividends or other rights of a stockholder with respect to Shares subject to the Option until the Grantee has given written notice of exercise of the Option, paid the Option Price in full for such Shares and, if applicable, has satisfied any other conditions pursuant to the Plan or this Agreement (including provisions for the payment of applicable withholding taxes, which provisions may be made in any of the ways in which the Option Price may be paid). Notwithstanding anything to the contrary contained in this Agreement or the Plan, for purposes of this Section 5(a), the Fair Market Value of a share of Stock shall, to the extent necessary to avoid incurring “additional tax,” interest or penalties under Section 409A of the Code, not be treated as greater than the “fair market value” of a share of Stock determined consistently with Section 409A of the Code and the regulations and guidance promulgated thereunder.

(b)Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and Federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange (collectively, the “Legal Requirements”) that the Committee shall in its sole discretion determine to be necessary or advisable, unless an exemption to such registration or qualification is available and satisfied. The Committee may establish additional procedures as it deems necessary or desirable in connection with the exercise of the Option or the issuance of any Shares upon such exercise to comply with any Legal Requirements, including suspending exercises of the Option and the tolling of any applicable exercise period and the Expiration Date during such suspension. Such procedures may include but are not limited to the establishment of limited periods during which the Option may be exercised or that following receipt of the notice of exercise, and prior to the completion of the exercise, the Grantee will be required to affirm the exercise of the Option following receipt of any disclosure deemed necessary or desirable by the Committee.

(c)The Company shall, upon payment in accordance with Section 5(a) above of the Option Price for Purchased Shares, deliver such Purchased Shares as soon as reasonably practicable to the Grantee and pay all original issue and transfer taxes and all other fees and expenses incident to such delivery. All Shares delivered upon any exercise of the Option shall, when delivered, (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) be registered for sale, and for resale, under U.S. state and federal securities laws to the extent that other shares of Stock issued under the Plan are then so registered or qualified and (iii) be listed, or otherwise qualified, for trading on any securities exchange or securities market on which other shares of Stock issued under the Plan of the same class are then listed or qualified.

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(d)In the event of the Grantee's death, the Vested Portion of the Option shall remain exercisable by the Grantee's executor or administrator, or the person or persons to whom the Grantee's rights under this Agreement shall pass by will or by the laws of descent and distribution, or the person or persons to whom such rights have passed under Section 10, as the case may be, to the extent set forth in Section 4 (and the term “Grantee” shall be deemed to include such heir or legatee or permitted transferee). Any such heir or legatee or permitted transferee of the Grantee shall take rights herein granted subject to the terms and conditions hereof.

6.    Transactions. This Option shall be subject to the provisions of Section 15.1.2 of the Plan in the event of a Transaction.

7.    Taxes

7.1If (i) the aggregate of all amounts and benefits due to the Grantee under this Option or under any other Company plan, program, agreement or arrangement would, if received by the Grantee in full and valued under Section 280G of the Code, constitute “parachute payments” as defined in and under Section 280G of the Code (collectively, “280G Benefits”), and if (ii) such aggregate 280G Benefits would, if reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, be less than the amount the Grantee would receive, after all taxes, if the Grantee received aggregate 280G Benefits equal (as valued under Section 280G of the Code) to only three times the Grantee's “base amount” as defined in and under Section 280G of the Code, less $1.00, then (iii) such 280G Benefits payable in cash, and/or such benefits under performance-vesting options, if any, in either case as the Grantee shall select shall (to the extent that the reduction of such 280G Benefits can achieve the intended result) be reduced or eliminated to the extent necessary so that the aggregate 280G Benefits received by the Grantee will not constitute “excess parachute payments” under Section 280G of the Code. The determinations with respect to this Section 7.1 shall be made by an independent auditor (the “Auditor”) paid by the Company. The Auditor shall be the Company's regular independent auditor.

7.2It is possible that after the determinations and selections made pursuant to Section 7.1 the Grantee will receive 280G Benefits that are, in the aggregate, either more or less than the amount provided under Section 7.1 (hereafter referred to as an “Excess Payment” or “Underpayment,” respectively). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then the Grantee shall promptly pay an amount equal to the Excess Payment to the Company, together with interest on such amount at the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of the Grantee's receipt of such Excess Payment until the date of such payment; provided, however, that the amount of the Excess Payment to be repaid by the Grantee will be reduced to the extent that the Auditor determines that any portion of the Excess Payment to be repaid will not be offset by a corresponding reduction in any applicable excise tax payable by the Grantee under Section 4999 of the Code by reason of such repayment of the Excess Payment. In the event that it is determined (x) by a court or (y) by the Auditor upon request by the Company or the Grantee, that an Underpayment has occurred, the Company shall promptly pay an amount equal to the Underpayment to the Grantee, together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Grantee had the provisions of Section 7.1 not been applied until the date of such payment and such payment will be deemed to have been made in accordance with the requirements of Treasury Regulation Section 1.409A-3(g) to the extent that Section 409A of the Code would be applicable.

4

8.No Right to Continued Employment. The granting of the Option evidenced hereby and this Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Grantee and shall not lessen or affect the Company's or its Affiliates' right to terminate the Service of the Grantee.

9.Legend on Certificates. The certificates representing the Shares purchased by exercise of the Option shall be subject to such stop transfer orders and other restrictions as the Committee may reasonably deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions, provided, however, that any such legends shall be removed, promptly upon the Grantee's reasonable written request, to the extent that the grounds that supported requiring the legend no longer apply.

10.Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance otherwise than by will or by the laws of descent and distribution shall be void and unenforceable against the Company or any Affiliate; provided that the designation of one or more beneficiaries to whom the Option shall be transferred, in whole or in part, upon the death of the Grantee shall not constitute a prohibited assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

11.Withholding Taxes. Prior to the issuance of any Shares upon exercise of the Option, the Grantee shall be required to satisfy any applicable withholding taxes in respect of the Option in accordance with Section 5(a) above. Subject to the foregoing, the Grantee shall be solely responsible for the payment of all taxes relating to the payment or provision of any amounts or benefits hereunder. All amounts and benefits due to the Grantee under this Agreement are subject to Section 7 of the Employment Agreement.

12.Securities Laws. In connection with the acquisition of any Shares pursuant to the exercise of the Option, the Grantee will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with any Legal Requirements or with this Agreement.

13.Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Grantee at the address appearing in the personnel records of the Company for the Grantee or to either party hereto at such other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

14.Choice of Law. This Agreement shall be governed by and construed in accordance with its express terms, and otherwise in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law, provided that the provisions set forth herein that are required to be governed by the Pennsylvania Business Corporation Law of 1988, as amended, shall be governed by the Pennsylvania Business Corporation Law of 1988, as amended.

15.Option Subject to Plan. By entering into this Agreement, the Grantee agrees and acknowledges that the Grantee has received and read a copy of the Plan. The Option is subject to the Plan to the extent that the Plan is not inconsistent with this Agreement. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of any

5

inconsistency between (x) any term or provision of this Agreement or any other Company Arrangement (as defined in the Employment Agreement), other than the Employment Agreement, and (y) any term or provision of the Plan, the terms and provisions of the Plan will govern and prevail.

16.Electronic Signature; Multiple Counterparts. This Agreement may be signed by the Parties through an electronic acknowledgment of the terms and conditions set forth herein and may also be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The Company may sign the Agreement electronically prior to distribution to the Grantee. Signatures delivered by facsimile or other electronic means approved or recognized by the Committee shall be effective for all purposes.

[signature page follows]

6

IN WITNESS WHEREOF, the Parties have executed this Executive Stock Option Agreement, effective as of the Grant Date.

EDUCATION MANAGEMENT CORPORATION

By:

Name:

Title:

Agreed and acknowledged as

of the date first above written:

_________________________________

[Grantee's name]

Number of time-vesting Shares

subject to the Option: __________

Option Price: $__________

Type of Option: [Non-qualified Stock Option/Incentive Stock Option]

Grant Date: ______________, 20__

7

EX-10.5

EXHIBIT 10.5

EDUCATION MANAGEMENT CORPORATION

NON-EXECUTIVE STOCK OPTION AGREEMENT

THIS AGREEMENT (the “Agreement”), is made effective as of [__________], 20__ (the “Grant Date”), between Education Management Corporation, a Pennsylvania corporation (the “Company”), and the participant set forth on the signature page hereto (the “Grantee” and together with the Company, the “Parties”):

RECITALS:

WHEREAS, the Company has adopted the Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this Agreement to the extent set forth in Section 15 below. Capitalized terms not otherwise defined herein or by reference herein shall have the meanings given thereto in the Plan; and

WHEREAS, the Committee has determined that it is in the best interests of the Company and its shareholders to grant an Option to the Grantee pursuant to the Plan and the terms set forth herein.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the Parties agree as follows:

1.Grant of the Option. The Company hereby grants to the Grantee the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of the number of shares of the Company's Stock set forth on the signature page hereto (the “Shares”), subject to adjustment as set forth in the Plan. The Option Price shall be as set forth on the signature page hereto, which the Parties agree is not less than the Fair Market Value of a share of Stock as of the Grant Date. If designated on the signature page hereto as an Incentive Stock Option, this Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. Nevertheless, to the extent that the Option fails to meet the requirements of an “incentive stock option” under Section 422 of the Code, this Option shall be treated as a Non-qualified Stock Option. The grant of this Option is conditioned on the Grantee's acceptance of the provisions set forth in this Agreement within 60 days after the Agreement is presented to the Grantee for review

2.Duration. Subject to the provisions of the Plan and this Agreement, the Grantee may exercise all or any part of the Vested Portion of the Option at any time prior to the tenth anniversary of the Grant Date (the “Expiration Date”). The Option may not be cancelled or forfeited without the Grantee's prior written consent prior to such Expiration Date, other than as expressly provided (x) in Section 15 of the Plan (relating to “Transactions”), or (y) in this Agreement.

3.    Vesting.

(a)Subject solely to the provisions of Sections 3(b), 4(a), 4(b) and 4(c) below and Section 15 of the Plan, the Option shall vest and become exercisable on each anniversary of the Grant

1

Date (beginning on the first anniversary of the Grant Date) with respect to an aggregate of twenty-five percent (25%) of the Shares originally subject to the Option; provided that the Grantee is employed by the Company as of each such vesting date. The portion of the Option which has become vested and exercisable as described in Sections 3(a) or 3(b) is hereinafter referred to as the “Vested Portion.” Notwithstanding the foregoing, the Committee may, in its discretion, accelerate vesting of the Option or extend the applicable exercise period subject to the terms and restrictions of the Plan.

(b)Notwithstanding the foregoing, one hundred percent (100%) of the Shares then subject to the Option shall be accelerated and become vested and exercisable immediately prior to, but subject to the consummation of, a Change in Control.

4.Effect of a Separation from Service.

(a)If the Grantee's Service is terminated by the Company for Cause, the Option shall, whether or not vested, automatically be canceled without payment of consideration therefor.

(b)If the Grantee's Service is terminated other than by termination by the Company for Cause or for death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until ninety days following the date of the termination of Service, but in no event later than the Expiration Date.

(c)If the Grantee's Service is terminated due to the Grantee's death or Disability, the Option shall, to the extent not then or previously vested and exercisable, automatically be canceled without payment of consideration therefor, and the Vested Portion of the Option shall remain exercisable until ninety days following the date of the termination of Service, but in no event later than the Expiration Date.

5. Exercise of Option.

(a)Subject to Section 2 and any electronic exercise methods implemented by the Company, any part of the Vested Portion of the Option may be exercised by delivering to the Company on any business day at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole shares of Stock only. Such notice shall specify the number of Shares for which the Option is being exercised (the “Purchased Shares”) and shall be accompanied by payment in full of the Option Price of the Purchased Shares in cash or by check or wire transfer; provided, however, that, in the sole discretion of the Committee, payment of such aggregate Option Price may instead be made, in whole or in part, by one or more of the following: (i) provided that the Company is not then contractually prohibited from permitting exercise in this fashion, the delivery to the Company of a certificate or certificates representing Stock, duly endorsed or accompanied by a duly executed stock power, which delivery effectively transfers to the Company good and valid title to such Stock, free and clear of any pledge, commitment, lien, claim or other encumbrance (such shares of Stock to be valued at their aggregate Fair Market Value on the date of such exercise), provided that if a certificate or certificates representing shares of Stock in excess of the amount required are delivered, a certificate (or other satisfactory evidence of ownership) representing the excess number of shares of Stock shall promptly be returned by the Company, (ii) a reduction in the number of Purchased Shares to be issued upon such exercise having a Fair Market Value on the date of exercise equal to the aggregate Option Price in respect of the Purchased Shares, provided that the Company is not then contractually prohibited from permitting exercise in this fashion, or (iii) other cashless exercise procedures approved by the Committee. The Grantee shall not have any rights to dividends or other rights of a stockholder with respect to Shares

2

subject to the Option until the Grantee has given written notice of exercise of the Option, paid the Option Price in full for such Shares and, if applicable, has satisfied any other conditions pursuant to the Plan or this Agreement (including provisions for the payment of applicable withholding taxes, which provisions may be made in any of the ways in which the Option Price may be paid). Notwithstanding anything to the contrary contained in this Agreement or the Plan, for purposes of this Section 5(a), the Fair Market Value of a share of Stock shall, to the extent necessary to avoid incurring “additional tax,” interest or penalties under Section 409A of the Code, not be treated as greater than the “fair market value” of a share of Stock determined consistently with Section 409A of the Code and the regulations and guidance promulgated thereunder.

(b)Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and Federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange (collectively, the “Legal Requirements”) that the Committee shall in its sole discretion determine to be necessary or advisable, unless an exemption to such registration or qualification is available and satisfied. The Committee may establish additional procedures as it deems necessary or desirable in connection with the exercise of the Option or the issuance of any Shares upon such exercise to comply with any Legal Requirements, including suspending exercises of the Option and the tolling of any applicable exercise period and the Expiration Date during such suspension. Such procedures may include but are not limited to the establishment of limited periods during which the Option may be exercised or that following receipt of the notice of exercise, and prior to the completion of the exercise, the Grantee will be required to affirm the exercise of the Option following receipt of any disclosure deemed necessary or desirable by the Committee.

(c)The Company shall, upon payment in accordance with Section 5(a) above of the Option Price for Purchased Shares, deliver such Purchased Shares as soon as reasonably practicable to the Grantee and pay all original issue and transfer taxes and all other fees and expenses incident to such delivery. All Shares delivered upon any exercise of the Option shall, when delivered, (i) be duly authorized, validly issued, fully paid and nonassessable, (ii) be registered for sale, and for resale, under U.S. state and federal securities laws to the extent that other shares of Stock issued under the Plan are then so registered or qualified and (iii) be listed, or otherwise qualified, for trading on any securities exchange or securities market on which other shares of Stock issued under the Plan of the same class are then listed or qualified.

(d)In the event of the Grantee's death, the Vested Portion of the Option shall remain exercisable by the Grantee's executor or administrator, or the person or persons to whom the Grantee's rights under this Agreement shall pass by will or by the laws of descent and distribution, or the person or persons to whom such rights have passed under Section 10, as the case may be, to the extent set forth in Section 4 (and the term “Grantee” shall be deemed to include such heir or legatee or permitted transferee). Any such heir or legatee or permitted transferee of the Grantee shall take rights herein granted subject to the terms and conditions hereof.

6.    Transactions. This Option shall be subject to the provisions of Section 15.1.2 of the Plan in the event of a Transaction.

7.    Taxes

7.1If (i) the aggregate of all amounts and benefits due to the Grantee under this Option or under any other Company plan, program, agreement or arrangement would, if received by the Grantee in full and valued under Section 280G of the Code, constitute “parachute payments” as defined in and

3

under Section 280G of the Code (collectively, “280G Benefits”), and if (ii) such aggregate 280G Benefits would, if reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed pursuant to Section 4999 of the Code, be less than the amount the Grantee would receive, after all taxes, if the Grantee received aggregate 280G Benefits equal (as valued under Section 280G of the Code) to only three times the Grantee's “base amount” as defined in and under Section 280G of the Code, less $1.00, then (iii) such 280G Benefits payable in cash, and/or such benefits under performance-vesting options, if any, in either case as the Grantee shall select shall (to the extent that the reduction of such 280G Benefits can achieve the intended result) be reduced or eliminated to the extent necessary so that the aggregate 280G Benefits received by the Grantee will not constitute “excess parachute payments” under Section 280G of the Code. The determinations with respect to this Section 7.1 shall be made by an independent auditor (the “Auditor”) paid by the Company. The Auditor shall be the Company's regular independent auditor.

7.2It is possible that after the determinations and selections made pursuant to Section 7.1 the Grantee will receive 280G Benefits that are, in the aggregate, either more or less than the amount provided under Section 7.1 (hereafter referred to as an “Excess Payment” or “Underpayment,” respectively). If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then the Grantee shall promptly pay an amount equal to the Excess Payment to the Company, together with interest on such amount at the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of the Grantee's receipt of such Excess Payment until the date of such payment; provided, however, that the amount of the Excess Payment to be repaid by the Grantee will be reduced to the extent that the Auditor determines that any portion of the Excess Payment to be repaid will not be offset by a corresponding reduction in any applicable excise tax payable by the Grantee under Section 4999 of the Code by reason of such repayment of the Excess Payment. In the event that it is determined (x) by a court or (y) by the Auditor upon request by the Company or the Grantee, that an Underpayment has occurred, the Company shall promptly pay an amount equal to the Underpayment to the Grantee, together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Grantee had the provisions of Section 7.1 not been applied until the date of such payment and such payment will be deemed to have been made in accordance with the requirements of Treasury Regulation Section 1.409A-3(g) to the extent that Section 409A of the Code would be applicable.

8.No Right to Continued Employment. The granting of the Option evidenced hereby and this Agreement shall impose no obligation on the Company or any Affiliate to continue the Service of the Grantee and shall not lessen or affect the Company's or its Affiliates' right to terminate the Service of the Grantee.

9.Legend on Certificates. The certificates representing the Shares purchased by exercise of the Option shall be subject to such stop transfer orders and other restrictions as the Committee may reasonably deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions, provided, however, that any such legends shall be removed, promptly upon the Grantee's reasonable written request, to the extent that the grounds that supported requiring the legend no longer apply.

10.Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Grantee otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or

4

encumbrance otherwise than by will or by the laws of descent and distribution shall be void and unenforceable against the Company or any Affiliate; provided that the designation of one or more beneficiaries to whom the Option shall be transferred, in whole or in part, upon the death of the Grantee shall not constitute a prohibited assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

11.Withholding Taxes. Prior to the issuance of any Shares upon exercise of the Option, the Grantee shall be required to satisfy any applicable withholding taxes in respect of the Option in accordance with Section 5(a) above. Subject to the foregoing, the Grantee shall be solely responsible for the payment of all taxes relating to the payment or provision of any amounts or benefits hereunder.

12.Securities Laws. In connection with the acquisition of any Shares pursuant to the exercise of the Option, the Grantee will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with any Legal Requirements or with this Agreement.

13.Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Grantee at the address appearing in the personnel records of the Company for the Grantee or to either party hereto at such other address as either party may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

14.Choice of Law. This Agreement shall be governed by and construed in accordance with its express terms, and otherwise in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law, provided that the provisions set forth herein that are required to be governed by the Pennsylvania Business Corporation Law of 1988, as amended, shall be governed by the Pennsylvania Business Corporation Law of 1988, as amended.

15.Option Subject to Plan. By entering into this Agreement, the Grantee agrees and acknowledges that the Grantee has received and read a copy of the Plan. The Option is subject to the Plan to the extent that the Plan is not inconsistent with this Agreement. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of any inconsistency between (x) any term or provision of this Agreement and (y) any term or provision of the Plan, the terms and provisions of the Plan will govern and prevail.

16.Non-Solicitation. During the term of the Grantee's Service and for a period of one year thereafter, the Grantee shall not directly or indirectly contact, induce or solicit (or assist any Person to contact, induce or solicit) for employment any individual who is, or within six (6) months prior to the date of such solicitation was, an employee of the Company or any of its direct or indirect Subsidiaries.

17.Electronic Signature; Multiple Counterparts. This Agreement may be signed by the Parties through an electronic acknowledgment of the terms and conditions set forth herein and may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The Company may sign the Agreement electronically prior to distribution to the Grantee. Signatures delivered by facsimile or other electronic means approved or recognized by the Committee shall be effective for all purposes.

[signature page follows]

5

IN WITNESS WHEREOF, the Parties have executed this Non-Executive Stock Option Agreement, effective as of the Grant Date.

EDUCATION MANAGEMENT CORPORATION

By:

Name:

Title:

Agreed and acknowledged as

of the date first above written:

_________________________________

[Grantee's name]

Number of time-vesting Shares

subject to the Option: __________

Option Price: $__________

Type of Option: [Non-qualified Stock Option/Incentive Stock Option]

Grant Date: ______________, 20__

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EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Edward H. West, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2012 of Education Management Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange of Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2012

By:	/S/ EDWARD H. WEST
	Edward H. West
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Randall J. Killeen, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2012 of Education Management Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange of Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2012

By:	/S/ RANDALL J. KILLEEN
	Randall J. Killeen
	Vice President and Acting Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER

FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Education Management Corporation (the “Company”) for the fiscal quarter ended September 30, 2012 (the “Report”), I, Edward H. West, President and Chief Executive Officer of the Company, hereby certify in such capacity, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2012

By:	/S/ EDWARD H. WEST
	Edward H. West
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER

FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of Education Management Corporation (the “Company”) for the fiscal quarter ended September 30, 2012 (the “Report”), I, Randall J. Killeen, Vice President and Acting Chief Financial Officer of the Company, hereby certify in such capacity, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2012

By:	/S/ RANDALL J. KILLEEN
	Randall J. Killeen
	Vice President and Acting Chief Financial Officer

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Property And Equipment Property and Equipment (Details) (USD $)	3 Months Ended																		3 Months Ended									3 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Sep. 30, 2012 Land [Member]	Jun. 30, 2012 Land [Member]	Sep. 30, 2011 Land [Member]	Sep. 30, 2012 Building and improvements [Member]	Jun. 30, 2012 Building and improvements [Member]	Sep. 30, 2011 Building and improvements [Member]	Sep. 30, 2012 Leasehold improvements and capitalized lease costs [Member]	Jun. 30, 2012 Leasehold improvements and capitalized lease costs [Member]	Sep. 30, 2011 Leasehold improvements and capitalized lease costs [Member]	Sep. 30, 2012 Furniture and equipment [Member]	Jun. 30, 2012 Furniture and equipment [Member]	Sep. 30, 2011 Furniture and equipment [Member]	Sep. 30, 2012 Technology and other equipment [Member]	Jun. 30, 2012 Technology and other equipment [Member]	Sep. 30, 2011 Technology and other equipment [Member]	Sep. 30, 2012 Software [Member]	Sep. 30, 2011 Software [Member]	Jun. 30, 2012 Software [Member]	Sep. 30, 2012 Library books [Member]	Jun. 30, 2012 Library books [Member]	Sep. 30, 2011 Library books [Member]	Sep. 30, 2012 Construction in progress [Member]	Jun. 30, 2012 Construction in progress [Member]	Sep. 30, 2011 Construction in progress [Member]	Sep. 30, 2012 Property and Equipment [Member]	Jun. 30, 2010 Property and Equipment [Member]
Property, Plant and Equipment [Line Items]
Depreciation and amortization of property and equipment	$ 42,616,000	$ 36,978,000																										$ 42,600,000	$ 37,000,000
Property and equipment, gross	1,265,511,000	1,175,324,000	1,254,357,000	16,725,000	16,712,000	16,699,000	75,206,000	74,783,000	71,563,000	556,902,000	545,646,000	529,096,000	158,800,000	158,464,000	149,427,000	309,989,000	307,511,000	280,780,000	86,876,000	72,102,000	86,810,000	43,028,000	42,706,000	40,125,000	17,985,000	21,725,000	15,532,000
Less accumulated depreciation	(639,174,000)	(498,374,000)	(602,560,000)
Property and equipment, net	626,337,000	676,950,000	651,797,000
Depreciation and amortization of property and equipment																			8,500,000	3,600,000
Accelerated Depreciation	$ 4,600,000

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Guarantor Subsidiaries Financial Information Guarantor Subsidiaries Financial Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				12 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Balance Sheet
Cash and cash equivalents	$ 211,956		$ 465,492		$ 191,008		$ 403,224
Restricted cash	277,376		88,071		267,880
Student and other receivables, net	229,847		202,523		198,411
Inventories	10,041		12,858		8,382
Other current assets	40,856		47,286		40,399
Total current assets	919,389		934,112		837,718
Property and equipment, net	626,337		676,950		651,797
Intangible assets, net (Note 5)	329,658		461,342		330,029
Goodwill	963,550		2,581,999		963,550		2,581,999
Total other long-term assets	57,551		43,733		56,001
Total assets	2,896,485	[1]	4,698,136	[1]	2,839,095	[1]
Current portion of long-term debt (Note 8)	12,076		12,076		12,076
Total current liabilities	604,144		697,223		534,005
Long-term debt, less current portion (Note 8)	1,450,583		1,463,749		1,453,468
Other long-term liabilities	46,429		47,702		45,533
Total shareholders' equity	486,827		2,077,658		496,564		2,103,944
Total liabilities and shareholders' equity	2,896,485		4,698,136		2,839,095
Income Statement
Net revenues	609,564		682,095
Educational services	(381,296)		(374,447)
General and administrative	(174,492)		(197,757)
Depreciation and amortization	44,145		38,888
Goodwill impairment					1,618,449
Total costs and expenses	599,933		611,092
(Loss) Income before interest, loss on extinguishment of debt and income taxes	9,631		71,003
Interest expense, net	31,452		26,888
(Loss) Income before income taxes	(21,821)		44,115		(21,821)		44,115
(Benefit from) provision for income taxes	(8,728)		17,161
Net (loss) income	(13,093)		26,954		(1,515,741)
Net change in unrecognized loss on interest rate swaps, net of tax	(2,182)		(10,385)
Net change in unrecognized loss on interest rate swaps, net of tax	(414)		(7,925)
Foreign currency translation gain (loss)	157		(1,008)
Other comprehensive (loss) income	(257)		(8,933)		(5,847)
Comprehensive (loss) income	(13,350)		18,021
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	156,577		221,307
Expenditures for long-lived assets	(20,541)		(20,198)
Other investing activities	(1,202)		(6,980)
Net cash flows used in investing activities	(21,743)		(27,178)
Issuance of common stock net of repurchases for treasury	0		75
Net cash flows used in financing activities	(114,185)		(131,652)
Effect of exchange rate changes on cash and cash equivalents	299		(209)
Net change in cash and cash equivalents	20,948		62,268
EM LLC [Member]
Balance Sheet
Cash and cash equivalents	152,499		409,755		(26,249)		(16,816)
Restricted cash	42,763		53,789		42,931
Student and other receivables, net	199		3,800		4,149
Inventories	0		0		0
Other current assets	36,970		23,941		35,543
Total current assets	232,431		491,285		56,374
Property and equipment, net	66,174		68,175		72,279
Intangible assets, net (Note 5)	722,172		648,992		1,059,102
Goodwill	16,219		48,614		15,276
Intercompany balances	852,712		2,236,963		826,651
Total other long-term assets	1,914		2,183		2,031
Investments in subsidiaries	7,328		7,328		7,328
Total assets	1,898,950		3,503,540		2,039,041
Current portion of long-term debt (Note 8)	11,850		9,871		123,150
Other current liabilities	48,773		87,725		63,935
Total current liabilities	60,623		97,596		187,085
Long-term debt, less current portion (Note 8)	1,450,418		1,465,294		1,453,234
Other long-term liabilities	54,993		55,169		52,450
Deferred income taxes	1,530		1,246		1,530
Total liabilities	1,567,564		1,619,305		1,694,299
Total shareholders' equity	331,386		1,884,235		344,742
Total liabilities and shareholders' equity	1,898,950		3,503,540		2,039,041
Income Statement
Net revenues	0		0
Educational services	(34,800)		20,121
General and administrative	11,578		(19,214)
Depreciation and amortization	11,598		6,442
Total costs and expenses	34,820		7,349
(Loss) Income before interest, loss on extinguishment of debt and income taxes	(34,820)		(7,349)
Interest expense, net	30,859		26,226
Equity in earnings of subsidiaries	(26,317)		(47,541)
(Loss) Income before income taxes	(39,362)		13,966
(Benefit from) provision for income taxes	(26,263)		(13,044)
Net (loss) income	(13,099)		27,010
Net change in unrecognized loss on interest rate swaps, net of tax	(414)
Net change in unrecognized loss on interest rate swaps, net of tax			(7,925)
Foreign currency translation gain (loss)	157		(1,008)
Other comprehensive (loss) income	(257)		(8,933)
Comprehensive (loss) income	(13,356)		18,077
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	(51,934)		(49,467)
Expenditures for long-lived assets	(2,170)		(2,020)
Other investing activities	(375)		0
Net cash flows used in investing activities	(2,545)		(2,020)
Net borrowings of debt and other	(114,116)		(81,962)
Issuance of common stock net of repurchases for treasury			0
Intercompany transactions	347,343		560,020
Net cash flows used in financing activities	233,227		478,058
Effect of exchange rate changes on cash and cash equivalents	0		0
Net change in cash and cash equivalents	178,748		426,571
Guarantor Subsidiaries [Member]
Balance Sheet
Cash and cash equivalents	148		123		98		270
Restricted cash	0		0		0
Student and other receivables, net	(681)		104		153
Inventories	158		117		159
Other current assets	640		577		660
Total current assets	265		921		1,070
Property and equipment, net	7,541		8,296		7,846
Intangible assets, net (Note 5)	(29,017)		(30,427)		(26,456)
Goodwill	791		0		0
Intercompany balances	0		0		0
Total other long-term assets	36		48		39
Investments in subsidiaries	0		0		0
Total assets	(20,384)		(21,162)		(17,501)
Current portion of long-term debt (Note 8)	0		0		0
Other current liabilities	3,686		2,954		8,319
Total current liabilities	3,686		2,954		8,319
Long-term debt, less current portion (Note 8)	0		0		0
Other long-term liabilities	345		444		374
Deferred income taxes	515		265		515
Total liabilities	4,546		3,663		9,208
Total shareholders' equity	(24,930)		(24,825)		(26,709)
Total liabilities and shareholders' equity	(20,384)		(21,162)		(17,501)
Income Statement
Net revenues	2,421		3,004
Educational services	(2,645)		2,949
General and administrative	3,339		(369)
Depreciation and amortization	151		102
Total costs and expenses	(543)		2,682
(Loss) Income before interest, loss on extinguishment of debt and income taxes	2,964		322
Interest expense, net	0		0
Equity in earnings of subsidiaries	0		0
(Loss) Income before income taxes	2,964		322
(Benefit from) provision for income taxes	1,185		125
Net (loss) income	1,779		197
Net change in unrecognized loss on interest rate swaps, net of tax	0
Net change in unrecognized loss on interest rate swaps, net of tax			0
Foreign currency translation gain (loss)	0		0
Other comprehensive (loss) income	0		0
Comprehensive (loss) income	1,779		197
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	(2,629)		(215)
Expenditures for long-lived assets	(248)		(246)
Other investing activities	0		0
Net cash flows used in investing activities	(248)		(246)
Net borrowings of debt and other	0		0
Issuance of common stock net of repurchases for treasury			0
Intercompany transactions	2,927		314
Net cash flows used in financing activities	2,927		314
Effect of exchange rate changes on cash and cash equivalents	0		0
Net change in cash and cash equivalents	50		(147)
Non-Guarantor Subsidiaries [Member]
Balance Sheet
Cash and cash equivalents	6,106		5,395		213,960		369,637
Restricted cash	234,613		34,282		224,949
Student and other receivables, net	261,182		229,676		216,284
Inventories	9,883		12,741		8,223
Other current assets	121,703		109,593		113,660
Total current assets	633,487		391,687		777,076
Property and equipment, net	552,622		600,479		571,672
Intangible assets, net (Note 5)	(795,285)		(761,641)		(1,181,164)
Goodwill	40,541		(4,883)		40,724
Intercompany balances	0		0		0
Total other long-term assets	327,708		459,111		327,959
Investments in subsidiaries	956,222		2,574,671		956,222
Total assets	1,715,295		3,259,424		1,492,489
Current portion of long-term debt (Note 8)	226		2,205		226
Other current liabilities	539,610		594,470		338,378
Total current liabilities	539,836		596,675		338,604
Long-term debt, less current portion (Note 8)	165		(1,545)		234
Other long-term liabilities	189,540		188,412		190,465
Deferred income taxes	108,112		214,094		109,826
Total liabilities	837,653		997,636		639,129
Total shareholders' equity	877,642		2,261,788		853,360
Total liabilities and shareholders' equity	1,715,295		3,259,424		1,492,489
Income Statement
Net revenues	607,143		679,091
Educational services	(343,851)		351,377
General and administrative	(189,409)		217,283
Depreciation and amortization	32,396		32,344
Total costs and expenses	565,656		601,004
(Loss) Income before interest, loss on extinguishment of debt and income taxes	41,487		78,087
Interest expense, net	599		663
Equity in earnings of subsidiaries	0		0
(Loss) Income before income taxes	40,888		77,424
(Benefit from) provision for income taxes	16,350		30,080
Net (loss) income	24,538		47,344
Net change in unrecognized loss on interest rate swaps, net of tax	0
Net change in unrecognized loss on interest rate swaps, net of tax			0
Foreign currency translation gain (loss)	157		(1,008)
Other comprehensive (loss) income	157		(1,008)
Comprehensive (loss) income	24,695		46,336
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	211,136		270,903
Expenditures for long-lived assets	(18,123)		(17,932)
Other investing activities	(827)		(6,980)
Net cash flows used in investing activities	(18,950)		(24,912)
Net borrowings of debt and other	(69)		(63)
Issuance of common stock net of repurchases for treasury			0
Intercompany transactions	(400,270)		(609,961)
Net cash flows used in financing activities	(400,339)		(610,024)
Effect of exchange rate changes on cash and cash equivalents	299		(209)
Net change in cash and cash equivalents	(207,854)		(364,242)
Eliminations [Member]
Balance Sheet
Cash and cash equivalents	0		0		0
Restricted cash	0		0		0
Student and other receivables, net	0		0		0
Inventories	0		0		0
Other current assets	0		0		0
Total current assets	0		0		0
Property and equipment, net	0		0		0
Intangible assets, net (Note 5)	0		0		0
Goodwill	0		0		0
Intercompany balances	(852,712)		(2,236,963)		(826,651)
Total other long-term assets	0		0		0
Investments in subsidiaries	0		0		0
Total assets	(852,712)		(2,236,963)		(826,651)
Current portion of long-term debt (Note 8)	0		0		0
Other current liabilities	0		0		0
Total current liabilities	0		0		0
Long-term debt, less current portion (Note 8)	0		0		0
Other long-term liabilities	0		0		0
Deferred income taxes	0		0		0
Total liabilities	0		0		0
Total shareholders' equity	(852,712)		(2,236,963)		(826,651)
Total liabilities and shareholders' equity	(852,712)		(2,236,963)		(826,651)
Income Statement
Net revenues	0		0
Educational services	0		0
General and administrative	0		0
Depreciation and amortization	0		0
Total costs and expenses	0		0
(Loss) Income before interest, loss on extinguishment of debt and income taxes	0		0
Interest expense, net	0		0
Equity in earnings of subsidiaries	26,317		47,541
(Loss) Income before income taxes	(26,317)		(47,541)
(Benefit from) provision for income taxes	0		0
Net (loss) income	(26,317)		(47,541)
Net change in unrecognized loss on interest rate swaps, net of tax	0
Net change in unrecognized loss on interest rate swaps, net of tax			0
Foreign currency translation gain (loss)	(157)		1,008
Other comprehensive (loss) income	(157)		1,008
Comprehensive (loss) income	(26,474)		(46,533)
EM LLC Consolidated [Member]
Balance Sheet
Cash and cash equivalents	158,753		415,273		187,809		353,091
Restricted cash	277,376		88,071		267,880
Student and other receivables, net	260,700		233,580		220,586
Inventories	10,041		12,858		8,382
Other current assets	159,313		134,111		149,863
Total current assets	866,183		883,893		834,520
Property and equipment, net	626,337		676,950		651,797
Intangible assets, net (Note 5)	(102,130)		(143,076)		(148,518)
Goodwill	57,551		43,731		56,000
Intercompany balances	0		0		0
Total other long-term assets	329,658		461,342		330,029
Investments in subsidiaries	963,550		2,581,999		963,550
Total assets	2,741,149		4,504,839		2,687,378
Current portion of long-term debt (Note 8)	12,076		12,076		123,376
Other current liabilities	592,069		685,149		410,632
Total current liabilities	604,145		697,225		534,008
Long-term debt, less current portion (Note 8)	1,450,583		1,463,749		1,453,468
Other long-term liabilities	244,878		244,025		243,289
Deferred income taxes	110,157		215,605		111,871
Total liabilities	2,409,763		2,620,604		2,342,636
Total shareholders' equity	331,386		1,884,235		344,742
Total liabilities and shareholders' equity	2,741,149		4,504,839		2,687,378
Income Statement
Net revenues	609,564		682,095
Educational services	(381,296)		374,447
General and administrative	(174,492)		197,700
Depreciation and amortization	44,145		38,888
Total costs and expenses	599,933		611,035
(Loss) Income before interest, loss on extinguishment of debt and income taxes	9,631		71,060
Interest expense, net	31,458		26,889
Equity in earnings of subsidiaries	0		0
(Loss) Income before income taxes	(21,827)		44,171
(Benefit from) provision for income taxes	(8,728)		17,161
Net (loss) income	(13,099)		27,010
Net change in unrecognized loss on interest rate swaps, net of tax	(414)
Net change in unrecognized loss on interest rate swaps, net of tax			(7,925)
Foreign currency translation gain (loss)	157		(1,008)
Other comprehensive (loss) income	(257)		(8,933)
Comprehensive (loss) income	(13,356)		18,077
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	156,573		221,221
Expenditures for long-lived assets	(20,541)		(20,198)
Other investing activities	(1,202)		(6,980)
Net cash flows used in investing activities	(21,743)		(27,178)
Net borrowings of debt and other	(114,185)		(82,025)
Issuance of common stock net of repurchases for treasury			0
Intercompany transactions	(50,000)		(49,627)
Net cash flows used in financing activities	(164,185)		(131,652)
Effect of exchange rate changes on cash and cash equivalents	299		(209)
Net change in cash and cash equivalents	(29,056)		62,182
EDMC [Member]
Balance Sheet
Cash and cash equivalents	53,203		50,219		3,199		50,133
Restricted cash	0		0		0
Student and other receivables, net	3		0		(1)
Inventories	0		0		0
Other current assets	0		0		0
Total current assets	53,206		50,219		3,198
Property and equipment, net	0		0		0
Intangible assets, net (Note 5)	102,130		143,076		148,518
Goodwill	0		2		1
Intercompany balances	331,386		1,884,235		344,742
Total other long-term assets	0		0		0
Investments in subsidiaries	0		0		0
Total assets	486,722		2,077,532		496,459
Current portion of long-term debt (Note 8)	0		0		0
Other current liabilities	(1)		(2)		(3)
Total current liabilities	(1)		(2)		(3)
Long-term debt, less current portion (Note 8)	0		0		0
Other long-term liabilities	0		0		2
Deferred income taxes	(104)		(124)		(104)
Total liabilities	(105)		(126)		(105)
Total shareholders' equity	486,827		2,077,658		496,564
Total liabilities and shareholders' equity	486,722		2,077,532		496,459
Income Statement
Net revenues	0		0
Educational services	0		0
General and administrative	0		57
Depreciation and amortization	0		0
Total costs and expenses	0		57
(Loss) Income before interest, loss on extinguishment of debt and income taxes	0		(57)
Interest expense, net	(6)		(1)
Equity in earnings of subsidiaries	13,099		(27,010)
(Loss) Income before income taxes	(13,093)		26,954
(Benefit from) provision for income taxes	0		0
Net (loss) income	(13,093)		26,954
Net change in unrecognized loss on interest rate swaps, net of tax	(414)
Net change in unrecognized loss on interest rate swaps, net of tax			(7,925)
Foreign currency translation gain (loss)	157		(1,008)
Other comprehensive (loss) income	(257)		(8,933)
Comprehensive (loss) income	(13,350)		18,021
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	4		86
Expenditures for long-lived assets	0		0
Other investing activities	0		0
Net cash flows used in investing activities	0		0
Net borrowings of debt and other	0		0
Issuance of common stock net of repurchases for treasury			(49,627)
Intercompany transactions	50,000		49,627
Net cash flows used in financing activities	50,000		0
Effect of exchange rate changes on cash and cash equivalents	0		0
Net change in cash and cash equivalents	50,004		86
Eliminations [Member]
Balance Sheet
Cash and cash equivalents	0		0		0
Restricted cash	0		0		0
Student and other receivables, net	0		0		0
Inventories	0		0		0
Other current assets	0		0		0
Total current assets	0		0		0
Property and equipment, net	0		0		0
Intangible assets, net (Note 5)	0		0		0
Goodwill	0		0		0
Intercompany balances	(331,386)		(1,884,235)		(344,742)
Total other long-term assets	0		0		0
Investments in subsidiaries	0		0		0
Total assets	(331,386)		(1,884,235)		(344,742)
Current portion of long-term debt (Note 8)	0		0		0
Other current liabilities	0		0		0
Total current liabilities	0		0		0
Long-term debt, less current portion (Note 8)	0		0		0
Other long-term liabilities	0		0		0
Deferred income taxes	0		0		0
Total liabilities	0		0		0
Total shareholders' equity	(331,386)		(1,884,235)		(344,742)
Total liabilities and shareholders' equity	(331,386)		(1,884,235)		(344,742)
Income Statement
Net revenues	0		0
Educational services	0		0
General and administrative	0		0
Depreciation and amortization	0		0
Total costs and expenses	0		0
(Loss) Income before interest, loss on extinguishment of debt and income taxes	0		0
Interest expense, net	0		0
Equity in earnings of subsidiaries	(13,099)		27,010
(Loss) Income before income taxes	13,099		(27,010)
(Benefit from) provision for income taxes	0		0
Net (loss) income	13,099		(27,010)
Net change in unrecognized loss on interest rate swaps, net of tax	414
Net change in unrecognized loss on interest rate swaps, net of tax			7,925
Foreign currency translation gain (loss)	(157)		1,008
Other comprehensive (loss) income	257		8,933
Comprehensive (loss) income	13,356		(18,077)
Consolidated Entities [Member]
Balance Sheet
Cash and cash equivalents	211,956		465,492		191,008		403,224
Restricted cash	277,376		88,071		267,880
Student and other receivables, net	260,703		233,580		220,585
Inventories	10,041		12,858		8,382
Other current assets	159,313		134,111		149,863
Total current assets	919,389		934,112		837,718
Property and equipment, net	626,337		676,950		651,797
Intangible assets, net (Note 5)	0		0		0
Goodwill	57,551		43,733		56,001
Intercompany balances	0		0		0
Total other long-term assets	329,658		461,342		330,029
Investments in subsidiaries	963,550		2,581,999		963,550
Total assets	2,896,485		4,698,136		2,839,095
Current portion of long-term debt (Note 8)	12,076		12,076		123,376
Other current liabilities	592,068		685,147		410,629
Total current liabilities	604,144		697,223		534,005
Long-term debt, less current portion (Note 8)	1,450,583		1,463,749		1,453,468
Other long-term liabilities	244,878		244,025		243,291
Deferred income taxes	110,053		215,481		111,767
Total liabilities	2,409,658		2,620,478		2,342,531
Total shareholders' equity	486,827		2,077,658		496,564
Total liabilities and shareholders' equity	2,896,485		4,698,136		2,839,095
Income Statement
Net revenues	609,564		682,095
Educational services	(381,296)		374,447
General and administrative	(174,492)		197,757
Depreciation and amortization	44,145		38,888
Total costs and expenses	599,933		611,092
(Loss) Income before interest, loss on extinguishment of debt and income taxes	9,631		71,003
Interest expense, net	31,452		26,888
Equity in earnings of subsidiaries	0		0
(Loss) Income before income taxes	(21,821)		44,115
(Benefit from) provision for income taxes	(8,728)		17,161
Net (loss) income	(13,093)		26,954
Net change in unrecognized loss on interest rate swaps, net of tax	(414)
Net change in unrecognized loss on interest rate swaps, net of tax			(7,925)
Foreign currency translation gain (loss)	157		(1,008)
Other comprehensive (loss) income	(257)		(8,933)
Comprehensive (loss) income	(13,350)		18,021
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations	156,577		221,307
Expenditures for long-lived assets	(20,541)		(20,198)
Other investing activities	(1,202)		(6,980)
Net cash flows used in investing activities	(21,743)		(27,178)
Net borrowings of debt and other	(114,185)		(82,025)
Issuance of common stock net of repurchases for treasury			(49,627)
Intercompany transactions	0		0
Net cash flows used in financing activities	(114,185)		(131,652)
Effect of exchange rate changes on cash and cash equivalents	299		(209)
Net change in cash and cash equivalents	$ 20,948		$ 62,268

[1] Excludes inter-company activity.

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Income Taxes Income Tax Contingency (Details) (Internal Revenue Service (IRS) [Member])	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Internal Revenue Service (IRS) [Member]
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract]
U.S Federal statutory income tax rate	40.00%	38.90%

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Fair Value Of Financial Instruments Fair Value Disclosures (Tables)

12 Months Ended

Jun. 30, 2012

Financial Instruments, Owned, at Fair Value [Abstract]

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block]

The following table presents the carrying amount and fair value of the interest rate swap liability, which is measured at fair value on a recurring basis, and the fair value of the Company's debt, which is recorded at carrying value (in thousands):

	September 30, 2012						June 30, 2012						September 30, 2011
	Carrying Value		Level 1		Level 2		Carrying Value		Level 1		Level 2		Carrying Value		Level 1		Level 2
Recurring:
Interest rate swap liability	$	30,557	$	—	$	30,557	$	30,114	$	—	$	30,114	$	32,407	$	—	$	32,407
Disclosure only:
Variable rate debt	1,087,268		—		928,421		1,090,084		—		980,477		1,103,127		—		1,085,768
Fixed rate debt	375,391		296,641		—		375,460		341,710		—		375,723		383,223		—

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Basis of Presentation Basis of Presentation (Policies)

12 Months Ended

Jun. 30, 2012

DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP [Abstract]

Comparability of Prior Year Financial Data, Policy [Policy Text Block]

Reclassifications

Certain reclassifications of prior year data have been made to conform to the September 30, 2012 presentation. These reclassifications did not materially change any of the previously reported amounts.

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Subsequent Events Subsequent Events (Details) (Sale-Leaseback Transaction [Member], Subsequent Event [Member], USD $) In Millions, unless otherwise specified	1 Months Ended
	Oct. 31, 2012 Sale_Leasebacks
Subsequent Event [Line Items]
Sale-leaseback Transactions, Number	3
Sale Leaseback Transaction, Gross Proceeds	$ 36.9
Minimum [Member]
Subsequent Event [Line Items]
Subsequent Event, Term of Contract	3 years
Maximum [Member]
Subsequent Event [Line Items]
Subsequent Event, Term of Contract	15 years

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Accrued Liabilities Accrued Liabilities, Current (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Jun. 30, 2012
Accrued liabilities, current [Line Items]
Payroll and related taxes	$ 48,731		$ 50,768		$ 50,291
Capital expenditures	4,254		5,897		5,624
Advertising	25,815		28,681		24,837
Interest	11,660		10,969		3,296
Benefits	16,060		12,571		14,014
Other	47,822		50,688		39,286
Total accrued liabilities	154,342		159,574		137,348
Restructuring Charges	9,145	[1]	6,667	[1]
Lease Abandonment Charge [Member]
Accrued liabilities, current [Line Items]
Restructuring Charges	1,600
The Art Institutes [Member] | Employee Severance [Member]
Accrued liabilities, current [Line Items]
Restructuring Charges	$ 7,500

[1] Refer to Note 7, "Accrued Liabilities" for more information on the current period charge. The prior year period includes a $5.2 million employee severance charge and a $1.5 million lease termination charge.

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Earnings Per Share Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net (loss) income	$ (13,093)	$ 26,954	$ (1,515,741)
Basic	124,478,000	128,474,000
Effect of stock-based awards	0	1,241,000
Diluted	124,478,000	129,715,000
Basic	$ (0.11)	$ 0.21
Diluted	$ (0.11)	$ 0.21
Time-Based Options [Member] | Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	8,000,000	1,600,000
Performance-based options [Member] | Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Contingently issuable options excluded from Computation of Earnings Per Share, Shares	2,000,000

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Contingencies Contingencies - Litigation Status (Details) (USD $) In Billions, unless otherwise specified	3 Months Ended	1 Months Ended				3 Months Ended	1 Months Ended
	Sep. 30, 2012 Pending Litigation [Member] Qui Tam Matters [Member] States	Mar. 31, 2010 Pending Litigation [Member] Buirkle APA Program Accreditation Lawsuit [Member] Plantiffs	May 31, 2010 Pending Litigation [Member] District Court of Dallas County, Texas [Member] Plantiffs	Sep. 30, 2012 Pending Litigation [Member] State of Colorado Attorney General [Member] Plantiffs	Dec. 31, 2010 Threatened Litigation [Member] Attorney General of the Commonwealth of Kentucky [Member] Education_Systems Subpoenas	Sep. 30, 2012 Threatened Litigation [Member] Florida Attorney General [Member] Education_Systems	Dec. 31, 2011 Threatened Litigation [Member] City Attorney of the City of San Francisco, California [Member] Education_Systems
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss	$ 11
Number of plaintiffs	5	15
Loss Contingency, Number of Locations Impacted					3	9	7
Loss Contingency Trial, Arbitratioin Or Alternative Dispute Resolution			3	3
Loss Contingency, Number of Subpoenas Received					6

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Consolidated Statements Of Shareholders' Equity (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		12 Months Ended	28 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Sep. 30, 2012
Cumulative loss on interest rate swaps, tax benefit	$ 18.1	$ 20.4	$ 17.6	$ 18.1
Foreign currency translation gain	$ (0.2)	$ (0.7)	$ (0.4)	$ (0.2)
Common stock and Treasury stock
Common stock, par value	$ 0.01	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized		600,000,000	600,000,000
Treasury stock, Beginning Balance	18,902,140	13,333,972	13,333,972
Common stock outstanding, Beginning Balance	124,477,807	129,811,749	129,811,749
Repurchased, Common Stock	0	(2,495,501)	(5,568,168)	18,900,000
Repurchased for treasury	0	2,495,501	5,568,168
Issued for stock-based compensation plans	0	6,710	234,226
Common stock outstanding, Ending Balance	124,477,807	127,322,958	124,477,807	124,477,807
Treasury stock, Ending Balance	18,902,140	15,829,473	18,902,140	18,902,140

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Short-Term And Long-Term Debt Short-Term And Long-Term Debt (Details) (USD $)	3 Months Ended					3 Months Ended																																								12 Months Ended			3 Months Ended		3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Mar. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Revolving Credit Facility [Member]	Mar. 31, 2012 Term Loan [Member]	Dec. 07, 2010 Term Loan [Member]	Sep. 30, 2012 Letter of Credit [Member]	Dec. 07, 2010 Lenders Providing Extended Revolving Credit Facility [Member] Revolving Credit Facility [Member]	Dec. 07, 2010 Lenders Holding Aggregated Term Loan [Member] Term Loan [Member]	Sep. 30, 2012 U.S. Department of Education [Member]	Sep. 30, 2012 U.S. Department of Education [Member] Revolving Credit Facility [Member]	Mar. 30, 2012 Cedit Agreement [Member] Term Loan [Member]	Sep. 30, 2012 Senior Secured Term Loan Facility Due 2013 [Member]	Sep. 30, 2011 Senior Secured Term Loan Facility Due 2013 [Member]	Sep. 30, 2012 Senior Secured Term Loan Facility Due 2016 [Member]	Jun. 30, 2012 Senior Secured Term Loan Facility Due 2016 [Member]	Sep. 30, 2011 Senior Secured Term Loan Facility Due 2016 [Member]	Mar. 30, 2012 Senior Secured Term Loan Facility, Due in March 2018 [Member] Term Loan [Member]	Jun. 30, 2012 Revolving Credit Facility Due 2015 [Member] Revolving Credit Facility [Member]	Sep. 30, 2012 Senior Secured Term Loan Facility Due 2018 [Member]	Jun. 30, 2012 Senior Secured Term Loan Facility Due 2018 [Member]	Sep. 30, 2012 Senior Notes [Member]	Sep. 30, 2012 Senior Notes [Member] Senior Notes Due 2014 [Member]	Jun. 30, 2012 Senior Notes [Member] Senior Notes Due 2014 [Member]	Sep. 30, 2011 Senior Notes [Member] Senior Notes Due 2014 [Member]	Sep. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility Due 2013 [Member]	Jun. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility Due 2013 [Member]	Sep. 30, 2011 Term Loan [Member] Senior Secured Term Loan Facility Due 2013 [Member]	Sep. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Jun. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Mar. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Sep. 30, 2011 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Sep. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility, Due in March 2018 [Member]	Jun. 30, 2012 Term Loan [Member] Senior Secured Term Loan Facility, Due in March 2018 [Member]	Sep. 30, 2011 Term Loan [Member] Senior Secured Term Loan Facility, Due in March 2018 [Member]	Sep. 30, 2012 Senior Subordinated Notes [Member]	Sep. 30, 2012 Other Long-term Debt [Member]	Jun. 30, 2012 Other Long-term Debt [Member]	Sep. 30, 2011 Other Long-term Debt [Member]	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Maximum [Member] Letter of Credit [Member]	Sep. 30, 2012 Maximum [Member] Revolving Credit Facility Due 2013 [Member] Letter of Credit [Member]	Sep. 30, 2012 Maximum [Member] Revolving Credit Facility Due 2014 [Member] Letter of Credit [Member]	Jun. 30, 2012 Maximum [Member] Cedit Agreement [Member] Revolving Credit Facility [Member]	Sep. 30, 2012 Maximum [Member] Cedit Agreement [Member] Revolving Credit Facility [Member]	Dec. 07, 2010 Maximum [Member] Cedit Agreement [Member] Revolving Credit Facility [Member]	Sep. 30, 2012 Maximum [Member] Cedit Agreement [Member] Term Loan [Member]	Mar. 30, 2012 Maximum [Member] Cedit Agreement [Member] Term Loan [Member]	Sep. 30, 2012 Prime Rate [Member] Lenders Holding Aggregated Term Loan [Member] Revolving Credit Facility [Member]	Sep. 30, 2012 Prime Rate [Member] Revolving Credit Facility Due 2015 [Member] Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Letters of Credit Outstanding, Amount	$ 417,200,000											$ 414,500,000
Letters of Credit Oustanding, Percentage of Total Title IV Aid Received by Students												15.00%
Letter of Credit, Collateralized, Number	2
Line of Credit Facility, Cash Secured									210,000,000																																		200,000,000	150,000,000	50,000,000
Cash Collateral for Borrowed Securities, Required Percentage of Aggregate																																										105.00%
Line of Credit Facility, Maximum Borrowing Capacity						328,300,000							214,500,000
Line of Credit Facility, Remaining Borrowing Capacity						111,100,000
Cash Collateral for Borrowed Securities	200,000,000
Term loan due March 2018														350,000,000
Original issue discount				97.00%
Debt Instrument, Description of Variable Rate Basis	LIBOR																																													LIBOR			LIBOR
Stated Percentage																								8.75%														10.25%												1.25%
Debt Instrument, Basis Spread on Variable Rate															1.75%		4.00%					1.25%																									4.00%	3.00%		7.00%		3.00%
Debt Issuance Cost							2,200,000
Refinancing costs, payments to sponsors							700,000
Capitalized discount	3,355,000	3,508,000	3,600,000
Capitalized Financing Costs																																																			2,100,000
Short-term Debt						111,300,000
Line of Credit Facility, Interest Rate at Period End																					6.25%
Line of Credit Facility, Commitment Fee Percentage						0.375%
Debt Instrument, Interest Rate at Period End																2.13%	4.38%	4.50%	4.38%			7.00%	8.25%
Long-term Debt, Excluding Current Maturities [Abstract]
Long-term Debt								1,100,000,000		328,300,000	758,700,000									348,600,000				375,000,000	375,000,000	375,000,000	375,000,000	0	0	349,562,000	742,518,000	744,539,000	746,600,000	750,603,000	344,750,000	345,545,000	0	385,000,000	391,000	460,000	660,000
Long-term Debt, Net of Discount	1,462,659,000	1,465,544,000			1,475,825,000
Less current portion	(12,076,000)	(12,076,000)			(12,076,000)
Total long-term debt, less current portion	$ 1,450,583,000	$ 1,453,468,000			$ 1,463,749,000

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Goodwill And Intangible Assets Goodwill And Intangible Assets (Tables)

12 Months Ended

Jun. 30, 2012

Goodwill And Intangible Assets [Abstract]

Schedule of Goodwill [Table Text Block]

he following table reflects changes to the Company's goodwill balance during fiscal 2012 (in thousands).

	Balance at June 30, 2011		Impairment Charge			Balance at June 30, 2012
The Art Institutes	$	1,984,688	$	(1,123,069	)	$	861,619
Argosy University	219,350		(155,905		)	63,445
Brown Mackie Colleges	254,561		(254,561		)	—
South University	123,400		(84,914		)	38,486
Total goodwill	$	2,581,999	$	(1,618,449	)	$	963,550

Schedule of Intangible Assets [Table Text Block]

Intangible assets other than goodwill consisted of the following amounts (in thousands):

	September 30, 2012					June 30, 2012					September 30, 2011
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Tradename-Art Institute	$	218,000	$	—		$	218,000	$	—		$	330,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			112,179		—
Curriculum and programs	39,845		(29,412		)	38,702		(28,541		)	36,074		(24,872		)
Student contracts, applications and relationships	39,511		(36,548		)	39,511		(36,270		)	39,511		(35,437		)
Favorable leases and other	19,441		(17,041		)	19,424		(16,659		)	19,410		(15,523		)
Total intangible assets	$	412,659	$	(83,001	)	$	411,499	$	(81,470	)	$	537,174	$	(75,832	)

Schedule of Expected Amortization Expense [Table Text Block]

Total estimated amortization of the Company’s intangible assets for each of the years ending June 30, 2013 through 2017 and thereafter is as follows at September 30, 2012 (in thousands):

Fiscal years	Amortization Expense
2013 (remainder)	$	5,390
2014	5,222
2015	2,989
2016	1,292
2017	308
Thereafter	595

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Property And Equipment Property and Equipment (Tables)

12 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property and equipment consisted of the following amounts (in thousands):

Asset Class	September 30, 2012			June 30, 2012			September 30, 2011
Land	$	16,725		$	16,712		$	16,699
Buildings and improvements	75,206			74,783			71,563
Leasehold improvements and capitalized lease costs	556,902			545,646			529,096
Furniture and equipment	158,800			158,464			149,427
Technology and other equipment	309,989			307,511			280,780
Software	86,876			86,810			72,102
Library books	43,028			42,706			40,125
Construction in progress	17,985			21,725			15,532
Total	1,265,511			1,254,357			1,175,324
Less accumulated depreciation	(639,174		)	(602,560		)	(498,374		)
Property and equipment, net	$	626,337		$	651,797		$	676,950

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Derivative Instruments Derivative Instruments (Details) (USD $)	3 Months Ended		0 Months Ended									3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012 Interest Rate Swap [Member]	Sep. 30, 2012 Interest Rate Swap [Member]	Sep. 30, 2011 Interest Rate Swap [Member]	Apr. 30, 2011 Interest Rate Swap [Member] Derivatives	Sep. 30, 2011 Interest Rate Swap [Member] Swap, Interest Rate Swaps, Maturity Fiscal 2013 [Member]	Sep. 30, 2011 Interest Rate Swap [Member] Swap, Interest Rate Swaps, Maturity Fiscal 2015 [Member] Derivatives	Dec. 07, 2010 Term Loan [Member]	Mar. 30, 2012 Senior Secured Term Loan Facility, Due in March 2018 [Member] Term Loan [Member]	Mar. 30, 2012 Cedit Agreement [Member] Term Loan [Member]	Sep. 30, 2012 Maximum [Member] Cedit Agreement [Member] Term Loan [Member]	Mar. 30, 2012 Maximum [Member] Cedit Agreement [Member] Term Loan [Member]
Derivative [Line Items]
Number of Interest Rate Derivatives Held						3		2
Derivative, Notional Amount					$ 950,000,000		$ 325,000,000	$ 312,500,000
Debt Instrument, Interest Rate, Effective Percentage							9.44%	6.26%
Interest Rate Derivative Liabilities, at Fair Value			30,100,000	30,600,000	32,400,000
Long-term Debt									1,100,000,000	348,600,000
Term loan due March 2018											350,000,000
Debt Instrument, Description of Variable Rate Basis	LIBOR											LIBOR
Stated Percentage													1.25%
Debt Instrument, Basis Spread on Variable Rate													7.00%
Revaluation Loss	400,000
Net change in unrecognized loss on interest rate swaps, net of tax	(2,182,000)	(10,385,000)	18,100,000
Estimated Net Transfer, Current	$ 7,500,000

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Other Long-Term Assets Other Long-Term Assets (Tables)

12 Months Ended

Jun. 30, 2012

Other Assets, Noncurrent Disclosure [Abstract]

Schedule of Other Assets, Noncurrent [Table Text Block]

Other long-term assets consisted of the following (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
Student receivables, net of allowances of $18,797, $14,602 and $7,317	$	22,429	$	20,163	$	10,452
Deferred financing fees	13,641		14,768		14,195
Deferred compensation	12,393		12,164		10,101
Other	9,088		8,906		8,985
Total other long-term assets	$	57,551	$	56,001	$	43,733

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

The Company's current and non-current allowance for doubtful accounts and loan loss reserves were as follows (in thousands):

Balance June 30, 2011	$	199,357
Bad debt expense	163,926
Amounts written off	(113,001		)
Balance June 30, 2012	250,282
Bad debt expense	48,931
Amounts written off	(36,171		)
Balance September 30, 2012	$	263,042

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Accrued Liabilities Accrued Liabilities, Current (Tables)

12 Months Ended

Jun. 30, 2012

Accrued Liabilities, Current [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Accrued liabilities consisted of the following amounts (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
Payroll and related taxes	$	48,731	$	50,291	$	50,768
Capital expenditures	4,254		5,624		5,897
Advertising	25,815		24,837		28,681
Interest	11,660		3,296		10,969
Benefits	16,060		14,014		12,571
Other	47,822		39,286		50,688
Total accrued liabilities	$	154,342	$	137,348	$	159,574

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Consolidated Statements Of Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock at Par Value (b) [Member]	Additional Paid-In Capital [Member]	Treasury Stock (b) [Member]	(Accumulated Deficit) Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]
Balance at Jun. 30, 2011	$ 2,103,944	$ 1,431	$ 1,761,848	$ (226,926)	$ 579,781	$ (12,190)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options including tax benefit	2,597	3	2,594	0	0	0
Share-based compensation	13,290	0	13,290	0	0	0
Common stock repurchased for treasury	(101,679)	0	0	(101,679)	0	0
Net (loss) income	(1,515,741)	0	0	0	(1,515,741)	0
Other comprehensive income	(5,847)	0	0	0	0	(5,847)
Balance at Jun. 30, 2012	496,564	1,434	1,777,732	(328,605)	(935,960)	(18,037)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation	3,613	0	3,613	0	0	0
Net (loss) income	(13,093)	0	0	0	(13,093)	0
Other comprehensive income	(257)	0	0	0	0	(257)
Balance at Sep. 30, 2012	$ 486,827	$ 1,434	$ 1,781,345	$ (328,605)	$ (949,053)	$ (18,294)

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Short-Term And Long-Term Debt Short-Term And Long-Term Debt (Tables)

12 Months Ended

Jun. 30, 2012

Short-Term And Long-Term Debt [Abstract]

Long-Term Debt

The Company’s long-term debt consisted of the following amounts (in thousands):

	September 30, 2012			June 30, 2012			September 30, 2011
Senior secured term loan facility, due in June 2013	$	—		$	—		$	349,562
Senior secured term loan facility, due in June 2016	742,518			744,539			750,603
Senior secured term loan facility, due in March 2018, net of discount of$3,355 and $3,508	344,750			345,545			—
Senior notes due in June 2014	375,000			375,000			375,000
Other	391			460			660
Total long-term debt	1,462,659			1,465,544			1,475,825
Less current portion	(12,076		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,450,583		$	1,453,468		$	1,463,749

Principal Payments of Long-term Debt and Related Instruments

	September 30, 2012			June 30, 2012			September 30, 2011
Senior secured term loan facility, due in June 2013	$	—		$	—		$	349,562
Senior secured term loan facility, due in June 2016	742,518			744,539			750,603
Senior secured term loan facility, due in March 2018, net of discount of$3,355 and $3,508	344,750			345,545			—
Senior notes due in June 2014	375,000			375,000			375,000
Other	391			460			660
Total long-term debt	1,462,659			1,465,544			1,475,825
Less current portion	(12,076		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,450,583		$	1,453,468		$	1,463,749

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Goodwill And Intangible Assets Goodwill And Intangible Assets (Details) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Goodwill, Beginning Balance	$ 963,550,000	$ 2,581,999,000	$ 2,581,999,000
Goodwill impairment			(1,618,449,000)
Goodwill, Ending Balance	963,550,000	2,581,999,000	963,550,000
Impairment of indefinite-lived intangible assets			128,300,000
Gross Carrying Amount - Intangible Assets, Net	412,659,000	537,174,000	411,499,000
Accumulated Amortization	(83,001,000)	(75,832,000)	(81,470,000)
Amortization of intangible assets	1,529,000	1,910,000
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
2013	5,390,000
2014	5,222,000
2015	2,989,000
2016	1,292,000
2017	308,000
Thereafter	595,000
Tradename-Art Institute [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Impairment of indefinite-lived intangible assets			112,000,000
Gross Carrying Amount - Indefinite-Lived Intangible Assets	218,000,000	330,000,000	218,000,000
Accumulated Amortization	0	0	0
Licensing, accreditation and Title IV program participation [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Impairment of indefinite-lived intangible assets			16,300,000
Gross Carrying Amount - Indefinite-Lived Intangible Assets	95,862,000	112,179,000	95,862,000
Accumulated Amortization	0	0	0
Curriculum and programs [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount - Finite-Lived Intangible Assets	39,845,000	36,074,000	38,702,000
Accumulated Amortization	(29,412,000)	(24,872,000)	(28,541,000)
Student contracts, application and relationships [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount - Finite-Lived Intangible Assets	39,511,000	39,511,000	39,511,000
Accumulated Amortization	(36,548,000)	(35,437,000)	(36,270,000)
Favorable leases and other [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount - Finite-Lived Intangible Assets	19,441,000	19,410,000	19,424,000
Accumulated Amortization	(17,041,000)	(15,523,000)	(16,659,000)
The Art Institutes [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Goodwill, Beginning Balance		1,984,688,000	1,984,688,000
Goodwill impairment			(1,123,069,000)
Goodwill, Ending Balance			861,619,000
Argosy University [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Goodwill, Beginning Balance		219,350,000	219,350,000
Goodwill impairment			(155,905,000)
Goodwill, Ending Balance			63,445,000
Brown Mackie Colleges [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Goodwill, Beginning Balance		254,561,000	254,561,000
Goodwill impairment			(254,561,000)
Goodwill, Ending Balance			0
South University [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Goodwill, Beginning Balance		123,400,000	123,400,000
Goodwill impairment			(84,914,000)
Goodwill, Ending Balance			$ 38,486,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Jun. 30, 2012		Sep. 30, 2011
Current assets:
Cash and cash equivalents	$ 211,956		$ 191,008		$ 465,492
Restricted cash	277,376		267,880		88,071
Total cash, cash equivalents and restricted cash	489,332		458,888		553,563
Student receivables, net of allowances of $244,245, $230,587 and $198,950	229,847		198,411		202,523
Notes, advances and other receivables	30,856		22,174		31,057
Inventories	10,041		8,382		12,858
Deferred income taxes (Note 11)	102,668		102,668		76,804
Prepaid income taxes	15,789		6,796		10,021
Other current assets	40,856		40,399		47,286
Total current assets	919,389		837,718		934,112
Property and equipment, net (Note 4)	626,337		651,797		676,950
Other long-term assets (Note 6)	57,551		56,001		43,733
Intangible assets, net (Note 5)	329,658		330,029		461,342
Goodwill (Note 5)	963,550		963,550		2,581,999
Total assets	2,896,485	[1]	2,839,095	[1]	4,698,136	[1]
Current liabilities:
Current portion of long-term debt (Note 8)	12,076		12,076		12,076
Revolving credit facility (Note 8)	0		111,300		0
Accounts payable	30,168		54,834		34,395
Accrued liabilities (Note 7)	154,342		137,348		159,574
Unearned tuition	168,601		116,277		170,399
Advance payments	238,957		102,170		320,779
Total current liabilities	604,144		534,005		697,223
Long-term debt, less current portion (Note 8)	1,450,583		1,453,468		1,463,749
Deferred income taxes (Note 11)	110,053		111,767		215,481
Deferred rent	198,449		197,758		196,323
Other long-term liabilities	46,429		45,533		47,702
Shareholders' equity:
Common stock, at par	1,434		1,434		1,432
Additional paid-in capital	1,781,345		1,777,732		1,764,848
Treasury stock (Note 13)	(328,605)		(328,605)		(274,234)
(Accumulated deficit) Retained earnings	(949,053)		(935,960)		606,735
Accumulated other comprehensive loss	(18,294)		(18,037)		(21,123)
Total shareholders' equity	486,827		496,564		2,077,658
Total liabilities and shareholders' equity	$ 2,896,485		$ 2,839,095		$ 4,698,136

[1] Excludes inter-company activity.

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Fair Value Of Financial Instruments Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt	$ 1,087,268	$ 1,090,084	$ 1,103,127
Fixed rate debt	375,391	375,460	375,723
Fair Value Measurement, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt	0	0	0
Fixed rate debt	296,641	341,710	383,223
Fair Value Measurement, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt	928,421	980,477	1,085,768
Fixed rate debt	0	0	0
Fair Value, Measurements, Recurring [Member] | Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liability	30,557	30,114	32,407
Fair Value, Measurements, Recurring [Member] | Fair Value Measurement, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liability	0	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value Measurement, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liability	$ 30,557	$ 30,114	$ 32,407

XML

Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	$ (1,278)	$ (6,122)
Other Comprehensive Income (Loss), Reclassification Adjustment for Derivative Interest Included in Net Income, Tax	$ 1,043	$ 1,447

XML

Segment Reporting (Tables)

12 Months Ended

Jun. 30, 2012

Segments [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	For the Three Months Ended September 30,
	2012			2011
Net revenues:
The Art Institutes	$	380,139		$	428,900
Argosy University	81,920			98,143
Brown Mackie Colleges	73,972			80,923
South University	73,533			74,129
Total EDMC	$	609,564		$	682,095
EBITDA excluding certain expenses:
The Art Institutes	$	67,926		$	110,318
Argosy University	1,193			10,234
Brown Mackie Colleges	10,595			17,583
South University	6,313			164
Corporate and other	(23,106		)	(21,741		)
Total EDMC	62,921			116,558
Reconciliation to consolidated (loss) income before income taxes:
Restructuring (A)	9,145			6,667
Depreciation and amortization	44,145			38,888
Net interest expense	31,452			26,888
(Loss) income before income taxes	$	(21,821	)	$	44,115

(A) Refer to Note 7, "Accrued Liabilities" for more information on the current period charge. The prior year period includes a $5.2 million employee severance charge and a $1.5 million lease termination charge.

Assets: (B)	September 30, 2012		June 30, 2012		September 30, 2011
The Art Institutes	$	1,782,747	$	1,804,221	$	2,997,038
Argosy University	274,711		298,037		384,504
Brown Mackie Colleges	187,153		268,694		412,624
South University	194,754		241,982		180,904
Corporate and other	457,120		226,161		723,066
Total EDMC	$	2,896,485	$	2,839,095	$	4,698,136

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Guarantor Subsidiaries Financial Information

12 Months Ended

Jun. 30, 2012

Guarantor Subsidiaries Financial Information [Abstract]

Guarantor Subsidiaries Financial Information

GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION

On June 1, 2006, in connection with the Transaction, EM LLC and Education Management Finance Corp. issued the Senior Notes. The Senior Notes are fully and unconditionally guaranteed by all of EM LLC’s existing direct and indirect domestic restricted subsidiaries, other than any subsidiary that directly owns or operates a school, or has been formed for such purposes, and subsidiaries that have no material assets (collectively, the “Guarantors”). All other subsidiaries of EM LLC, either direct or indirect, do not guarantee the Senior Notes (“Non-Guarantors”).

In November 2009, the Company guaranteed the indebtedness of EM LLC and Education Management Finance Corp. (a wholly owned subsidiary of EM LLC) under the Senior Notes.

The following tables present the condensed consolidated financial position of EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries EDMC as of September 30, 2012, June 30, 2012 and September 30, 2011. The results of operations and comprehensive income (loss) for the three months ended September 30, 2012 and 2011 and the condensed statements of cash flows for the three months ended September 30, 2012 and 2011 are presented for EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and EDMC.

CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2012 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	152,499	$	148		$	6,106		$	—		$	158,753		$	53,203		$	—		$	211,956
Restricted cash	42,763		—			234,613			—			277,376			—			—			277,376
Student and other receivables, net	199		(681		)	261,182			—			260,700			3			—			260,703
Inventories	—		158			9,883			—			10,041			—			—			10,041
Other current assets	36,970		640			121,703			—			159,313			—			—			159,313
Total current assets	232,431		265			633,487			—			866,183			53,206			—			919,389
Property and equipment, net	66,174		7,541			552,622			—			626,337			—			—			626,337
Intercompany balances	722,172		(29,017		)	(795,285		)	—			(102,130		)	102,130			—			—
Other long-term assets	16,219		791			40,541			—			57,551			—			—			57,551
Investment in subsidiaries	852,712		—			—			(852,712		)	—			331,386			(331,386		)	—
Intangible assets, net	1,914		36			327,708			—			329,658			—			—			329,658
Goodwill	7,328		—			956,222			—			963,550			—			—			963,550
Total assets	$	1,898,950	$	(20,384	)	$	1,715,295		$	(852,712	)	$	2,741,149		$	486,722		$	(331,386	)	$	2,896,485
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,850	$	—		$	226		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	48,773		3,686			539,610			—			592,069			(1		)	—			592,068
Total current liabilities	60,623		3,686			539,836			—			604,145			(1		)	—			604,144
Long-term debt, less current portion	1,450,418		—			165			—			1,450,583			—			—			1,450,583
Other long-term liabilities	54,993		345			189,540			—			244,878			—			—			244,878
Deferred income taxes	1,530		515			108,112			—			110,157			(104		)	—			110,053
Total liabilities	1,567,564		4,546			837,653			—			2,409,763			(105		)	—			2,409,658
Total shareholders’ equity (deficit)	331,386		(24,930		)	877,642			(852,712		)	331,386			486,827			(331,386		)	486,827
Total liabilities and shareholders’ equity (deficit)	$	1,898,950	$	(20,384	)	$	1,715,295		$	(852,712	)	$	2,741,149		$	486,722		$	(331,386	)	$	2,896,485

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	(26,249	)	$	98		$	213,960		$	—		$	187,809		$	3,199		$	—		$	191,008
Restricted cash	42,931			—			224,949			—			267,880			—			—			267,880
Student and other receivables, net	4,149			153			216,284			—			220,586			(1		)	—			220,585
Inventories	—			159			8,223			—			8,382			—			—			8,382
Other current assets	35,543			660			113,660			—			149,863			—			—			149,863
Total current assets	56,374			1,070			777,076			—			834,520			3,198			—			837,718
Property and equipment, net	72,279			7,846			571,672			—			651,797			—			—			651,797
Intercompany balances	1,059,102			(26,456		)	(1,181,164		)	—			(148,518		)	148,518			—			—
Other long-term assets	15,276			—			40,724			—			56,000			1			—			56,001
Investment in subsidiaries	826,651			—			—			(826,651		)	—			344,742			(344,742		)	—
Intangible assets, net	2,031			39			327,959			—			330,029			—			—			330,029
Goodwill	7,328			—			956,222			—			963,550			—			—			963,550
Total assets	$	2,039,041		$	(17,501	)	$	1,492,489		$	(826,651	)	$	2,687,378		$	496,459		$	(344,742	)	$	2,839,095
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt and revolving credit facility	$	123,150		$	—		$	226		$	—		$	123,376		$	—		$	—		$	123,376
Other current liabilities	63,935			8,319			338,378			—			410,632			(3		)	—			410,629
Total current liabilities	187,085			8,319			338,604			—			534,008			(3		)	—			534,005
Long-term debt, less current portion	1,453,234			—			234			—			1,453,468			—			—			1,453,468
Other long-term liabilities	52,450			374			190,465			—			243,289			2			—			243,291
Deferred income taxes	1,530			515			109,826			—			111,871			(104		)	—			111,767
Total liabilities	1,694,299			9,208			639,129			—			2,342,636			(105		)	—			2,342,531
Total shareholders’ equity (deficit)	344,742			(26,709		)	853,360			(826,651		)	344,742			496,564			(344,742		)	496,564
Total liabilities and shareholders’ equity (deficit)	$	2,039,041		$	(17,501	)	$	1,492,489		$	(826,651	)	$	2,687,378		$	496,459		$	(344,742	)	$	2,839,095

CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2011 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	409,755	$	123		$	5,395		$	—		$	415,273		$	50,219		$	—		$	465,492
Restricted cash	53,789		—			34,282			—			88,071			—			—			88,071
Student and other receivables, net	3,800		104			229,676			—			233,580			—			—			233,580
Inventories	—		117			12,741			—			12,858			—			—			12,858
Other current assets	23,941		577			109,593			—			134,111			—			—			134,111
Total current assets	491,285		921			391,687			—			883,893			50,219			—			934,112
Property and equipment, net	68,175		8,296			600,479			—			676,950			—			—			676,950
Intercompany balances	648,992		(30,427		)	(761,641		)	—			(143,076		)	143,076			—			—
Other long-term assets	48,614		—			(4,883		)	—			43,731			2			—			43,733
Investment in subsidiaries	2,236,963		—			—			(2,236,963		)	—			1,884,235			(1,884,235		)	—
Intangible assets, net	2,183		48			459,111			—			461,342			—			—			461,342
Goodwill	7,328		—			2,574,671			—			2,581,999			—			—			2,581,999
Total assets	$	3,503,540	$	(21,162	)	$	3,259,424		$	(2,236,963	)	$	4,504,839		$	2,077,532		$	(1,884,235	)	$	4,698,136
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	9,871	$	—		$	2,205		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	87,725		2,954			594,470			—			685,149			(2		)	—			685,147
Total current liabilities	97,596		2,954			596,675			—			697,225			(2		)	—			697,223
Long-term debt, less current portion	1,465,294		—			(1,545		)	—			1,463,749			—			—			1,463,749
Other long-term liabilities	55,169		444			188,412			—			244,025			—			—			244,025
Deferred income taxes	1,246		265			214,094			—			215,605			(124		)	—			215,481
Total liabilities	1,619,305		3,663			997,636			—			2,620,604			(126		)	—			2,620,478
Total shareholders’ equity (deficit)	1,884,235		(24,825		)	2,261,788			(2,236,963		)	1,884,235			2,077,658			(1,884,235		)	2,077,658
Total liabilities and shareholders’ equity (deficit)	$	3,503,540	$	(21,162	)	$	3,259,424		$	(2,236,963	)	$	4,504,839		$	2,077,532		$	(1,884,235	)	$	4,698,136

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	2,421		$	607,143	$	—		$	609,564		$	—		$	—		$	609,564
Costs and expenses:
Educational services	34,800			2,645			343,851		—			381,296			—			—			381,296
General and administrative	(11,578		)	(3,339		)	189,409		—			174,492			—			—			174,492
Depreciation and amortization	11,598			151			32,396		—			44,145			—			—			44,145
Total costs and expenses	34,820			(543		)	565,656		—			599,933			—			—			599,933
Income (loss) before interest and income taxes	(34,820		)	2,964			41,487		—			9,631			—			—			9,631
Interest (income) expense, net	30,859			—			599		—			31,458			(6		)	—			31,452
Equity in earnings of subsidiaries	(26,317		)	—			—		26,317			—			13,099			(13,099		)	—
Income (loss) before income taxes	(39,362		)	2,964			40,888		(26,317		)	(21,827		)	(13,093		)	13,099			(21,821		)
Income tax expense (benefit)	(26,263		)	1,185			16,350		—			(8,728		)	—			—			(8,728		)
Net (loss) income	$	(13,099	)	$	1,779		$	24,538	$	(26,317	)	$	(13,099	)	$	(13,093	)	$	13,099		$	(13,093	)
Net change in unrecognized loss on interest rate swaps, net of tax	$	(414	)	$	—		$	—	$	—		$	(414	)	$	(414	)	$	414		$	(414	)
Foreign currency translation gain	157			—			157		(157		)	157			157			(157		)	157
Other comprehensive (loss) income	(257		)	—			157		(157		)	(257		)	(257		)	257			(257		)
Comprehensive (loss) income	$	(13,356	)	$	1,779		$	24,695	$	(26,474	)	$	(13,356	)	$	(13,350	)	$	13,356		$	(13,350	)

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2011 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	3,004		$	679,091		$	—		$	682,095		$	—		$	—		$	682,095
Costs and expenses:
Educational services	20,121			2,949			351,377			—			374,447			—			—			374,447
General and administrative	(19,214		)	(369		)	217,283			—			197,700			57			—			197,757
Depreciation and amortization	6,442			102			32,344			—			38,888			—			—			38,888
Total costs and expenses	7,349			2,682			601,004			—			611,035			57			—			611,092
Income (loss) before interest and income taxes	(7,349		)	322			78,087			—			71,060			(57		)	—			71,003
Interest (income) expense, net	26,226			—			663			—			26,889			(1		)	—			26,888
Equity in earnings of subsidiaries	(47,541		)	—			—			47,541			—			(27,010		)	27,010			—
Income before income taxes	13,966			322			77,424			(47,541		)	44,171			26,954			(27,010		)	44,115
Income tax expense (benefit)	(13,044		)	125			30,080			—			17,161			—			—			17,161
Net income	$	27,010		$	197		$	47,344		$	(47,541	)	$	27,010		$	26,954		$	(27,010	)	$	26,954
Net change in unrecognized loss on interest rate swaps, net of tax	$	(7,925	)	$	—		$	—		$	—		$	(7,925	)	$	(7,925	)	$	7,925		$	(7,925	)
Foreign currency translation gain	(1,008		)	—			(1,008		)	1,008			(1,008		)	(1,008		)	1,008			(1,008		)
Other comprehensive loss	(8,933		)	—			(1,008		)	1,008			(8,933		)	(8,933		)	8,933			(8,933		)
Comprehensive income	$	18,077		$	197		$	46,336		$	(46,533	)	$	18,077		$	18,021		$	(18,077	)	$	18,021

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Months Ended September 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC		EDMC Consolidated
Net cash flows provided by (used in) operations	$	(51,934	)	$	(2,629	)	$	211,136		$	156,573		$	4	$	156,577
Cash flows from investing activities:
Expenditures for long-lived assets	(2,170		)	(248		)	(18,123		)	(20,541		)	—		(20,541		)
Other investing activities	(375		)	—			(827		)	(1,202		)	—		(1,202		)
Net cash flows used in investing activities	(2,545		)	(248		)	(18,950		)	(21,743		)	—		(21,743		)
Cash flows from financing activities:
Net repayments of debt and other	(114,116		)	—			(69		)	(114,185		)	—		(114,185		)
Intercompany transactions	347,343			2,927			(400,270		)	(50,000		)	50,000		—
Net cash flows provided by (used in) financing activities	233,227			2,927			(400,339		)	(164,185		)	50,000		(114,185		)
Effect of exchange rate changes on cash and cash equivalents	—			—			299			299			—		299
Decrease in cash and cash equivalents	178,748			50			(207,854		)	(29,056		)	50,004		20,948
Beginning cash and cash equivalents	(26,249		)	98			213,960			187,809			3,199		191,008
Ending cash and cash equivalents	$	152,499		$	148		$	6,106		$	158,753		$	53,203	$	211,956

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Months Ended September 30, 2011 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(49,467	)	$	(215	)	$	270,903		$	221,221		$	86		$	221,307
Cash flows from investing activities
Expenditures for long-lived assets	(2,020		)	(246		)	(17,932		)	(20,198		)	—			(20,198		)
Other investing activities	—			—			(6,980		)	(6,980		)	—			(6,980		)
Net cash flows used in investing activities	(2,020		)	(246		)	(24,912		)	(27,178		)	—			(27,178		)
Cash flows from financing activities
Net repayments of debt	(81,962		)	—			(63		)	(82,025		)	—			(82,025		)
Common stock repurchased and stock option exercises	—			—			—			—			(49,627		)	(49,627		)
Intercompany transactions	560,020			314			(609,961		)	(49,627		)	49,627			—
Net cash flows provided by (used in) financing activities	478,058			314			(610,024		)	(131,652		)	—			(131,652		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(209		)	(209		)	—			(209		)
Increase (decrease) in cash and cash equivalents	426,571			(147		)	(364,242		)	62,182			86			62,268
Beginning cash and cash equivalents	(16,816		)	270			369,637			353,091			50,133			403,224
Ending cash and cash equivalents	$	409,755		$	123		$	5,395		$	415,273		$	50,219		$	465,492

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Basis of Presentation Basis of Presentation (Details) (USD $)	1 Months Ended	3 Months Ended		12 Months Ended	28 Months Ended
	Oct. 31, 2009	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012 Education_Systems	Sep. 30, 2012	Oct. 31, 2012 Students	Oct. 31, 2011
Number of students						132,000
Online platforms				3
Number of education systems				4
Common Stock, Shares, Issued	23,000,000
Common Stock, Par Value	$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 0.01
Price Per Share							$ 18.00
Stock Repurchased During Period, Shares		0	(2,495,501)	(5,568,168)	18,900,000
Stock Repurchased During Period, Value					$ 328,600,000
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased		46,400,000			46,400,000
Senior Notes [Member]
Long-term Debt		375,000,000			375,000,000
Stated Percentage		8.75%			8.75%
Senior Subordinated Notes [Member]
Long-term Debt		$ 385,000,000			$ 385,000,000
Stated Percentage		10.25%			10.25%

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Subsequent Events

12 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

In October 2012, the Company completed three sale-leaseback transactions with unrelated third parties for total proceeds of $36.9 million. The Company signed leases at these locations for periods ranging from three to 15 years.

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net (loss) income	$ (13,093)	$ 26,954
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization of property and equipment	42,616	36,978
Amortization of intangible assets	1,529	1,910
Bad debt expense	48,931	35,130
Amortization of debt issuance costs	1,280	1,316
Share-based compensation	3,613	2,926
Non cash adjustments related to deferred rent	(3,622)	(2,410)
Changes in assets and liabilities:
Restricted cash	(9,496)	(40,558)
Receivables	(89,033)	(95,813)
Reimbursements for tenant improvements	1,202	6,980
Inventory	(1,654)	(3,282)
Other assets	(3,410)	(217)
Accounts payable	(21,896)	(17,701)
Accrued liabilities	10,624	29,894
Unearned tuition	52,324	30,249
Advance payments	136,662	208,951
Total adjustments	169,670	194,353
Net cash flows (used in) provided by operating activities	156,577	221,307
Cash flows from investing activities:
Expenditures for long-lived assets	(20,541)	(20,198)
Reimbursements for tenant improvements	(1,202)	(6,980)
Net cash flows used in investing activities	(21,743)	(27,178)
Cash flows from financing activities:
Payments under revolving credit facility	(111,300)	(79,000)
Issuance of common stock	0	75
Common stock repurchased for treasury	0	(49,702)
Principal payments on long-term debt	(2,885)	(3,025)
Net cash flows used in financing activities	(114,185)	(131,652)
Effect of exchange rate changes on cash and cash equivalents	299	(209)
Net change in cash and cash equivalents	20,948	62,268
Cash and cash equivalents, beginning of period	191,008	403,224
Cash and cash equivalents, end of period	211,956	465,492
Cash paid during the period for:
Interest (including swap settlement)	22,044	26,904
Income taxes, net of refunds	1,059	14,945
Noncash investing activities:
Capital expenditures in current liabilities	$ 9,050	$ 9,117

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Jun. 30, 2011
Current assets:
Allowances for student receivables	$ 244,245	$ 230,587	$ 198,950

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Short-Term And Long-Term Debt

12 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Short-Term And Long-Term Debt

SHORT-TERM AND LONG-TERM DEBT

U.S. Department of Education Letters of Credit

The Company had outstanding letters of credit of $417.2 million at September 30, 2012, the largest of which is issued to the U.S. Department of Education, which requires that the Company maintain a letter of credit due to its failure to satisfy certain regulatory financial ratios after giving effect to the Transaction. The amount of this letter of credit was $414.5 million at September 30, 2012, which equals 15% of the total Title IV aid received by students attending the Company’s institutions during fiscal 2011. During fiscal 2012, the Company entered into two cash secured letter of credit facilities pursuant to which the lenders agreed to issue letters of credit at any time to the U.S. Department of Education in an aggregate face amount of up to $200.0 million. The Company's obligations with respect to such letters of credit are secured by liens in favor of the lenders on certain of the Company's cash deposits, which must total at least 105% of the aggregate face amount of any outstanding letters of credit. The two facilities, one of which provides for letters of credit in an aggregate face amount of up to $150.0 million and one of which provides for letters of credit of an aggregate face amount of up to $50.0 million, mature on November 30, 2013 and March 9, 2014, respectively, or earlier if the existing revolving credit facility is terminated. The Company can elect to provide the letter of credit to the U.S. Department of Education using any combination of the cash secured letter of credit lines and the revolving credit facility. 

On September 30, 2012, in order to fund its current letter of credit obligation to the U.S. Department of Education, the Company utilized $214.5 million of letter of credit capacity under its revolving credit facility and all $200.0 million of capacity under the cash secured letter of credit facilities, in connection with which the Company classifies $210.0 million as restricted cash to satisfy the 105% collateralization requirement. Any reduction in the usage of the cash secured letter of credit lines will reduce the amount of cash that is classified as restricted cash on the balance sheet.

Senior Secured Credit Facilities

On March 30, 2012, the Company completed a refinancing of the then-outstanding $348.6 million portion of the $1.1 billion term loan under its senior secured credit facility that was due to expire in June 2013 by replacing it with $350.0 million of new term debt under the same credit agreement. The $350.0 million term loan, which was issued with an original issue discount at 97.0% accrues interest at a rate equal to the greater of LIBOR or 1.25% plus a margin of 7.0%. The term loan will mature in March 2018, but the maturity accelerates to March 1, 2014 in the event that the Senior Notes are not repaid in full or extended, renewed or refinanced on or prior to that date. It is prepayable at any time; however, there are substantial penalties if it is prepaid prior to March 30, 2014. There were no changes to the revolving credit facility or the then-remaining $746.6 million of other term loan debt due in June 2016 as a result of the refinancing. In connection with the refinancing, the Company capitalized $2.2 million of third party costs as deferred financing fees within other long-term assets, of which $0.7 million was paid to an affiliate of one of the Sponsors. Additionally, the Company capitalized a $3.6 million discount as a reduction to long-term debt. These capitalized fees are being charged to interest expense over the life of the debt through the maturity date.

On December 7, 2010, the Company entered into an agreement to extend the maturity date on an aggregate of $758.7 million of then-outstanding amounts under the term loan from June 1, 2013 to June 1, 2016 at an interest rate of LIBOR + 4.00%. In addition, lenders providing $328.3 million in total commitments under the revolving credit facility extended those commitments from June 1, 2012 to June 1, 2015 at an interest rate of LIBOR + 4.00% or the prime rate, as defined in the credit facility, plus a margin of 3.0%. The Company capitalized $2.1 million of third party costs as a result of the refinancing.

The lenders also approved other amendments to the senior secured credit facilities, including a springing maturity of March 1, 2014 for the term loan and accelerated termination of the commitments under the revolving credit facility in the event that the Company does not refinance, extend or pay in full the Senior Notes on or prior to March 1, 2014, an increase to the covenant basket amount for capital expenditures and certain restricted payments and the ability to use cash to collateralize letters of credit.

Short-Term Debt

There were $111.3 million of borrowings outstanding under the $328.3 million revolving credit facility at June 30, 2012. These borrowings were repaid in full on July 2, 2012. There were no borrowings outstanding under the revolving credit facility at September 30, 2012 and 2011. After adjusting for outstanding letters of credit, which decrease availability under the revolving credit facility, the Company had $111.1 million of remaining borrowing capacity under the revolving credit facility at September 30, 2012.

The interest rate on amounts outstanding under the revolving credit facility at June 30, 2012 was 6.25%, which is equal to the prime rate, as defined under the credit facility, plus a margin of 3.00%. The applicable margin for borrowings under the revolving credit facility can change depending on the Company's leverage ratios and credit ratings. The Company is obligated to pay a per annum commitment fee on undrawn amounts under the revolving credit facility, which is currently 0.375% and varies based on certain leverage ratios. The revolving credit facility is secured by certain of the Company’s assets and is subject to the Company’s satisfaction of certain covenants and financial ratios, which are described in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Covenant Compliance."

Long-Term Debt

The Company’s long-term debt consisted of the following amounts (in thousands):

	September 30, 2012			June 30, 2012			September 30, 2011
Senior secured term loan facility, due in June 2013	$	—		$	—		$	349,562
Senior secured term loan facility, due in June 2016	742,518			744,539			750,603
Senior secured term loan facility, due in March 2018, net of discount of$3,355 and $3,508	344,750			345,545			—
Senior notes due in June 2014	375,000			375,000			375,000
Other	391			460			660
Total long-term debt	1,462,659			1,465,544			1,475,825
Less current portion	(12,076		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,450,583		$	1,453,468		$	1,463,749

The interest rate on the senior secured term loan facility due in June 2013, which equaled three-month LIBOR plus a margin of 1.75%, was 2.13% at September 30, 2011.

The interest rate on the senior secured term loan facility due in June 2016, which equals three-month LIBOR plus a margin of 4.00%, was 4.38%, 4.50% and 4.38% at September 30, 2012, June 30, 2012 and September 30, 2011, respectively.

The interest rate on the senior secured term loan facility due in March 2018, which equals the greater of three-month LIBOR or 1.25%, plus a margin of 7.0%, was 8.25% at September 30, 2012 and June 30, 2012, respectively.

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Document And Entity Information (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Nov. 08, 2012	Dec. 31, 2011
Entity Information [Line Items]
Entity Registrant Name	Education Management Corporation
Entity Central Index Key	0000880059
Current Fiscal Year End Date	--06-30
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		124,500,658
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 559.1

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Derivative Instruments

12 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedges, Assets [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

The Company has historically utilized interest rate swap agreements, which are contractual agreements to exchange payments based on underlying interest rates, to manage the floating rate portion of its term debt. In April 2011, the Company entered into three interest rate swap agreements for an aggregate notional amount of $950.0 million, each of which became effective on July 1, 2011. One swap agreement is for a notional amount of $325.0 million and effectively fixes future interest payments at a maximum rate of 9.44% through June 1, 2013. The other two swap agreements, one of which was entered into with an affiliate of one of the Sponsors, are for notional amounts of $312.5 million each and effectively fix future interest payments at a rate of 6.26% through June 1, 2015.

The fair values of the interest rate swap liabilities were $30.6 million, $30.1 million and $32.4 million at September 30, 2012, June 30, 2012 and September 30, 2011, respectively, and were recorded in other long-term liabilities on the accompanying consolidated balance sheets.

On March 30, 2012, the Company replaced $348.6 million of its term loan with a new $350.0 million term loan, as described in Note 8. Because the interest payable on the new term loan is based on the higher of LIBOR or 1.25% (rather than strictly the prevailing LIBOR) plus a margin of 7.0%, the $325.0 million interest rate swap does not qualify for cash flow hedge accounting treatment as of the date of this refinancing. As a result, changes in the fair value of this interest rate swap are being recorded as interest expense in the period incurred. The Company recorded a $0.4 million revaluation loss through interest expense during the three months ended September 30, 2012 related to this interest rate swap.

The refinancing of the term loan did not impact the Company's other two swap agreements for notional amounts of $312.5 million each. Consequently, at September 30, 2012, there was a cumulative unrealized loss of $18.1 million, net of tax, related to these interest rate swaps included in accumulated other comprehensive loss on the Company’s accompanying consolidated balance sheet. This loss would be immediately recognized in the consolidated statement of operations if these instruments fail to meet certain cash flow hedge requirements.

Over the next twelve months, the Company estimates approximately $7.5 million, net of tax, will be reclassified from accumulated other comprehensive loss to the consolidated statement of operations based on current interest rates and underlying debt obligations at September 30, 2012.

The Company used “level two” inputs to value its interest rate swaps. These inputs are defined as other than quoted prices in active markets that are either directly or indirectly observable. The application of level two inputs includes obtaining quotes from counterparties, which are based on LIBOR forward curves, and assessing non-performance risk based upon published market data.

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Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net revenues	$ 609,564	$ 682,095
Costs and expenses:
Educational services	381,296	374,447
General and administrative	174,492	197,757
Depreciation and amortization	44,145	38,888
Total costs and expenses	599,933	611,092
(Loss) Income before interest, loss on extinguishment of debt and income taxes	9,631	71,003
Interest expense, net	31,452	26,888
(Loss) Income before income taxes	(21,821)	44,115	(21,821)	44,115
Income tax (benefit) expense	(8,728)	17,161
Net (loss) income	$ (13,093)	$ 26,954	$ (1,515,741)
(Loss) Earnings per share: (Note 3)
Basic	$ (0.11)	$ 0.21
Diluted	$ (0.11)	$ 0.21
Weighted average number of shares outstanding: (Note 3)
Basic	124,478	128,474
Diluted	124,478	129,715

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Share-Based Compensation

3 Months Ended

Sep. 30, 2012

Share-based Compensation [Abstract]

Share-Based Compensation

SHARE-BASED COMPENSATION

2012 Omnibus Long-Term Incentive Plan

Effective in September 2012, the Company adopted the Education Management Corporation 2012 Omnibus Long-Term Incentive Plan (the “2012 Omnibus Plan”), which may be used to issue stock options, stock-option appreciation rights, restricted stock, restricted stock units and other forms of long-term incentive compensation. On September 13, 2012, the Company granted options to purchase 8,254,667 shares of Common Stock under the 2012 Omnibus Plan in connection with the Option Exchange described below. At September 30, 2012, 8,645,333 shares of Common Stock remain reserved for issuance under the 2012 Omnibus Plan.

2009 Omnibus Long-Term Incentive Plan and 2006 Stock Option Plan

In August 2006, the Company adopted the 2006 Stock Option Plan (the "2006 Plan") for executive management and key personnel. Under the 2006 Plan, certain of the Company's employees were granted a combination of time-based and performance-based options to purchase Common Stock. In April 2009, the Company adopted the Education Management Corporation Omnibus Long-Term Incentive Plan (the "2009 Omnibus Plan"), which became effective upon the completion of the Initial Public Offering and provided for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units and other forms of long-term incentive compensation. As a result of the adoption of the 2009 Omnibus Plan, the 2006 Stock Option Plan was frozen, such than no further awards were granted under that plan. Likewise, the 2009 Omnibus Plan was frozen in connection with the adoption of the 2012 Omnibus Plan. However, stock options granted under the 2006 Stock Option Plan and the 2009 Omnibus Plan that were not surrendered for exchange in the Option Exchange described below remain subject to the terms and conditions of the 2006 Stock Option Plan or the 2009 Omnibus Plan, as applicable.

Option Exchange

In August 2012, the Company's Board of Directors authorized a program (the "Option Exchange") to allow eligible option holders the opportunity to exchange their existing EDMC stock options for replacement options having an exercise price of $3.59 per share, which was the closing price for a share of the Company's Common Stock on the NASDAQ on September 13, 2012, the date on which the offer expired. Campus presidents and directors who participated in the Option Exchange received a new option grant, based on seniority, which vests in four equal annual installments beginning on the first anniversary of the grant date and expires on the tenth anniversary of the grant date. Campus presidents and directors who elected to not participate in the Option Exchange retained their existing stock options and received a new grant of options to purchase a smaller number of shares than they would have received had they participated in the Option Exchange. The new option grant has similar vesting and expiration terms as options received by campus presidents and directors who participated in the Option Exchange. All other employees who participated in the Option Exchange received a fixed number of new options, calculated on the basis of a set exchange ratio corresponding to the grant date and exercise price of the options that they surrendered for exchange. The vesting terms of the new option grants remained subject to the original vesting schedule of the corresponding options that were surrendered for exchange, provided that none of the replacement options vest before September 13, 2013, except under certain specific circumstances described in the 2012 Omnibus Plan and/or the Stock Option Agreements under which the replacement stock options were granted, including but not limited to a change in control of EDMC.

In connection with the Option Exchange, the Company granted approximately 6.3 million time-based and approximately 2.0 million performance-based replacement options in return for a cancellation of approximately 8.5 million time-based and approximately 3.1 million performance-based options. The Option Exchange was accounted for as a modification of the original awards. Consequently, incremental value to the option holders was calculated using a Black-Scholes-Merton pricing model by taking the value of all time-based options on September 13, 2013 using the original option award terms and comparing that to the value of the modified time-based options using the new option award terms on September 13, 2013. Because the original awards had exercise prices well in excess of the price of a share of Common Stock on the modification date, the Company used a lattice model to determine the expected life to use in the Black-Scholes-Merton model. The modification of the original awards resulted in $2.2 million of incremental compensation expense, net of expected forfeitures. The incremental compensation cost will be recognized over the remaining period of time through which the relevant option holder must remain employed by the Company in order for all of the options included in the option grant to vest, which is referred to as the "service period" of the awards, and which ranges from one year to four years. Because the relevant performance conditions are not probable of being met at September 30, 2012, the Company continues to defer the recognition of any expense on its outstanding performance-based stock options.

Below is a summary of the key assumptions used in determining the incremental compensation cost associated with the time-based replacement options granted in connection with the Option Exchange:

Replacement options:
Number of options	6,300,075
Volatility	80-87%
Expected term	2.94-6.25 yrs
Fair value per option	$1.87-$2.53
Canceled options:
Number of options	8,525,171
Volatility	78-87%
Expected term	2.25-7.67 yrs
Fair value per option	$0.78-$1.97

Other Share-Based Compensation Activity

The Company recognized $3.6 million and $2.9 million of share-based compensation expense during the quarters ended September 30, 2012 and 2011, respectively. None of the share-based compensation expense related to the Company’s performance-based stock options.

On August 14, 2012, the Company granted 1.1 million time-based stock options that vest 25% per year over a four year service period. The options, which have an exercise price of $3.20 per share and a contractual life of ten years from the date of grant, will result in compensation expense of $2.5 million over a four year period.

No stock options were exercised during the quarter ended September 30, 2012. Net of estimated forfeitures, the Company had $29.4 million of unrecognized compensation cost relating to time-based stock options and $4.5 million of unrecognized compensation cost related to performance-based stock options at September 30, 2012.

Long-Term Incentive Compensation Plan

In fiscal 2007, EDMC adopted the Long-Term Incentive Compensation Plan (the “LTIC Plan”). The LTIC Plan consists of a bonus pool that is valued based on returns to Providence Equity Partners and Goldman Sachs Capital Partners in connection with a change in control of EDMC. Out of a total of 1,000,000 authorized units, approximately 469,000 units were outstanding under the LTIC Plan at September 30, 2012. Each unit represents the right to receive a payment based on the value of the bonus pool. Because the contingent future events that would result in value to the unit-holders are less than probable, no compensation expense has been recognized by the Company during any of the periods following the Transaction. The plan is being accounted for as an equity-based plan because the units may be settled in stock or cash at the Company’s discretion, and it is the Company’s intent to settle any future payment out of the LTIC Plan by issuing Common Stock. The total amount of unrecognized compensation cost over the vesting periods of all units, net of estimated forfeitures, is approximately $1.7 million at September 30, 2012.

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Earnings Per Share

12 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed using the weighted average number of shares outstanding during the period. The Company uses the treasury stock method to compute diluted EPS, which assumes that restricted stock is converted into common stock and that outstanding stock options are exercised and the resulting proceeds are used to acquire shares of common stock at its average market price during the reporting period.

Basic and diluted EPS were calculated as follows (in thousands, except per share amounts):

	For the Three Months Ended September 30,
	2012			2011
Net (loss) income	$	(13,093	)	$	26,954
Weighted average number of shares outstanding:
Basic	124,478			128,474
Effect of stock-based awards	—			1,241
Diluted	124,478			129,715
(Loss) Earnings per share:
Basic	$	(0.11	)	$	0.21
Diluted	$	(0.11	)	$	0.21

All of the Company's 8.0 million options to purchase shares of Common Stock at September 30, 2012 were excluded from the computation of diluted EPS because the Company recorded a net loss. Time-based options to purchase another 1.6 million shares of Common Stock were also excluded from the computation of diluted EPS for the quarter ended September 30, 2011 because the effect of applying the treasury stock method would have been antidilutive. In addition, and as further described in Note 3, “Share-Based Compensation,” the Company has determined that all of its outstanding performance-based stock options (2.0 million options) are contingently issuable; therefore, they were not included in the diluted EPS calculation for any period presented.

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Segment Reporting

12 Months Ended

Jun. 30, 2012

Segments [Abstract]

Segment Reporting Disclosure [Text Block]

SEGMENT REPORTING

The Company's principal business is providing post-secondary education. The Company manages its operations through four reportable segments: The Art Institutes; Argosy University; Brown Mackie Colleges; and South University. A summary of each reportable segment is detailed below.

The Art Institutes. The Art Institutes focus on applied arts in creative professions such as media arts and animation, graphic design, culinary arts, interior design, web site development, digital filmmaking and video production, fashion design and marketing and game art and design. The Art Institutes offer Associate's, Bachelor's and Master's degree programs, as well as selective non-degree diploma programs. Students pursue their degrees through local campuses, fully online programs through The Art Institute of Pittsburgh and blended formats, which combine campus-based and online education. At September 30, 2012, there were 51 Art Institutes campuses in 25 U.S. states and in Canada included in this reportable segment. As of October 2012, students enrolled at The Art Institutes represented approximately 54% of the Company's total enrollments.

Argosy University. Argosy University offers academic programs in psychology and behavioral sciences, business, education and health sciences disciplines. Argosy University offers Doctoral, Master's and undergraduate degrees through local campuses, fully online programs and blended formats. Argosy's academic programs focus on graduate students seeking advanced credentials as a prerequisite to initial licensing, career advancement and/or structured pay increases. At September 30, 2012, there were 20 Argosy University campuses in 13 U.S. states included in this reportable segment. As of October 2012, students enrolled at Argosy University represented approximately 19% of the Company's total enrollments. This segment includes Western State College of Law, which offers Juris Doctor degrees, and the Ventura Group, which provides courses and materials for post-graduate licensure examinations in the human services fields and continuing education courses for K-12 educators.

Brown Mackie Colleges. Brown Mackie Colleges offer flexible Associate's and non-degree diploma programs that enable students to develop skills for entry-level positions in high demand vocational specialties and Bachelor's degree programs that assist students to advance within the workplace. Brown Mackie Colleges offer programs in growing fields such as medical assisting, criminal justice, nursing, business, legal support and information technology. At September 30, 2012, there were 28 Brown Mackie College campuses in 15 U.S. states included in this reportable segment. As of October 2012, students enrolled at Brown Mackie Colleges represented approximately 13% of the Company's total enrollments.

South University. South University offers academic programs in health sciences and business disciplines, including business administration, criminal justice, nursing, information technology, psychology, pharmacy and medical assisting. South University offers Doctoral, Master's, Bachelor's and Associate's degrees through local campuses, fully online programs and blended formats. At September 30, 2012, there were 11 South University campuses in nine U.S. states included in this reportable segment. As of October 2012, students enrolled at South University represented approximately 14% of the Company's total enrollments.

EBITDA excluding certain expenses, the measure used by the chief operating decision maker to evaluate segment performance and allocate resources, is defined as net income before interest expense, net, provision for income taxes, depreciation and amortization and certain expenses presented below. EBITDA excluding certain expenses is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA excluding certain expenses is not intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Management believes EBITDA excluding certain expenses is helpful in highlighting trends because EBITDA excluding certain expenses excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, this presentation of EBITDA excluding certain expenses may not be comparable to similarly titled measures of other companies. Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate and other,” which primarily includes unallocated corporate activity. A reconciliation of EBITDA excluding certain expenses by reportable segment to consolidated income before income taxes along with other summary financial information by reportable segment is presented below (in thousands):

	For the Three Months Ended September 30,
	2012			2011
Net revenues:
The Art Institutes	$	380,139		$	428,900
Argosy University	81,920			98,143
Brown Mackie Colleges	73,972			80,923
South University	73,533			74,129
Total EDMC	$	609,564		$	682,095
EBITDA excluding certain expenses:
The Art Institutes	$	67,926		$	110,318
Argosy University	1,193			10,234
Brown Mackie Colleges	10,595			17,583
South University	6,313			164
Corporate and other	(23,106		)	(21,741		)
Total EDMC	62,921			116,558
Reconciliation to consolidated (loss) income before income taxes:
Restructuring (A)	9,145			6,667
Depreciation and amortization	44,145			38,888
Net interest expense	31,452			26,888
(Loss) income before income taxes	$	(21,821	)	$	44,115

(A) Refer to Note 7, "Accrued Liabilities" for more information on the current period charge. The prior year period includes a $5.2 million employee severance charge and a $1.5 million lease termination charge.

Assets: (B)	September 30, 2012		June 30, 2012		September 30, 2011
The Art Institutes	$	1,782,747	$	1,804,221	$	2,997,038
Argosy University	274,711		298,037		384,504
Brown Mackie Colleges	187,153		268,694		412,624
South University	194,754		241,982		180,904
Corporate and other	457,120		226,161		723,066
Total EDMC	$	2,896,485	$	2,839,095	$	4,698,136

(B) Excludes inter-company activity.

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Fair Value Of Financial Instruments

12 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Of Financial Instruments

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The Company uses a fair value hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level One - Quoted prices for identical instruments in active markets.

Level Two - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations for which all significant inputs are observable market data.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity.

In some cases, the inputs used to measure fair value may meet the definition of more than one level of fair value hierarchy. The lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.

The following table presents the carrying amount and fair value of the interest rate swap liability, which is measured at fair value on a recurring basis, and the fair value of the Company's debt, which is recorded at carrying value (in thousands):

	September 30, 2012						June 30, 2012						September 30, 2011
	Carrying Value		Level 1		Level 2		Carrying Value		Level 1		Level 2		Carrying Value		Level 1		Level 2
Recurring:
Interest rate swap liability	$	30,557	$	—	$	30,557	$	30,114	$	—	$	30,114	$	32,407	$	—	$	32,407
Disclosure only:
Variable rate debt	1,087,268		—		928,421		1,090,084		—		980,477		1,103,127		—		1,085,768
Fixed rate debt	375,391		296,641		—		375,460		341,710		—		375,723		383,223		—

Derivative financial instruments are carried at fair value, which is based on the framework discussed in Note 9. As a result of the goodwill and indefinite-lived intangible asset impairments recorded during fiscal 2012, goodwill, the tradename for The Art Institutes and the licensing, accreditation and Title IV program participation assets were measured at fair value as of June 30, 2012 on a non-recurring basis using "Level-Three" inputs. The fair value of the Company’s debt was based on each instrument’s trading value at the dates presented. The fair values of cash and cash equivalents, restricted cash, students receivable, notes receivable, the revolving credit facility, accounts payable and accrued expenses approximate carrying values.

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Other Long-Term Assets

12 Months Ended

Jun. 30, 2012

Other Assets, Noncurrent Disclosure [Abstract]

Other Long-Term Assets

OTHER LONG-TERM ASSETS

Other long-term assets consisted of the following (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
Student receivables, net of allowances of $18,797, $14,602 and $7,317	$	22,429	$	20,163	$	10,452
Deferred financing fees	13,641		14,768		14,195
Deferred compensation	12,393		12,164		10,101
Other	9,088		8,906		8,985
Total other long-term assets	$	57,551	$	56,001	$	43,733

Student receivables, net of allowance, relates to the extension of credit to students for amounts due beyond one year. Beginning in fiscal 2011, the Company extended the repayment period for financing made available to students to include periods of up to 42 months beyond graduation. This extension of credit to students helps fund the difference between total tuition and fees and the amount covered by various sources of financial aid, including amounts awarded under Title IV programs, private loans and cash payments by students. Out-of-school balances are reserved for at a higher rate than in-school balances. The Company's non-current receivable balances were as follows (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
In-school	$	28,364	$	24,354	$	11,735
Out-of-school	12,862		10,411		6,034
Gross non-current student receivables	$	41,226	$	34,765	$	17,769

The Company's current and non-current allowance for doubtful accounts and loan loss reserves were as follows (in thousands):

Balance June 30, 2011	$	199,357
Bad debt expense	163,926
Amounts written off	(113,001		)
Balance June 30, 2012	250,282
Bad debt expense	48,931
Amounts written off	(36,171		)
Balance September 30, 2012	$	263,042

These amounts are recorded within student receivables, net and other long-term assets on the consolidated balance sheets. When certain criteria are met, which is generally when receivables age past the due date by more than four months and internal collection measures have been taken without success, the accounts of former students are placed with an outside collection agency. Student accounts that are in collection are reserved for at higher rates than accounts for students who are in school and are written off after repeated collection attempts have been unsuccessful.

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Property And Equipment

12 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property And Equipment

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following amounts (in thousands):

Asset Class	September 30, 2012			June 30, 2012			September 30, 2011
Land	$	16,725		$	16,712		$	16,699
Buildings and improvements	75,206			74,783			71,563
Leasehold improvements and capitalized lease costs	556,902			545,646			529,096
Furniture and equipment	158,800			158,464			149,427
Technology and other equipment	309,989			307,511			280,780
Software	86,876			86,810			72,102
Library books	43,028			42,706			40,125
Construction in progress	17,985			21,725			15,532
Total	1,265,511			1,254,357			1,175,324
Less accumulated depreciation	(639,174		)	(602,560		)	(498,374		)
Property and equipment, net	$	626,337		$	651,797		$	676,950

Depreciation and amortization expense related to property and equipment was $42.6 million and $37.0 million, respectively, for the three months ended September 30, 2012 and 2011. Included in these amounts is amortization expense on software assets of $8.5 million in the current quarter, which includes $4.6 million in accelerated amortization resulting from the write off of a software asset that no longer had a useful life, and $3.6 million in the prior year quarter.

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Goodwill And Intangible Assets

12 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill And Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

Goodwill

In connection with the Transaction, property, equipment, intangible assets other than goodwill and other assets and liabilities were recorded at fair value. The excess of the amount paid to acquire the Company at the time of the Transaction over the fair values of these net assets represented the intrinsic value of the Company beyond its tangible and identifiable intangible net assets and was assigned to goodwill. In connection with the Transaction, the Company recorded approximately $2.6 billion of goodwill, which was allocated among its four reporting units: The Art Institutes, Argosy University, Brown Mackie Colleges and South University.

Goodwill is evaluated annually on April 1 for impairment and on an interim basis if events or changes in circumstances between annual tests indicate that goodwill might be impaired. A significant amount of judgment is involved in determining whether an indicator of impairment has occurred between annual impairment tests. These indicators include, but are not limited to, adverse changes in recent forecasts of operating results or market capitalization, updated business plans and regulatory and legal developments. As a result of interim impairment tests conducted as of March 31, 2012 and June 30, 2012, the Company recorded goodwill impairment charges of $1.12 billion, $155.9 million, $254.6 million and $84.9 million at The Art Institutes, Argosy University, Brown Mackie Colleges and South University, respectively, during the fiscal year ended June 30, 2012.

Because no interim impairment indicators were identified during the quarter ended September 30, 2012, the goodwill balance did not change between June 30, 2012 and September 30, 2012. The following table reflects changes to the Company's goodwill balance during fiscal 2012 (in thousands).

	Balance at June 30, 2011		Impairment Charge			Balance at June 30, 2012
The Art Institutes	$	1,984,688	$	(1,123,069	)	$	861,619
Argosy University	219,350		(155,905		)	63,445
Brown Mackie Colleges	254,561		(254,561		)	—
South University	123,400		(84,914		)	38,486
Total goodwill	$	2,581,999	$	(1,618,449	)	$	963,550

Intangible Assets

In addition to the goodwill impairment charges noted above, the Company also performed an impairment analysis with respect to indefinite-lived intangible assets at June 30, 2012 and recorded a $128.3 million impairment charge related to indefinite-lived intangible assets. The charge consisted of a $112.0 million impairment of the tradename of The Art Institutes and a $16.3 million impairment of the licensing, accreditation and Title IV program assets recorded at The Art Institutes and Argosy University. There were no triggering events during the quarter ended September 30, 2012 that would have required the Company to perform an interim impairment evaluation of these assets.

Intangible assets other than goodwill consisted of the following amounts (in thousands):

	September 30, 2012					June 30, 2012					September 30, 2011
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Tradename-Art Institute	$	218,000	$	—		$	218,000	$	—		$	330,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			112,179		—
Curriculum and programs	39,845		(29,412		)	38,702		(28,541		)	36,074		(24,872		)
Student contracts, applications and relationships	39,511		(36,548		)	39,511		(36,270		)	39,511		(35,437		)
Favorable leases and other	19,441		(17,041		)	19,424		(16,659		)	19,410		(15,523		)
Total intangible assets	$	412,659	$	(83,001	)	$	411,499	$	(81,470	)	$	537,174	$	(75,832	)

Tradenames are often considered to have useful lives similar to that of the overall business, which generally means such assets are assigned an indefinite life for accounting purposes. State licenses and accreditations of the Company’s schools as well as their eligibility for Title IV program participation are periodically renewed in cycles ranging from every year to up to every ten years depending upon government and accreditation regulations. Because the Company considers these renewal processes to be a routine aspect of the overall business these assets are assigned indefinite lives.

Amortization of intangible assets was $1.5 million and $1.9 million for the three months ended September 30, 2012 and 2011, respectively. Total estimated amortization of the Company’s intangible assets for each of the years ending June 30, 2013 through 2017 and thereafter is as follows at September 30, 2012 (in thousands):

Fiscal years	Amortization Expense
2013 (remainder)	$	5,390
2014	5,222
2015	2,989
2016	1,292
2017	308
Thereafter	595

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Accrued Liabilities

12 Months Ended

Jun. 30, 2012

Accrued Liabilities, Current [Abstract]

Accrued Liabilities

ACCRUED LIABILITIES

Accrued liabilities consisted of the following amounts (in thousands):

	September 30, 2012		June 30, 2012		September 30, 2011
Payroll and related taxes	$	48,731	$	50,291	$	50,768
Capital expenditures	4,254		5,624		5,897
Advertising	25,815		24,837		28,681
Interest	11,660		3,296		10,969
Benefits	16,060		14,014		12,571
Other	47,822		39,286		50,688
Total accrued liabilities	$	154,342	$	137,348	$	159,574

During the quarter ended September 30, 2012, the Company implemented a restructuring plan at several locations to improve operational efficiencies and recorded a related charge of $9.1 million in education services and general and administrative expense. The restructuring charge consisted of $7.5 million related to employee severance costs, primarily at The Art Institutes reportable segment, and a lease abandonment charge of $1.6 million at one of the Company's operations offices. The majority of these costs will be paid through December 31, 2012.

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Guarantor Subsidiaries Financial Information Guarantor Subsidiaries Financial Information (Tables)

12 Months Ended

Jun. 30, 2012

Gurantor Subsidiaries Financial Information [Abstract]

Schedule of Condensed Balance Sheet [Table Text Block]

CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2012 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	152,499	$	148		$	6,106		$	—		$	158,753		$	53,203		$	—		$	211,956
Restricted cash	42,763		—			234,613			—			277,376			—			—			277,376
Student and other receivables, net	199		(681		)	261,182			—			260,700			3			—			260,703
Inventories	—		158			9,883			—			10,041			—			—			10,041
Other current assets	36,970		640			121,703			—			159,313			—			—			159,313
Total current assets	232,431		265			633,487			—			866,183			53,206			—			919,389
Property and equipment, net	66,174		7,541			552,622			—			626,337			—			—			626,337
Intercompany balances	722,172		(29,017		)	(795,285		)	—			(102,130		)	102,130			—			—
Other long-term assets	16,219		791			40,541			—			57,551			—			—			57,551
Investment in subsidiaries	852,712		—			—			(852,712		)	—			331,386			(331,386		)	—
Intangible assets, net	1,914		36			327,708			—			329,658			—			—			329,658
Goodwill	7,328		—			956,222			—			963,550			—			—			963,550
Total assets	$	1,898,950	$	(20,384	)	$	1,715,295		$	(852,712	)	$	2,741,149		$	486,722		$	(331,386	)	$	2,896,485
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,850	$	—		$	226		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	48,773		3,686			539,610			—			592,069			(1		)	—			592,068
Total current liabilities	60,623		3,686			539,836			—			604,145			(1		)	—			604,144
Long-term debt, less current portion	1,450,418		—			165			—			1,450,583			—			—			1,450,583
Other long-term liabilities	54,993		345			189,540			—			244,878			—			—			244,878
Deferred income taxes	1,530		515			108,112			—			110,157			(104		)	—			110,053
Total liabilities	1,567,564		4,546			837,653			—			2,409,763			(105		)	—			2,409,658
Total shareholders’ equity (deficit)	331,386		(24,930		)	877,642			(852,712		)	331,386			486,827			(331,386		)	486,827
Total liabilities and shareholders’ equity (deficit)	$	1,898,950	$	(20,384	)	$	1,715,295		$	(852,712	)	$	2,741,149		$	486,722		$	(331,386	)	$	2,896,485

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	(26,249	)	$	98		$	213,960		$	—		$	187,809		$	3,199		$	—		$	191,008
Restricted cash	42,931			—			224,949			—			267,880			—			—			267,880
Student and other receivables, net	4,149			153			216,284			—			220,586			(1		)	—			220,585
Inventories	—			159			8,223			—			8,382			—			—			8,382
Other current assets	35,543			660			113,660			—			149,863			—			—			149,863
Total current assets	56,374			1,070			777,076			—			834,520			3,198			—			837,718
Property and equipment, net	72,279			7,846			571,672			—			651,797			—			—			651,797
Intercompany balances	1,059,102			(26,456		)	(1,181,164		)	—			(148,518		)	148,518			—			—
Other long-term assets	15,276			—			40,724			—			56,000			1			—			56,001
Investment in subsidiaries	826,651			—			—			(826,651		)	—			344,742			(344,742		)	—
Intangible assets, net	2,031			39			327,959			—			330,029			—			—			330,029
Goodwill	7,328			—			956,222			—			963,550			—			—			963,550
Total assets	$	2,039,041		$	(17,501	)	$	1,492,489		$	(826,651	)	$	2,687,378		$	496,459		$	(344,742	)	$	2,839,095
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt and revolving credit facility	$	123,150		$	—		$	226		$	—		$	123,376		$	—		$	—		$	123,376
Other current liabilities	63,935			8,319			338,378			—			410,632			(3		)	—			410,629
Total current liabilities	187,085			8,319			338,604			—			534,008			(3		)	—			534,005
Long-term debt, less current portion	1,453,234			—			234			—			1,453,468			—			—			1,453,468
Other long-term liabilities	52,450			374			190,465			—			243,289			2			—			243,291
Deferred income taxes	1,530			515			109,826			—			111,871			(104		)	—			111,767
Total liabilities	1,694,299			9,208			639,129			—			2,342,636			(105		)	—			2,342,531
Total shareholders’ equity (deficit)	344,742			(26,709		)	853,360			(826,651		)	344,742			496,564			(344,742		)	496,564
Total liabilities and shareholders’ equity (deficit)	$	2,039,041		$	(17,501	)	$	1,492,489		$	(826,651	)	$	2,687,378		$	496,459		$	(344,742	)	$	2,839,095

CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2011 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	409,755	$	123		$	5,395		$	—		$	415,273		$	50,219		$	—		$	465,492
Restricted cash	53,789		—			34,282			—			88,071			—			—			88,071
Student and other receivables, net	3,800		104			229,676			—			233,580			—			—			233,580
Inventories	—		117			12,741			—			12,858			—			—			12,858
Other current assets	23,941		577			109,593			—			134,111			—			—			134,111
Total current assets	491,285		921			391,687			—			883,893			50,219			—			934,112
Property and equipment, net	68,175		8,296			600,479			—			676,950			—			—			676,950
Intercompany balances	648,992		(30,427		)	(761,641		)	—			(143,076		)	143,076			—			—
Other long-term assets	48,614		—			(4,883		)	—			43,731			2			—			43,733
Investment in subsidiaries	2,236,963		—			—			(2,236,963		)	—			1,884,235			(1,884,235		)	—
Intangible assets, net	2,183		48			459,111			—			461,342			—			—			461,342
Goodwill	7,328		—			2,574,671			—			2,581,999			—			—			2,581,999
Total assets	$	3,503,540	$	(21,162	)	$	3,259,424		$	(2,236,963	)	$	4,504,839		$	2,077,532		$	(1,884,235	)	$	4,698,136
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	9,871	$	—		$	2,205		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	87,725		2,954			594,470			—			685,149			(2		)	—			685,147
Total current liabilities	97,596		2,954			596,675			—			697,225			(2		)	—			697,223
Long-term debt, less current portion	1,465,294		—			(1,545		)	—			1,463,749			—			—			1,463,749
Other long-term liabilities	55,169		444			188,412			—			244,025			—			—			244,025
Deferred income taxes	1,246		265			214,094			—			215,605			(124		)	—			215,481
Total liabilities	1,619,305		3,663			997,636			—			2,620,604			(126		)	—			2,620,478
Total shareholders’ equity (deficit)	1,884,235		(24,825		)	2,261,788			(2,236,963		)	1,884,235			2,077,658			(1,884,235		)	2,077,658
Total liabilities and shareholders’ equity (deficit)	$	3,503,540	$	(21,162	)	$	3,259,424		$	(2,236,963	)	$	4,504,839		$	2,077,532		$	(1,884,235	)	$	4,698,136

C

Schedule of Income Statement [Table Text Block]

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	2,421		$	607,143	$	—		$	609,564		$	—		$	—		$	609,564
Costs and expenses:
Educational services	34,800			2,645			343,851		—			381,296			—			—			381,296
General and administrative	(11,578		)	(3,339		)	189,409		—			174,492			—			—			174,492
Depreciation and amortization	11,598			151			32,396		—			44,145			—			—			44,145
Total costs and expenses	34,820			(543		)	565,656		—			599,933			—			—			599,933
Income (loss) before interest and income taxes	(34,820		)	2,964			41,487		—			9,631			—			—			9,631
Interest (income) expense, net	30,859			—			599		—			31,458			(6		)	—			31,452
Equity in earnings of subsidiaries	(26,317		)	—			—		26,317			—			13,099			(13,099		)	—
Income (loss) before income taxes	(39,362		)	2,964			40,888		(26,317		)	(21,827		)	(13,093		)	13,099			(21,821		)
Income tax expense (benefit)	(26,263		)	1,185			16,350		—			(8,728		)	—			—			(8,728		)
Net (loss) income	$	(13,099	)	$	1,779		$	24,538	$	(26,317	)	$	(13,099	)	$	(13,093	)	$	13,099		$	(13,093	)
Net change in unrecognized loss on interest rate swaps, net of tax	$	(414	)	$	—		$	—	$	—		$	(414	)	$	(414	)	$	414		$	(414	)
Foreign currency translation gain	157			—			157		(157		)	157			157			(157		)	157
Other comprehensive (loss) income	(257		)	—			157		(157		)	(257		)	(257		)	257			(257		)
Comprehensive (loss) income	$	(13,356	)	$	1,779		$	24,695	$	(26,474	)	$	(13,356	)	$	(13,350	)	$	13,356		$	(13,350	)

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended September 30, 2011 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	3,004		$	679,091		$	—		$	682,095		$	—		$	—		$	682,095
Costs and expenses:
Educational services	20,121			2,949			351,377			—			374,447			—			—			374,447
General and administrative	(19,214		)	(369		)	217,283			—			197,700			57			—			197,757
Depreciation and amortization	6,442			102			32,344			—			38,888			—			—			38,888
Total costs and expenses	7,349			2,682			601,004			—			611,035			57			—			611,092
Income (loss) before interest and income taxes	(7,349		)	322			78,087			—			71,060			(57		)	—			71,003
Interest (income) expense, net	26,226			—			663			—			26,889			(1		)	—			26,888
Equity in earnings of subsidiaries	(47,541		)	—			—			47,541			—			(27,010		)	27,010			—
Income before income taxes	13,966			322			77,424			(47,541		)	44,171			26,954			(27,010		)	44,115
Income tax expense (benefit)	(13,044		)	125			30,080			—			17,161			—			—			17,161
Net income	$	27,010		$	197		$	47,344		$	(47,541	)	$	27,010		$	26,954		$	(27,010	)	$	26,954
Net change in unrecognized loss on interest rate swaps, net of tax	$	(7,925	)	$	—		$	—		$	—		$	(7,925	)	$	(7,925	)	$	7,925		$	(7,925	)
Foreign currency translation gain	(1,008		)	—			(1,008		)	1,008			(1,008		)	(1,008		)	1,008			(1,008		)
Other comprehensive loss	(8,933		)	—			(1,008		)	1,008			(8,933		)	(8,933		)	8,933			(8,933		)
Comprehensive income	$	18,077		$	197		$	46,336		$	(46,533	)	$	18,077		$	18,021		$	(18,077	)	$	18,021

Schedule of Condensed Cash Flow Statement [Table Text Block]

NDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Months Ended September 30, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC		EDMC Consolidated
Net cash flows provided by (used in) operations	$	(51,934	)	$	(2,629	)	$	211,136		$	156,573		$	4	$	156,577
Cash flows from investing activities:
Expenditures for long-lived assets	(2,170		)	(248		)	(18,123		)	(20,541		)	—		(20,541		)
Other investing activities	(375		)	—			(827		)	(1,202		)	—		(1,202		)
Net cash flows used in investing activities	(2,545		)	(248		)	(18,950		)	(21,743		)	—		(21,743		)
Cash flows from financing activities:
Net repayments of debt and other	(114,116		)	—			(69		)	(114,185		)	—		(114,185		)
Intercompany transactions	347,343			2,927			(400,270		)	(50,000		)	50,000		—
Net cash flows provided by (used in) financing activities	233,227			2,927			(400,339		)	(164,185		)	50,000		(114,185		)
Effect of exchange rate changes on cash and cash equivalents	—			—			299			299			—		299
Decrease in cash and cash equivalents	178,748			50			(207,854		)	(29,056		)	50,004		20,948
Beginning cash and cash equivalents	(26,249		)	98			213,960			187,809			3,199		191,008
Ending cash and cash equivalents	$	152,499		$	148		$	6,106		$	158,753		$	53,203	$	211,956

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Three Months Ended September 30, 2011 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(49,467	)	$	(215	)	$	270,903		$	221,221		$	86		$	221,307
Cash flows from investing activities
Expenditures for long-lived assets	(2,020		)	(246		)	(17,932		)	(20,198		)	—			(20,198		)
Other investing activities	—			—			(6,980		)	(6,980		)	—			(6,980		)
Net cash flows used in investing activities	(2,020		)	(246		)	(24,912		)	(27,178		)	—			(27,178		)
Cash flows from financing activities
Net repayments of debt	(81,962		)	—			(63		)	(82,025		)	—			(82,025		)
Common stock repurchased and stock option exercises	—			—			—			—			(49,627		)	(49,627		)
Intercompany transactions	560,020			314			(609,961		)	(49,627		)	49,627			—
Net cash flows provided by (used in) financing activities	478,058			314			(610,024		)	(131,652		)	—			(131,652		)
Effect of exchange rate changes on cash and cash equivalents	—			—			(209		)	(209		)	—			(209		)
Increase (decrease) in cash and cash equivalents	426,571			(147		)	(364,242		)	62,182			86			62,268
Beginning cash and cash equivalents	(16,816		)	270			369,637			353,091			50,133			403,224
Ending cash and cash equivalents	$	409,755		$	123		$	5,395		$	415,273		$	50,219		$	465,492

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Contingencies

12 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

CONTINGENCIES

Qui Tam Matters

Washington v. Education Management Corporation. On May 3, 2011, a qui tam action captioned United States of America, and the States of California, Florida, Illinois, Indiana, Massachusetts, Minnesota, Montana, New Jersey, New Mexico, New York and Tennessee, and the District of Columbia, each ex rel. Lynntoya Washington and Michael T. Mahoney v. Education Management Corporation, et al. (“Washington”) filed under the federal False Claims Act in April 2007 was unsealed due to the U.S. Department of Justice's decision to intervene in the case. Five of the states listed in the caption joined the case based on qui tam actions filed under their respective False Claims Acts. The Court granted the Company's motion to dismiss the District of Columbia from the case and denied the Commonwealth of Kentucky's motion to intervene in the case under its consumer protection laws.

The case, which is pending in U.S. District Court for the Western District of Pennsylvania, relates to whether the Company's compensation plans for admission representatives violated the Higher Education Act, as amended (“HEA”), and U.S. Department of Education regulations prohibiting an institution participating in Title IV programs from providing any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments to any person or entity engaged in any student recruitment or admissions activity during the period of July 1, 2003 through June 30, 2011. The complaint was initially filed by a former admissions representative at The Art Institute of Pittsburgh Online Division and a former director of training at EDMC Online Higher Education and asserts the relators are entitled to recover treble the amount of actual damages allegedly sustained by the federal government as a result of the alleged activity, plus civil monetary penalties. The complaint does not specify the amount of damages sought but claims that the Company and/or students attending the Company's schools received over $11 billion in funds from participation in Title IV programs and state financial aid programs during the period of alleged wrongdoing.

On May 11, 2012, the Court ruled on the Company's motion to dismiss case for failure to state a claim upon which relief can be granted, dismissing the claims that the design of the Company's compensation plan for admissions representatives violated the incentive compensation rule and allowing the allegations that the plan as implemented violated the rule and common law claims to continue to discovery.

The Company believes the case to be without merit and intends to vigorously defend itself.

Sobek v. Education Management Corporation. On March 13, 2012, a qui tam action captioned United States of America, ex rel. Jason Sobek v. Education Management Corporation, et al. filed under the federal False Claims Act on January 28, 2010 was unsealed after the U.S. Department of Justice declined to intervene in the case at this time. The case, which is pending in the U.S. District Court for the Western District of Pennsylvania, alleges that the defendants violated the U.S. Department of Education's regulation prohibiting institutions from making substantial misrepresentations to prospective students, did not adequately track student academic progress and violated the U.S. Department of Education's prohibition on the payment of incentive compensation to admissions representatives. The complaint was filed by a former project associate director of admissions at EDMC Online Higher Education who worked for South University and asserts the relator is entitled to recover treble the amount of actual damages allegedly sustained by the federal government as a result of the alleged activity, plus civil monetary penalties. The complaint does not specify the amount of damages sought but claims that the Company's institutions were ineligible to participate in Title IV programs during the period of alleged wrongdoing.

On May 29, 2012, the Company filed a motion to dismiss the case with prejudice for failure to state a claim upon which relief can be granted. The Company believes the remaining claims in the case to be without merit and intends to vigorously defend itself. On October 22, 2012, the magistrate judge assigned to the case issued a Report and Recommendation on the Company's motion to dismiss, which recommends that the Court dismiss with prejudice claims related to incentive compensation, program costs and the withholding of amounts due to the government and allow claims related to satisfactory academic progress, job placement statistics and programmatic accreditation to continue. The Report and Recommendation is not binding on the federal district judge assigned to the case. The Company has until November 9, 2012 to file objections to the Report and Recommendation with the Court.

Shareholder Derivative Lawsuits

Oklahoma Law Enforcement Retirement System v. Nelson. On May 21, 2012, a shareholder derivative class action captioned Oklahoma Law Enforcement Retirement System v. Todd S. Nelson, et al. was filed against the directors of the Company in state court located in Pittsburgh, Pennsylvania. The Company is named as a nominal defendant in the case. The complaint alleges that the defendants violated their fiduciary obligations to the Company's shareholders due to the Company's violation of the U.S. Department of Education's prohibition on paying incentive compensation to admissions representatives, engaging in improper recruiting tactics in violation of Title IV of the HEA and accrediting agency standards, falsification of job placement data for graduates of its schools and failure to satisfy the U.S. Department of Education's financial responsibility standards. The Company previously received two demand letters from the plaintiff which were investigated by a Special Litigation Committee of the Board of Directors and found to be without merit. The Company filed a motion to dismiss the case with prejudice on August 13, 2012. In response, the plaintiffs filed an amended complaint making substantially the same allegations as the initial complaint on September 27, 2012. The Company and the director defendants filed a motion to dismiss the amended complaint on October 17, 2012. The Company believes that the claims are without merit and intends to vigorously defend itself.

Bushansky v. Nelson. On August 3, 2012, a shareholder derivative class action captioned Stephen Bushansky v. Todd S. Nelson, et al. was filed against certain of the directors of the Company in the U.S. District Court for the Western District of Pennsylvania. The Company is named as a nominal defendant in the case. The complaint alleges that the defendants violated their fiduciary obligations to the Company's shareholders due to the Company's use of improper recruiting, enrollment admission and financial aid practices and violation of the U.S. Department of Education's prohibition on the payment of incentive compensation to admissions representatives. The Company previously received a demand letter from the plaintiff which was investigated by a Special Litigation Committee of the Board of Directors and found to be without merit. The Company and the named director defendants filed a motion to dismiss the case on October 19, 2012. The Company believes that the claims set forth in the complaint are without merit and intends to vigorously defend itself.

Buirkle APA Program Accreditation Lawsuit

In August 2009, a petition was filed in the District Court for Dallas County, Texas in the case of Capalbo et al. v. Argosy Education Group, Inc. University, Education Management LLC, Education Management Corporation and Marilyn Powell-Kissinger by 15 former students in the Clinical Psychology program offered by the Dallas campus of Argosy University. In September 2009, the defendants removed the case to the United States District Court for the Northern District of Texas, Dallas division. The case was remandedto state court in November 2009 by agreement after the plaintiffs amended their pleadings to specify their allegations and agreed to dismiss Dr. Powell-Kissinger as a defendant. The plaintiffs filed an amended petition in state court in January 2010 captioned Buirkle et al. v. Argosy Education Group, Inc., Education Management LLC and Education Management Corporation and included three new plaintiffs. The petition alleges that, prior to the plaintiffs' enrollment and/or while the plaintiffs were enrolled in the program, the defendants violated the Texas Deceptive Trade Practices and Consumer Protection Act and made material misrepresentations regarding the importance of accreditation of the program by the Commission on Accreditation of the American Psychological Association, the status of the application of the Dallas campus for such accreditation, the availability of loan repayment options for the plaintiffs, and the quantity and quality of the plaintiffs' career options. Plaintiffs seek unspecified monetary compensatory and punitive damages. In March 2010, claims filed by three of the plaintiffs who signed arbitration agreements with Argosy University were compelled to binding arbitration. The remainder of the state court action was stayed pending the resolution of the three arbitrations.

In May 2010, those three plaintiffs and a fourth former student in the Clinical Psychology program offered by the Dallas campus of Argosy University filed a demand for arbitration. Also in May 2010, three additional former students in the Clinical Psychology program offered by the Dallas campus of Argosy University filed a new action in the District Court for Dallas County, Texas in the case of Adibian et al. v. Argosy Education Group, Inc., Education Management LLC, and Education Management Corporation alleging the same claims made in the Buirkle lawsuit. The defendants filed a motion to stay the new action pending the resolution of the arbitration proceedings. Prior to the hearing on the motion, plaintiffs filed a notice of non-suit without prejudice. On August 9, 2012, the Court entered joint notice of nonsuit dismissing the plaintiffs' claims under the Texas Deceptive Trade Practices Act with prejudice. In October 2012, the Company entered into settlement agreements with six of the plaintiffs, including all four plaintiffs scheduled for binding arbitration, for the payment by the Company of an immaterial amount in settlement. The remaining 13 plaintiffs will pursue their common law fraud cases in state court.

The Company believes the claims in the lawsuits and the arbitrations to be without merit and intends to vigorously defend itself.

State Attorney General Investigations

In September 2012, the Company received a subpoena from the State of Colorado Attorney General's office requesting documents and detailed information for the period of January 1, 2006 through the present. The subpoena is primarily focused on the programs offered by the College of Psychology and Behavioral Sciences at the Denver, Colorado campus of Argosy University. Argosy University also received in September 2012 demand letters from an attorney representing three former students in the Doctorate of Counseling Psychology program alleging that the students were unable to find internships necessary to complete the program in Denver, Colorado and that the campus claimed that the program would lead to licensure in Colorado, among other things. The Company intends to cooperate with the Attorney General's investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In August 2011, the Company received a subpoena from the Attorney General of the State of New York requesting documents and detailed information for the time period of January 1, 2000 through the present. The Art Institute of New York City is the Company's only school located in New York though the subpoena also addresses fully online students who reside in the State. The subpoena is primarily related to the Company's compensation of admissions representatives and recruiting activities. The relators in the Washington qui tam case filed the complaint under the State of New York's False Claims Act though the state has not announced an intention to intervene in the matter. The Company intends to cooperate with the investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In December 2010, the Company received a subpoena from the Office of Consumer Protection of the Attorney General of the Commonwealth of Kentucky requesting documents and detailed information for the time period of January 1, 2008 through December 31, 2010. The Company has three Brown Mackie College locations in Kentucky. The Kentucky Attorney General announced an investigation of the business practices of private sector post-secondary schools and that subpoenas were issued to six private sector colleges that do business in Kentucky in connection with the investigation. The Company intends to continue to cooperate with the investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In October 2010, Argosy University received a subpoena from the Florida Attorney General's office seeking a wide range of documents related to the Company's institutions, including the nine institutions located in Florida, from January 2, 2006 to the present. The Florida Attorney General has announced that it is investigating potential misrepresentations in recruitment, financial aid and other areas. The Company is cooperating with the investigation, but has also filed a suit to quash or limit the subpoena and to protect information sought that constitutes proprietary or trade secret information. The Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

In June 2007, The New England Institute of Art (“NEIA”) received a civil investigative demand letter from the Massachusetts State Attorney General requesting information in connection with the Attorney General's review of alleged submissions of false claims by NEIA to the Commonwealth of Massachusetts and alleged unfair and deceptive student lending and marketing practices engaged in by the school. In February 2008, the Attorney General informed NEIA that it does not plan to further pursue its investigation of deceptive marketing practices. In June and August of 2011, the Company provided the Attorney General with additional information related to the false claims investigation. NEIA intends to fully cooperate with the Attorney General in connection with its continuing investigation.

City of San Francisco

In December 2011, the Company received a letter from the City Attorney of the City of San Francisco, California requesting information related to student recruitment and indebtedness, including recruiting practices and job placement reporting, among other issues, by The Art Institute of San Francisco and the seven other Art Institutes located in California.  The Company intends to cooperate with the investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

Other Matters

The Company is a defendant in certain other legal proceedings arising out of the conduct of its business. In the opinion of management, based upon an investigation of these claims and discussion with legal counsel, the ultimate outcome of such other legal proceedings, individually and in the aggregate, is not expected to have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

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Earnings Per Share Earnings Per Share (Tables)

12 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Basic and diluted EPS were calculated as follows (in thousands, except per share amounts):

	For the Three Months Ended September 30,
	2012			2011
Net (loss) income	$	(13,093	)	$	26,954
Weighted average number of shares outstanding:
Basic	124,478			128,474
Effect of stock-based awards	—			1,241
Diluted	124,478			129,715
(Loss) Earnings per share:
Basic	$	(0.11	)	$	0.21
Diluted	$	(0.11	)	$	0.21

XML

Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				12 Months Ended
	Sep. 30, 2012		Sep. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Segment Reporting Information [Line Items]
Net revenues	$ 609,564		$ 682,095
EBITDA Excluding Certain Expenses	62,921		116,558
Restructuring Charges	9,145	[1]	6,667	[1]
Depreciation and amortization	44,145		38,888
Interest expense, net	31,452		26,888
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	(21,821)		44,115		(21,821)		44,115
Income tax (benefit) expense	(8,728)		17,161
Expenditures for long-lived assets	20,541		20,198
Assets	2,896,485	[2]	4,698,136	[2]	2,839,095	[2]
The Art Institutes [Member]
Segment Reporting Information [Line Items]
Number of Operating Segments	51
Number of States in which Entity Operates	25
Student Concentration, Percentage	54.00%
Net revenues	380,139		428,900
EBITDA Excluding Certain Expenses	67,926		110,318
Assets	1,782,747	[2]	2,997,038	[2]	1,804,221	[2]
Argosy University [Member]
Segment Reporting Information [Line Items]
Number of Operating Segments	20
Number of States in which Entity Operates	13
Student Concentration, Percentage	19.00%
Net revenues	81,920		98,143
EBITDA Excluding Certain Expenses	1,193		10,234
Assets	274,711	[2]	384,504	[2]	298,037	[2]
Brown Mackie Colleges [Member]
Segment Reporting Information [Line Items]
Number of Operating Segments	28
Number of States in which Entity Operates	15
Student Concentration, Percentage	13.00%
Net revenues	73,972		80,923
EBITDA Excluding Certain Expenses	10,595		17,583
Assets	187,153	[2]	412,624	[2]	268,694	[2]
South University [Member]
Segment Reporting Information [Line Items]
Number of Operating Segments	11
Number of States in which Entity Operates	9
Student Concentration, Percentage	14.00%
Net revenues	73,533		74,129
EBITDA Excluding Certain Expenses	6,313		164
Assets	194,754	[2]	180,904	[2]	241,982	[2]
Corporate and Other [Member]
Segment Reporting Information [Line Items]
EBITDA Excluding Certain Expenses	(23,106)		(21,741)
Assets	$ 457,120	[2],[3]	$ 723,066	[2],[3]	$ 226,161	[2],[3]

[1] Refer to Note 7, "Accrued Liabilities" for more information on the current period charge. The prior year period includes a $5.2 million employee severance charge and a $1.5 million lease termination charge.

[2] Excludes inter-company activity.

[3]

XML

Other Long-Term Assets Other Long-Term Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Jun. 30, 2012
Schedule of Other Assets, Noncurrent [Line Items]
Allowance for Doubtful Accounts Receivable, Noncurrent	$ 18,797	$ 7,317	$ 14,602
Student receivables, net of allowances	22,429	10,452	20,163
Deferred financing fees	13,641	14,195	14,768
Deferred compensation	12,393	10,101	12,164
Other	9,088	8,985	8,906
Total other long-term assets	57,551	43,733	56,001
Student Receivables, Gross	41,226	17,769	34,765
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	250,282	199,357	199,357
Bad debt expense	(48,931)	(35,130)	(163,926)
Amounts written off	(36,171)		(113,001)
Ending Balance	263,042		250,282
In-School Students [Member]
Schedule of Other Assets, Noncurrent [Line Items]
Student Receivables, Gross	28,364	11,735	24,354
Out-of-School Students [Member]
Schedule of Other Assets, Noncurrent [Line Items]
Student Receivables, Collection Period, Extended	42 months
Student Receivables, Gross	$ 12,862	$ 6,034	$ 10,411

XML

Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Net (loss) income	$ (13,093)	$ 26,954
Other comprehensive (loss) income:
Periodic revaluation of interest rate swaps, net of tax benefit of $8,049, $8,771 and $6,430	(2,182)	(10,385)
Reclassification adjustment for interest recognized in consolidated statement of operations, net of tax expense of $4,988, $13,994 and $14,005	1,768	2,460
Net change in unrecognized loss on interest rate swaps, net of tax	(414)	(7,925)
Foreign currency translation gain (loss)	157	(1,008)
Other comprehensive (loss) income	(257)	(8,933)
Comprehensive (loss) income	$ (13,350)	$ 18,021

XML

Basis of Presentation

12 Months Ended

Jun. 30, 2012

DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP [Abstract]

DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP

Basis of presentation

The accompanying unaudited consolidated financial statements of Education Management Corporation ("EDMC" and, together with its subsidiaries, the "Company") have been prepared by the Company’s management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States for annual financial statements. The unaudited consolidated financial statements included herein contain all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position of the Company as of September 30, 2012 and 2011, and its statements of operations, comprehensive income and cash flows for the three months ended September 30, 2012 and 2011. The statements of operations for the three months ended September 30, 2012 and 2011 are not necessarily indicative of the results to be expected for future periods. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012 (the “Annual Report on Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”). The accompanying consolidated balance sheet at June 30, 2012 has been derived from the consolidated audited balance sheet included in the Annual Report on Form 10-K.

Description of Business

The Company is among the largest providers of post-secondary education in North America, with approximately 132,000 enrolled students as of October 2012. The Company offers campus-based education through four different education systems and through online platforms at three of the four education systems, or through a combination of both. These four education systems coincide with the Company's reportable segments and include The Art Institutes, Argosy University, Brown Mackie Colleges and South University. Refer to Note 14, "Segment Reporting" for additional information.

The Company is committed to offering quality academic programs and strives to improve the learning experience for its students. The curriculum is designed with a strong emphasis on applied career-oriented content and is primarily taught by faculty members who possess practical and relevant professional experience in their respective fields.

Ownership

On June 1, 2006, EDMC was acquired by a consortium of private equity investment funds led by Providence Equity Partners, Goldman Sachs Capital Partners and Leeds Equity Partners (collectively, the “Sponsors”). The acquisition was accomplished through the merger of EM Acquisition Corporation into EDMC, with EDMC surviving the merger (the "Transaction").

The acquisition of EDMC was financed by equity invested by the Sponsors and other investors, cash on hand, borrowings under a new senior secured credit facility by wholly-owned subsidiary Education Management LLC (“EM LLC”) and the issuance by EM LLC and Education Management Finance Corp. (a wholly-owned subsidiary of EM LLC) of $375.0 million of 8.75% senior notes due on June 1, 2014 (the "Senior Notes") and $385.0 million of 10.25% senior subordinated notes originally due in 2016 (the “Senior Subordinated Notes”). The Company repurchased all of the Senior Subordinated Notes in a series of transactions completed in fiscal 2010 and 2011. Refer to Note 8, "Short-Term and Long-Term Debt" for additional information.

In October 2009, EDMC completed an initial public offering of 23.0 million shares of its common stock, $0.01 par value per share ("Common Stock"), at a per share price of $18.00 (the "Initial Public Offering"). The Sponsors did not sell any of their shares in connection with the Initial Public Offering.

In June 2010, EDMC's Board of Directors approved a stock repurchase program that permits EDMC to purchase shares of its Common Stock in the open market, in privately negotiated transactions, through accelerated repurchase programs or in structured share repurchase programs. From the inception of the repurchase program through September 30, 2012, EDMC repurchased approximately 18.9 million shares of Common Stock under the program for a total cost of approximately $328.6 million. The Company did not make any purchases under the program during the fiscal quarter ended September 30, 2012. At September 30, 2012, approximately $46.4 million remained available for share purchases under the stock repurchase program, which expires on December 31, 2012.

Seasonality

The Company’s quarterly net revenues and income fluctuate primarily as a result of the pattern of student enrollments, and its first fiscal quarter is typically its lowest revenue recognition quarter of the fiscal year due to student vacations.

Reclassifications

Certain reclassifications of prior year data have been made to conform to the September 30, 2012 presentation. These reclassifications did not materially change any of the previously reported amounts.

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Share-Based Compensation Share-Based Compensation (Tables)

3 Months Ended

Sep. 30, 2012

Share-based Compensation [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Below is a summary of the key assumptions used in determining the incremental compensation cost associated with the time-based replacement options granted in connection with the Option Exchange:

Replacement options:
Number of options	6,300,075
Volatility	80-87%
Expected term	2.94-6.25 yrs
Fair value per option	$1.87-$2.53
Canceled options:
Number of options	8,525,171
Volatility	78-87%
Expected term	2.25-7.67 yrs
Fair value per option	$0.78-$1.97

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Share-Based Compensation Share-Based Compensation (Details) (USD $)	0 Months Ended	3 Months Ended			0 Months Ended		0 Months Ended		0 Months Ended		1 Months Ended	3 Months Ended		0 Months Ended
	Aug. 14, 2012	Sep. 30, 2012	Sep. 30, 2011	Aug. 14, 2012 Performance-based options [Member]	Aug. 14, 2012 Time-Based Shares, Principal Shareholders or August 14, 2020 Restrictions [Member]	Aug. 14, 2012 Time-based shares [Member]	Sep. 13, 2012 2012 Omnibus Plan [Member] Common Stock [Member]	Sep. 30, 2012 2012 Omnibus Plan [Member] Common Stock [Member]	Sep. 13, 2012 Option Exchange [Member]	Aug. 14, 2012 Option Exchange [Member]	Aug. 31, 2012 Option Exchange [Member] Time-based shares [Member]	Sep. 30, 2012 Option Exchange [Member] Minimum [Member]	Sep. 30, 2012 Option Exchange [Member] Maximum [Member]	Sep. 13, 2012 Replacement options [Member] Performance-based options [Member]	Sep. 13, 2012 Replacement options [Member] Time-based shares [Member]	Sep. 13, 2012 Replacement options [Member] Time-based shares [Member] Common Stock [Member]	Sep. 13, 2012 Replacement options [Member] Minimum [Member] Time-based shares [Member] Common Stock [Member]	Sep. 13, 2012 Replacement options [Member] Maximum [Member] Time-based shares [Member] Common Stock [Member]	Sep. 13, 2012 Cancelled options [Member] Performance-based options [Member]	Sep. 13, 2012 Cancelled options [Member] Time-based shares [Member]	Sep. 13, 2012 Cancelled options [Member] Time-based shares [Member] Common Stock [Member]	Sep. 13, 2012 Cancelled options [Member] Minimum [Member] Time-based shares [Member] Common Stock [Member]	Sep. 13, 2012 Cancelled options [Member] Maximum [Member] Time-based shares [Member] Common Stock [Member]	Sep. 30, 2012 Long-Term Incentive Compensation Plan [Member] Common Stock [Member]	Aug. 14, 2012 Long-Term Incentive Compensation Plan [Member] Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, options granted	1,100,000						8,254,667							2,000,000	6,300,000
Share-based compensation arrangement by share based payment aware, award vesting percentage	25.00%
Common Stock shares reserved for issuance								8,645,333
Options, Grants in Period, Weighted Average Exercise Price					$ 3.20						$ 3.59
Common stock exchange, options cancelled																			3,100,000	8,500,000
Incremental compensation expense, net of forfeitures									$ 2,155,000
Volatility minimum																80.00%					78.00%
Volatility maximum																87.00%					87.00%
Expected term																	2 years 11 months 9 days	6 years 3 months				2 years 3 months	7 years 8 months 1 day
Fair value per option																	$ 1.87	$ 2.53				$ 0.78	$ 1.97
Vesting periods	4 years											1 year	4 years
Share-based Compensation		3,613,000	2,926,000
Options, Exercisable, Weighted Average Remaining Contractual Term					10 years
Unrecognized Compensation Costs, Net of Forfeitures				$ 4,500,000		$ 29,400,000				$ 2,500,000															$ 1,700,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																								1,000,000
Long-Term Incentive Compensation Plan [Abstract]
LTIC Plan, Options Oustanding																								469,000

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Income Taxes

12 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company uses the asset and liability method to account for income taxes. Under this method, deferred tax assets and liabilities result from (i) temporary differences in the recognition of income and expense for financial and federal income tax reporting requirements, and (ii) differences between the recorded value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred tax assets should be reduced by a valuation allowance if, based upon the weight of the available evidence, it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. Future realization of deferred tax assets ultimately depends upon the existence of sufficient taxable income of the appropriate character in either the carry back or carry forward period under applicable tax law.

The Company assesses the realizability of its deferred tax assets on a quarterly basis by considering the relative impact of all available evidence, both positive and negative, to determine whether, based upon the weight of that evidence a valuation allowance is needed. This evaluation requires the use of considerable judgment and estimates that are subject to change. Excluding deferred tax liabilities related to indefinite-lived intangible assets, which are not scheduled to reverse, the Company is in a net deferred tax asset position at September 30, 2012.

The Company incurred cumulative losses before taxes in the three most recent fiscal years ended June 30, 2012 due to goodwill and indefinite-lived asset impairment charges recorded in fiscal 2012 described in Note 5, "Goodwill and Intangible Assets." However, the Company had income before taxes in both fiscal 2010 and 2011, and excluding the non-deductible goodwill impairment charge incurred in fiscal 2012, the Company would have had income before taxes in fiscal 2012 and for the three year period ended June 30, 2012. The Company has sufficient taxable income in the carry back period to realize the benefit of its deferred tax assets. Additionally, the Company has consistently generated taxable income in the past and reasonably expects to generate sufficient taxable income in the future to realize the benefit of its deferred tax assets. Therefore, the Company believes it is more-likely-than-not that it will realize the benefit of its deferred tax assets and, as such, no valuation allowance is required except as disclosed in Part II, Item 8 "Financial Statements and Supplementary Data", Note 11, "Income Taxes" of the June 30, 2012 Annual Report on Form 10-K with respect to certain state deferred tax assets.

The Company's effective tax rate was 40.0% for the three months ended September 30, 2012 and 38.9% for the three months ended September 30, 2011. The effective tax rates differed from the combined federal and state statutory rates due to valuation allowances, expenses that are non-deductible for tax purposes, and accounting related to uncertain tax positions. There have been no material adjustments to liabilities relating to uncertain tax positions since the last annual disclosure for the fiscal year ended June 30, 2012.