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 December 31, 2013

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 February 7, 2014, there were 125,920,645 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	33
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	47
ITEM 4	CONTROLS AND PROCEDURES	47
PART II — OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	48
ITEM 1A	RISK FACTORS	48
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	51
ITEM 4	MINE SAFETY DISCLOSURES	51
ITEM 5	OTHER INFORMATION	51
ITEM 6	EXHIBITS INDEX	52
SIGNATURES		53

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 (Loss)	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)

	December 31, 2013			June 30, 2013			December 31, 2012
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	60,790		$	130,695		$	189,042
Restricted cash	270,272			271,340			273,425
Total cash, cash equivalents and restricted cash	331,062			402,035			462,467
Student receivables, net of allowances of $180,355, $174,760 and $175,407 (Note 6)	163,741			206,406			156,294
Notes, advances and other receivables	37,639			32,547			16,532
Deferred income taxes	76,927			76,927			102,668
Prepaid income taxes	35,379			20,854			—
Other current assets	34,709			32,850			48,107
Total current assets	679,457			771,619			786,068
Property and equipment, net (Note 4)	477,222			525,625			562,184
Goodwill (Note 5)	669,090			669,090			963,550
Intangible assets, net (Note 5)	299,979			300,435			329,361
Other long-term assets (Note 6)	54,340			48,524			52,655
Total assets	$	2,180,088		$	2,315,293		$	2,693,818
Liabilities and shareholders’ equity
Current liabilities:
Current portion of long-term debt (Note 8)	$	11,901		$	12,076		$	12,076
Revolving credit facility (Note 8)	—			75,000			—
Accounts payable	58,413			32,559			38,161
Accrued liabilities (Note 7)	154,758			157,417			136,613
Accrued income taxes	—			—			10,525
Unearned tuition	50,956			113,371			55,038
Advance payments	83,361			95,675			116,569
Total current liabilities	359,389			486,098			368,982
Long-term debt, less current portion (Note 8)	1,272,387			1,273,164			1,447,699
Deferred rent	189,173			201,202			212,085
Deferred income taxes	72,122			70,316			99,845
Other long-term liabilities	30,772			34,414			41,599
Shareholders’ equity:
Common stock, at par	1,450			1,435			1,435
Additional paid-in capital	1,809,769			1,794,846			1,785,413
Treasury stock, at cost	(331,782		)	(328,605		)	(328,605		)
Accumulated deficit	(1,212,362		)	(1,203,936		)	(917,909		)
Accumulated other comprehensive loss	(10,830		)	(13,641		)	(16,726		)
Total shareholders’ equity	256,245			250,099			523,608
Total liabilities and shareholders’ equity	$	2,180,088		$	2,315,293		$	2,693,818

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 December 31,					For the Six Months Ended December 31,
	2013			2012		2013			2012
Net revenues	$	593,673		$	654,895	$	1,174,053		$	1,264,459
Costs and expenses:
Educational services	345,587			360,377		703,276			741,673
General and administrative	176,414			171,190		348,583			345,682
Depreciation and amortization	38,593			39,255		77,198			83,400
Long-lived asset impairments (Note 4)	3,847			—		3,847			—
Total costs and expenses	564,441			570,822		1,132,904			1,170,755
Income before interest and income taxes	29,232			84,073		41,149			93,704
Interest expense, net	31,615			31,009		63,481			62,461
(Loss) income before income taxes	(2,383		)	53,064		(22,332		)	31,243
Income tax (benefit) expense	(3,472		)	21,920		(13,906		)	13,192
Net income (loss)	$	1,089		$	31,144	$	(8,426	)	$	18,051
Earnings (loss) per share: (Note 2)
Basic	$	0.01		$	0.25	$	(0.07	)	$	0.14
Diluted	$	0.01		$	0.25	$	(0.07	)	$	0.14
Weighted average number of shares outstanding: (Note 2)
Basic	125,450			124,560		125,053			124,519
Diluted	131,010			124,762		125,053			124,620

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 December 31,						For the Six Months Ended December 31,
	2013			2012			2013			2012
Net income (loss)	$	1,089		$	31,144		$	(8,426	)	$	18,051
Other comprehensive income
Net change in interest rate swaps:
Periodic revaluation of interest rate swaps, net of tax benefit of $271, $147, $766 and $1,434	(459		)	(249		)	(1,300		)	(2,432		)
Reclassification adjustment for interest recognized in consolidated statement of operations, net of tax expense of $1,166, $1,130, $2,316 and $2,173	1,977			1,915			3,928			3,684
Net change in unrecognized loss on interest rate swaps, net of tax	1,518			1,666			2,628			1,252
Foreign currency translation (loss) gain	(163		)	(98		)	183			59
Other comprehensive income	1,355			1,568			2,811			1,311
Comprehensive income (loss)	$	2,444		$	32,712		$	(5,615	)	$	19,362

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 Six Months Ended December 31,
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(8,426	)	$	18,051
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation and amortization of property and equipment	74,181			80,241
Amortization of intangible assets	3,017			3,159
Bad debt expense	84,683			89,768
Long-lived asset impairments	3,847			—
Amortization of debt issuance costs	7,200			2,561
Share-based compensation	9,828			7,679
Non cash adjustments related to deferred rent	(9,956		)	(7,824		)
Amortization of deferred gains on sale-leaseback transactions	(1,126		)	—
Changes in assets and liabilities:
Restricted cash	1,068			(5,545		)
Receivables	(44,338		)	(40,727		)
Reimbursements for tenant improvements	573			3,891
Inventory	(1,292		)	(583		)
Other assets	(204		)	2,939
Accounts payable	24,863			(15,853		)
Accrued liabilities, including income taxes	(29,539		)	2,343
Unearned tuition	(62,416		)	(61,239		)
Advance payments	(12,273		)	14,316
Total adjustments	48,116			75,126
Net cash flows provided by operating activities	39,690			93,177
Cash flows from investing activities:
Expenditures for long-lived assets	(31,331		)	(39,458		)
Proceeds from sale of fixed assets	—			65,065
Reimbursements for tenant improvements	(573		)	(3,891		)
Net cash flows (used in) provided by investing activities	(31,904		)	21,716
Cash flows from financing activities:
Payments under revolving credit facility	(75,000		)	(111,300		)
Issuance of common stock as a result of stock option exercises	2,722			3
Gross excess tax benefit from share-based compensation	3,391			—
Minimum tax withholding requirements upon restricted stock unit vesting	(2,724		)	—
Principal payments on long-term debt	(6,088		)	(5,769		)
Net cash flows used in financing activities	(77,699		)	(117,066		)
Effect of exchange rate changes on cash and cash equivalents	8			207
Net change in cash and cash equivalents	(69,905		)	(1,966		)
Cash and cash equivalents, beginning of period	130,695			191,008
Cash and cash equivalents, end of period	$	60,790		$	189,042
Cash paid (received) during the period for:
Interest (including swap settlement)	$	55,870		$	60,980
Income taxes, net of refunds	(2,058		)	7,860
	As of December 31,
Noncash investing activities:	2013			2012
Capital expenditures in current liabilities	$	11,826		$	13,538

 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			Accumulated Other Comprehensive Loss				Total
	(In thousands)
Balance at June 30, 2012	$	1,434	$	1,777,732	$	(328,605	)	$	(935,960	)	$	(18,037	)		$	496,564
Exercise of stock options including tax benefit	—		3		—			—			—				3
Share-based compensation	1		17,111		—			—			—				17,112
Net loss	—		—		—			(267,976		)	—				(267,976		)
Other comprehensive income	—		—		—			—			4,396				4,396
Balance at June 30, 2013	1,435		1,794,846		(328,605		)	(1,203,936		)	(13,641		)	(a)	250,099
(Unaudited)
Exercise of stock options	15		2,707		—			—			—				2,722
Share-based compensation	—		9,828		—			—			—				9,828
Minimum tax withholding requirements for restricted stock units	—		—		(3,177		)	—			—				(3,177		)
Net excess tax benefit from share-based compensation	—		2,388		—			—			—				2,388
Net loss	—		—		—			(8,426		)	—				(8,426		)
Other comprehensive income	—		—		—			—			2,811				2,811
Balance at December 31, 2013	$	1,450	$	1,809,769	$	(331,782	)	$	(1,212,362	)	$	(10,830	)	(a)	$	256,245

(a) The balance in accumulated other comprehensive loss at December 31, 2013, June 30, 2013 and December 31, 2012 was comprised of $(10.1) million, $(12.7) million and $(16.4) million of cumulative unrealized losses on interest rate swaps, net of tax, respectively and $(0.7) million, $(0.9) million and $(0.3) 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 December 31, 2013, June 30, 2013 and December 31, 2012. There were 124,601,524 outstanding shares of common stock, net of 18,902,140 shares in treasury, at December 31, 2012. Common stock outstanding and treasury stock balances and activity were as follows for the periods indicated.

	Treasury	Net outstanding
Balance at June 30, 2012	18,902,140	124,477,807
Issued for stock-based compensation plans	—	123,717
Balance at June 30, 2013	18,902,140	124,601,524
Issued for stock-based compensation plans	—	1,526,280
Minimum tax withholding requirements upon restricted stock unit vesting	233,450	(233,450	)
Balance at December 31, 2013	19,135,590	125,894,354

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

8

EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the accompanying interim financial statements have been reflected. The consolidated statements of operations for the three and six months ended December 31, 2013 and 2012 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, 2013 (the “Annual Report on Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”). The accompanying consolidated balance sheet at June 30, 2013 and consolidated statement of shareholders' equity for the fiscal year ended June 30, 2013 have been derived from the consolidated audited balance sheet and statement of shareholders' equity included in the 2013 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 125,560 enrolled students as of October 2013. The Company offers campus-based education through four different education systems and through online platforms at three of its four education systems, or through a combination of both. These four education systems comprise the Company's reportable segments, which are 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 to help them achieve their educational goals across the spectrum of in-demand careers. 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") and was financed by equity invested by the Sponsors and other investors, cash on hand and secured and unsecured borrowings. Refer to Note 8, "Short-Term and Long-Term Debt" for more information.

9

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.

Reclassifications

Certain reclassifications of prior year data have been made to conform to the December 31, 2013 presentation with no effect on previously reported net income (loss) or shareholders' equity.

Recent Accounting Pronouncements

In July 2013, the FASB clarified the presentation of an unrecognized tax benefit when a net operating loss or tax credit carryforward exists.  The clarification requires that an unrecognized tax benefit be presented as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward when settlement of the unrecognized tax benefit using those carryforwards is available pursuant to existing tax law.  The Company's adoption of the FASB clarification had no impact on its consolidated financial statements.

2. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed using the weighted average number of shares outstanding during a given period. The Company uses the treasury stock method to compute diluted EPS, which assumes that restricted stock units are 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 December 31,				For the Six Months Ended December 31,
	2013		2012		2013			2012
Net income (loss)	$	1,089	$	31,144	$	(8,426	)	$	18,051
Weighted average number of shares outstanding:
Basic	125,450		124,560		125,053			124,519
Effect of stock-based awards	5,560		202		—			101
Diluted	131,010		124,762		125,053			124,620
Earnings (loss) per share
Basic	$	0.01	$	0.25	$	(0.07	)	$	0.14
Diluted	$	0.01	$	0.25	$	(0.07	)	$	0.14

Because the effect of applying the treasury stock method would have been antidilutive, the Company excluded time-based options to purchase approximately 1.5 million shares of common stock and 0.6 million restricted stock units outstanding at December 31, 2013 from the computation of diluted EPS in the current quarter and approximately 9.7 million shares of common stock outstanding at December 31, 2012 from the computation of diluted EPS for the three and six months ended December 31, 2012. All outstanding stock options and restricted stock units were excluded from the computation of diluted EPS for the six months ended December 31, 2013 because the Company recorded a net loss.

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 replaced the Education Management Corporation Omnibus Long-Term Incentive Plan (the "2009 Omnibus Plan") that was adopted in April 2009 and became effective upon the completion of the Initial Public Offering. The 2009 Omnibus Plan and the 2006 Stock Option Plan, which it replaced, are now frozen. The 2012 Omnibus Plan may be used to issue stock options, stock appreciation rights, restricted stock, restricted stock units and other forms of long-term incentive compensation.

The Company amended the 2012 Omnibus Plan in November 2013 to formally authorize the grant of cash and stock-based awards that generally have a performance period of one year and to increase the number of shares of Common Stock authorized for issuance by 4.0 million. As of December 31, 2013, approximately 5.6 million shares of Common Stock remain reserved for issuance under the 2012 Omnibus Plan.

10

Share-Based Compensation Activity

On November 8, 2013, the Company granted the share-based compensation awards presented in the table below. The fair value of the time-based stock options was determined using a Black-Scholes-Merton model in which the key assumptions are presented below.

	Time-Based Stock Options			Restricted Stock Units
Number granted (in millions)	1.5			0.6
Fair value per unit	$	7.66		$	12.74
Exercise price	$	12.74		N/A
Expected dividend yield	0		%	N/A
Expected volatility	64		%	N/A
Risk free interest rate	1.86		%	N/A
Expected term (yrs)	6.25 years			N/A

The above awards will vest 25 percent per year and will result in compensation expense of approximately $16.5 million over the four-year service period, net of expected forfeitures. The Company also granted 0.1 million shares of restricted stock to members of its Board of Directors on November 8, 2013, all of which will vest after one year.

The Company recognized $5.7 million and $4.1 million of share-based compensation expense during the three months ended December 31, 2013 and 2012, respectively, and $9.8 million and $7.7 million of share-based compensation expense during the six months ended December 31, 2013 and 2012, respectively. Compensation expense for the three and six months ended December 31, 2013 includes additional expense recognized upon the termination of former employees that are no longer required to provide services to obtain certain awards in accordance with the terms of their employment agreements.

The table below presents outstanding share units, unrecognized compensation expense (net of expected forfeitures) and stock options that are exercisable at December 31, 2013:

	Outstanding (in millions)	Unrecognized Compensation Expense (in millions)		Exercisable (in 000s)	Weighted Average Exercise Price / Share Price
Time-based stock options	11.3	$	27.0	3.6	$	3.58
Restricted stock units	2.5	$	12.6	N/A	$	5.90
Performance-based stock options	1.0	$	2.1	—	$	3.59
Total	14.8	$	41.7	3.6

During the six month period ended December 31, 2013, the Company issued 1.5 million shares of Common Stock and recorded a gross excess tax benefit of $3.4 million in connection with share-based compensation activity. The gross excess tax benefit is classified as a cash inflow from financing activities in the accompanying consolidated statement of cash flows.

Performance-based stock options vest upon the greater of (i) the percentage of the Company's common stock sold by certain investment funds affiliated with Providence Equity Partners and Goldman Sachs Capital Partners (together, the "Principal Stockholders") or (ii) certain return on investment hurdles achieved by the Principal Stockholders. As of December 31, 2013, the Company continues to defer recognizing expense on outstanding performance-based stock options until the relevant performance conditions become probable of being met.

4. PROPERTY AND EQUIPMENT

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

11

Asset Class	December 31, 2013			June 30, 2013			December 31, 2012
Leasehold improvements	$	574,231		570,286			$	564,578
Technology and other equipment	322,349			324,403			314,663
Furniture and equipment	164,148			163,595			161,013
Software	105,720			98,537			86,284
Library books	45,001			44,248			43,319
Buildings and improvements	25,708			25,566			25,358
Construction in progress	24,182			19,600			20,258
Land	5,496			5,496			5,496
Total	1,266,835			1,251,731			1,220,969
Less accumulated depreciation and amortization	(789,613		)	(726,106		)	(658,785		)
Property and equipment, net	$	477,222		$	525,625		$	562,184

Depreciation and amortization expense related to property and equipment was $37.1 million and $37.6 million, respectively, for the three months ended December 31, 2013 and 2012 and $74.2 million and $80.2 million, respectively, for the six months ended December 31, 2013 and 2012. Depreciation and amortization expense for the six months ended December 31, 2012 included $4.6 million in accelerated amortization resulting from the write off of a software asset that no longer had a useful life.

During the three months ended December 31, 2013, the Company recorded an impairment of long-lived assets of $3.8 million in the consolidated statement of operations as estimated future cash flows at two of the Company's Brown Mackie Colleges locations were insufficient to support the carrying values of its property and equipment. In connection with the impairment, the leasehold improvement assets at the affected locations were measured at fair value using the discounted cash flow method (income approach) on a non-recurring basis using Level Three inputs as defined in Note 10, "Fair Value of Financial Instruments."

During the three months ended December 31, 2012, the Company completed five sale-leaseback transactions with unrelated third parties for net proceeds of $65.1 million. Concurrent with these sales, the Company entered into agreements to lease the properties back from the purchasers over initial lease terms ranging from three to 15 years. The Company classified these leases as operating and considers them normal leasebacks with no other continuing involvement.

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

In connection with the Transaction on June 1, 2006, the Company recorded approximately $2.6 billion of goodwill, which was allocated to its four reporting units: The Art Institutes, Argosy University, Brown Mackie Colleges and South University. The Company formally evaluates the carrying amount of goodwill for each of its reporting units on April 1 of each fiscal year. In addition, the Company performs an evaluation on an interim basis if it determines that recent events or prevailing conditions indicate a potential impairment of goodwill. 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, overall financial performance such as adverse changes in recent forecasts of operating results, industry and market considerations, the Company's market capitalization, updated business plans and regulatory and legal developments.

As disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Use of Estimates and Critical Accounting Policies" of the Company's 2013 Annual Report on Form 10-K, the fair value of The Art Institutes reporting unit exceeded its carrying value by more than 15 percent at March 31, 2013. During the quarter ended December 31, 2013, management observed declining application trends for future academic terms, particularly at The Art Institutes reporting unit, and performed a sensitivity analysis of its fair value using the most recently completed long range forecast and available earnings multiples of the Company's peer group.

As a result of the sensitivity analysis performed in the current quarter, management continues to believe that the fair value of The Art Institutes exceeds its carrying value by more than 10 percent at December 31, 2013; accordingly, the Company does not believe that it is more-likely-than-not that the fair value of The Art Institutes has decreased below its carrying value at December 31, 2013. Management also considered the results of the most recently completed long range forecast and available earnings multiples for the potential impact on the fair values of the Argosy University and South University reporting units and, based on its analysis, management does not believe that it is more-likely-than-not that the fair values of these reporting units have decreased below their carrying values at December 31, 2013. Consequently, management concluded that none of the

12

Company's reporting units experienced any triggering event that would have required a step one interim goodwill impairment analysis at December 31, 2013.

A roll forward of the Company's consolidated goodwill balance from June 30, 2012 to June 30, 2013 is as follows (in thousands):

	June 30, 2012		Impairment			June 30, 2013
The Art Institutes	$	861,619	$	(294,460	)	$	567,159
Argosy University	63,445		—			63,445
South University	38,486		—			38,486
Total goodwill	$	963,550	$	(294,460	)	$	669,090

The entire goodwill balance attributed to the Brown Mackie Colleges reporting unit was written off in connection with impairment charges incurred in fiscal 2012; therefore, it was not considered in the sensitivity analysis described above. The Company's goodwill balance did not change between June 30, 2013 and December 31, 2013.

Intangible Assets

The Company also evaluates indefinite-lived intangible assets annually on April 1 for impairment and on an interim basis if it determines that recent events or prevailing conditions indicate these assets could be potentially impaired. The Company does not believe that it is more-likely-than-not that the fair values of its indefinite-lived intangible assets have decreased below their respective carrying values at December 31, 2013; consequently, management concluded that no triggering event occurred in the current quarter that would have required an interim evaluation of these assets. Intangible assets other than goodwill consisted of the following amounts (in thousands):

	December 31, 2013					June 30, 2013					December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
The Art Institutes trade name	$	190,000	$	—		$	190,000	$	—		$	218,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			95,862		—
Curriculum and programs	45,315		(33,800		)	43,575		(32,596		)	41,172		(30,392		)
Student contracts, applications and relationships	39,511		(37,937		)	39,511		(37,381		)	39,511		(36,826		)
Favorable leases and other	19,403		(18,375		)	19,424		(17,960		)	19,435		(17,401		)
Total intangible assets	$	390,091	$	(90,112	)	$	388,372	$	(87,937	)	$	413,980	$	(84,619	)

The Company considers The Art Institutes reporting unit trade name to have a useful life similar to that of the overall business and assigned it 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 one 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 originally assigned indefinite lives and annual costs to renew are expensed as incurred.

Amortization of intangible assets was approximately $1.5 million and $1.6 million for the three months ended December 31, 2013 and 2012, respectively, and $3.0 million and $3.2 million for the six months ended December 31, 2013 and 2012. Total estimated amortization of the Company’s intangible assets for each of the fiscal years ending June 30, 2014 through 2018 was as follows at December 31, 2013 (in thousands):

Fiscal years	Amortization Expense
2014 (remainder)	$	2,882
2015	5,266
2016	3,910
2017	2,008
2018	51

6. STUDENT RECEIVABLES    

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The Company records student receivables at cost less an estimated allowance for doubtful accounts, which is determined on a monthly basis based on the likelihood of collection considering students' enrollment status and historical payment experience. For example, receivables from students who are out-of-school are reserved for at a higher rate than the receivables from students who are in-school. 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 a collection agency. Student accounts that have been placed with a collection agency are reserved for at a very high rate and are written off after collection attempts have been unsuccessful.

Student receivables include $27.6 million (net of $29.6 million allowance), $24.3 million (net of $27.9 million allowance), and $18.9 million (net of $24.1 million allowance) recorded in other long-term assets on the accompanying consolidated balance sheets at December 31, 2013, June 30, 2013 and December 31, 2012, respectively. These amounts relate to the extension of credit to students for amounts due beyond one year, which helps students 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 and private loans. During fiscal 2013, the Company extended the repayment period for financing made available to students from a maximum of 36 months beyond graduation to a maximum of 42 months beyond graduation. The majority of applicable accounts incur interest charges that accrue each month on unpaid balances except for those accounts that have been placed into collections. The gross short-term and long-term student receivables by student status were as follows (in thousands):

	December 31, 2013		June 30, 2013		December 31, 2012
In-school	$	191,671	$	194,062	$	188,224
Out-of-school	209,647		239,330		186,465
Gross student receivables	$	401,318	$	433,392	$	374,689

The Company commenced a new program in fiscal 2013 under which it purchases loans awarded and disbursed to its students from a private lender. The Company has awarded approximately $10 million of aid under this program as of December 31, 2013, all of which has been purchased and recorded in other long-term assets, net of an allowance.

Details surrounding the Company's total allowance for doubtful accounts, including reserves related to student and other related receivables and loan loss reserves is as follows (in thousands):

Balance June 30, 2012	$	250,282
Bad debt expense	171,850
Amounts written off	(213,884		)
Balance June 30, 2013	208,248
Bad debt expense	84,683
Amounts written off	(72,236		)
Balance December 31, 2013	$	220,695

The amounts set forth above are recorded within student receivables, net and other long-term assets on the consolidated balance sheets. Recoveries of amounts previously written off were not significant in any period presented.

7. ACCRUED LIABILITIES

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

	December 31, 2013		June 30, 2013		December 31, 2012
Payroll and related taxes	$	28,602	$	35,668	$	36,476
Advertising	26,176		33,010		28,027
Benefits	15,383		16,235		15,444
Interest	11,117		10,416		3,037
Capital expenditures	5,791		4,113		6,789
Other	67,689		57,975		46,840
Total accrued liabilities	$	154,758	$	157,417	$	136,613

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Over the past several fiscal years, the Company has completed restructuring plans across the organization intended to improve operational efficiencies and align costs with student enrollment levels. During the six months ended December 31, 2013, the Company recorded restructuring expenses of $11.1 million split between educational services expense and general and administrative expense, which consisted of employee severance charges of $9.4 million and $1.7 million related to a sublease transaction the Company entered into after consolidating office space. At December 31, 2013, the remaining liability for all restructuring plans was $8.8 million, consisting primarily of employee severance amounts that will be paid through June 30, 2014 and net rent charges that will be paid through the remaining lease terms.

8. SHORT-TERM AND LONG-TERM DEBT

U.S. Department of Education Letters of Credit

The Company had outstanding letters of credit of $354.0 million at December 31, 2013, the largest of which is issued to the U.S. Department of Education, which requires the Company to 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 $348.6 million at December 31, 2013, which equals 15 percent of the total Title IV aid received by students who attended the Company’s institutions during the fiscal year ended June 30, 2012.

As of December 31, 2013, in order to fund its current letter of credit obligation to the U.S. Department of Education, the Company utilized all $200.0 million of capacity under two cash secured letter of credit facilities, in connection with which the Company classifies $210.0 million as restricted cash to satisfy the 105 percent collateralization requirement, and $148.6 million of letter of credit capacity under its $328.3 million revolving credit facility, which expires on June 1, 2015. The cash secured letter of credit facilities currently mature on July 8, 2014 or earlier if the existing revolving credit facility is terminated. Any future reduction in the usage of the cash secured letter of credit facilities will reduce the amount of cash that is classified as restricted cash on the consolidated balance sheet. In January 2014, the U.S. Department of Education decreased its letter of credit requirement from $348.6 million to $302.2 million, which equals 15 percent of total Title IV aid received by students who attended the Company's institutions during the fiscal year ended June 30, 2013.

Short-Term Debt

There were $75.0 million of borrowings outstanding at June 30, 2013 under the revolving credit facility, all of which was repaid in full on July 1, 2013. No borrowings were outstanding under the revolving credit facility at December 31, 2013 and 2012. After adjusting for outstanding letters of credit, which decrease availability thereunder, the Company had $174.3 million of additional capacity under the revolving credit facility at December 31, 2013 available for borrowings or issuance of letters of credit.

The interest rate on amounts outstanding at June 30, 2013 under the revolving credit facility was 6.25 percent, which is equal to the prime rate as defined under the credit facility plus a margin of 3.00 percent. The applicable margin for borrowings under the revolving credit facility can change depending on the Company's leverage ratios and credit ratings. Education Management LLC ("EM LLC"), an indirect wholly-owned subsidiary of the Company, is obligated to pay a per annum commitment fee on undrawn amounts under the revolving credit facility, which is currently 0.375 percent and varies based on certain leverage ratios. EM LLC must also pay customary letter of credit fees for outstanding letters of credit under the revolving credit facility, which is secured by certain of the Company’s assets and is subject to the Company’s satisfaction of certain covenants and financial ratios described further below.

Long-Term Debt

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

	December 31, 2013			June 30, 2013			December 31, 2012
Senior secured term loan facility, due in June 2016 ("Tranche C-2 Loan")	$	732,412		$	736,454		$	740,497
Senior secured term loan facility, due in March 2018, net of discount of $2,593, $2,898 and $3,203 ("Tranche C-3 Loan")	340,776			342,364			343,954
Senior cash pay/PIK notes due 2018, net of discount of $25,024 and $27,712 ("PIK Notes")	211,073			206,242			—
8.75% senior notes	—			—			375,000
Other	27			180			324
Total long-term debt	1,284,288			1,285,240			1,459,775
Less current portion	(11,901		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,272,387		$	1,273,164		$	1,447,699

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Cash interest on the PIK Notes accrues at the rate of 15.0 percent per annum and is payable semi-annually on March 30 and September 30. For any interest period after March 30, 2014 up to and including July 1, 2018, interest in addition to the cash interest payable will be paid by increasing the principal amount of the outstanding PIK Notes (“PIK Interest”). Additionally, the PIK Notes are required to be paid at a premium of 13.0 percent at their contractual maturity, which is being treated as an original issuance discount for accounting purposes. Including PIK Interest and the original issuance discount, the annual effective interest rate on the PIK Notes is 19.8 percent. The Tranche C-3 Loan bears interest at a rate equal to the greater of three-month LIBOR or 1.25 percent, plus a margin of 7.0 percent, which yielded an interest rate of 8.25 percent at December 31, 2013, June 30, 2013 and December 31, 2012.  The Tranche C-2 Loan bears interest at a rate equal to three-month LIBOR plus a margin of 4.00 percent, which yielded an interest rate of 4.25 percent, 4.31 percent and 4.38 percent at December 31, 2013, June 30, 2013 and December 31, 2012, respectively. 

The indenture and credit agreement governing the senior secured credit facilities and PIK Notes, respectively, contain a number of covenants that, among other things, restrict, subject to certain exceptions, EM LLC’s ability to incur additional indebtedness, pay dividends and distributions on or repurchase capital stock, create liens on assets, repay subordinated indebtedness, make investments, loans or advances, make capital expenditures, engage in certain transactions with affiliates, amend certain material agreements, change its lines of business, sell assets and engage in mergers or consolidations. In addition, EM LLC is required to satisfy and maintain a maximum total leverage ratio and a minimum interest coverage ratio under the senior secured credit facilities on a quarterly basis. EM LLC met the requirements of these two financial covenants for the twelve month period ended December 31, 2013. While the Company has continued to satisfy applicable financial covenant compliance ratios, the margin between the actual results and the covenant requirements has decreased significantly over the past 12 months due to declining operating performance.

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. The Company currently holds two interest rate swap agreements, one of which was entered into with an affiliate of one of the Sponsors, that are for notional amounts of $312.5 million each and effectively fix future interest payments at a rate of 6.26 percent through June 1, 2015. Because both interest rate swaps are deemed to be highly effective for accounting purposes, they qualify for cash flow hedge accounting treatment and changes in their fair values are recorded in other comprehensive income or loss. The Company uses Level Two inputs to value its interest rate swaps as defined in Note 10, "Fair Value of Financial Instruments," which includes obtaining quotes from counter-parties that are based on LIBOR forward curves and assessing non-performance risk based upon published market data.

At December 31, 2013, there was a cumulative unrealized loss of $10.1 million, net of tax, related to the Company's interest rate swaps included in accumulated other comprehensive loss on the accompanying consolidated balance sheet. This unrealized loss would be recognized in the consolidated statement of operations immediately if the forecasted cash flows being hedged did not occur.  The fair values of the interest rate swap liabilities were $16.1 million, $20.2 million and $27.3 million at December 31, 2013, June 30, 2013 and December 31, 2012, respectively, and were recorded in other long-term liabilities on the accompanying consolidated balance sheets. Over the next twelve months, the Company estimates that approximately $7.9 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 December 31, 2013.

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 value hierarchy is 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 of what 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.

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The following table presents the carrying amounts and fair values of the interest rate swap liabilities, which are measured at fair value on a recurring basis based on the framework described in Note 9, "Derivative Instruments," and the fair values of the Company's debt, which is recorded at carrying value (in thousands):

	December 31, 2013						June 30, 2013					December 31, 2012
	Carrying Value		Level Two		Level Three		Carrying Value		Level Two		Level Three	Carrying Value		Level One		Level Two
Recurring:
Interest rate swap liabilities	$	16,054	$	16,054	$	—	$	20,232	$	20,232	—	$	27,252	$	—	$	27,252
Disclosure only:
Variable rate debt	1,073,188		1,043,977		—		1,078,818		962,134		—	1,084,451		—		883,833
Fixed rate debt	211,110		—		225,875		206,422		—		206,422	375,324		301,262		—

The fair value of the Company’s variable rate debt was based on each instrument’s trading value in markets that are not active. The fixed rate debt at December 31, 2012 consists of the Company's 8.75 percent senior notes that were retired in connection with a refinancing transaction described in Part II, Item 8 "Financial Statements and Supplementary Data," Note 8, "Short-Term and Long-Term Debt" of the June 30, 2013 Annual Report on Form 10-K. The fixed rate debt at December 31, 2013 and June 30, 2013 reflects the Company's PIK Notes that were issued in connection with this refinancing transaction. There is currently no observable trading for the Company's PIK Notes; therefore, the fair value of the fixed rate PIK Notes was estimated using the performance of the Company's other debt while also considering current market conditions. Student accounts receivable, notes receivable and the revolving credit facility have fair values that approximate their 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 if 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 December 31, 2013.

The Company incurred cumulative losses before taxes in the three most recent fiscal years ended June 30, 2013 primarily due to long-lived asset impairment charges recorded in fiscal 2013 and 2012, most of which was not deductible. Absent these impairment charges, the Company would have recorded pre-tax earnings in fiscal 2013 and 2012. Management considered the cumulative loss for book purposes and concluded that it was more-likely-than-not that the Company's deferred tax assets would be realized except as disclosed in Part II, Item 8 "Financial Statements and Supplementary Data," Note 11, "Income Taxes" of the June 30, 2013 Annual Report on Form 10-K with respect to certain state deferred tax assets.

The effective tax rates differ from the combined federal and state statutory rates due to valuation allowances, expenses that are non-deductible for tax purposes, discrete items and the accounting related to uncertain tax positions. The Company's effective tax rate in the three months ended December 31, 2013 was impacted by the disproportionate impact on low earnings of discrete items as well as permanent tax differences, which have remained relatively consistent period over period. The effective tax rate for the three months ended December 31, 2012 was 41.3 percent. The Company's effective tax rate was a benefit of 62.3 percent and expense of 42.2 percent, respectively, for the six months ended December 31, 2013 and 2012. The current six-month period includes a deferred tax benefit of approximately $3.2 million that was recorded as a discrete item resulting from the July 2013 enactment of Pennsylvania House Bill No. 465, which, in addition to other amendments, changes how revenues from the sale of services are sourced for Pennsylvania income tax purposes. 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, 2013.

12. CONTINGENCIES

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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 on the case 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 federal district court in the Western District of Pennsylvania, relates to whether the Company's compensation plans for admission representatives violated the Higher Education Act of 1965, 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 common law claims and the allegations that the plan as implemented violated the rule to continue to discovery.  The Company believes the case to be without merit and intends to vigorously defend itself. From time to time, the Company engages in settlement discussions with respect to this case.  There can be no assurance that these conversations will lead to a settlement acceptable to all parties and approved by all parties.   There can also be no assurance that any settlement will be within amounts currently accrued or be covered by insurance or not be material to the Company. 

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. The case, which is pending in the federal district court in 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.

In August 2013, the parties to the action, along with the U.S. Department of Justice, participated in a private mediation in which the relator and defendants reached an agreement in principle regarding the financial terms of a potential settlement. The agreement between the parties remains subject to approval by the U.S. Department of Justice. Significant terms remain to be negotiated, and there is no certainty that a final agreement will be reached. The settlement amount agreed to by the parties under the terms of the agreement in principle would be paid by the Company's insurer and the Company would pay an immaterial amount of attorneys' fees incurred by the relator. The ultimate dismissal of the action, should a final settlement be reached, is subject to the Court's approval.

In the course of settlement discussions regarding the Sobek matter, the U.S. Department of Justice informed the Company that it is the subject of an investigation related to a claim under the federal false claims act by the U. S. Attorney’s Office in the Middle District of Tennessee. The Company plans on cooperating with the U.S. Department of Justice with regard to this matter. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

Shareholder Derivative Lawsuits

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, PA. 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

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compensation to admissions representatives, engaging in improper recruiting tactics in violation of Title IV of the HEA and accrediting agency standards, improper classification 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 and the director defendants 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. On July 16, 2013, the Court dismissed the claims that the Company engaged in improper recruiting tactics and mismanaged the Company's financial well-being with prejudice and found that the Special Litigation Committee could conduct a supplemental investigation of the plaintiff's claims related to incentive compensation paid to admissions representatives and graduate placement statistics. The Special Litigation Committee filed supplemental reports on October 15, 2013 and January 9, 2014, finding no support for the incentive compensation and graduate placement statistic claims. The Court held a hearing on the defendants' supplemental motion to dismiss the case on January 29, 2014.

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 federal district court in 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 believes that the claims set forth in the complaint are without merit and intends to vigorously defend itself. The Company and the named director defendants filed a motion to stay the litigation pending the resolution of the Oklahoma Law Enforcement Retirement System shareholder derivative case or, alternatively, dismiss the case on October 19, 2012. On August 5, 2013, the Court granted the Company's motion to stay the case in light of the ruling on the defendants' motion to dismiss the Oklahoma Law Enforcement Retirement System case.

OIG Subpoena

On May 24, 2013, the Company received a subpoena from the Office of Inspector General of the U.S. Department of Education requesting policies and procedures related to Argosy University's attendance, withdrawal and return to Title IV policies during the period of July 1, 2010 through December 31, 2011 and detailed information on a number of students who enrolled in Argosy University's Bachelor's of Psychology degree program. The Company plans to cooperate with the Office of Inspector General in connection with its investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

State Attorney General Investigations

In January 2014, the Company received inquiries from 13 states regarding the Company’s business practices. The Attorney General of the Commonwealth of Pennsylvania informed the Company that it will serve as the point of contact for the inquiries related to the Company. The inquiries focus on the Company's practices relating to the recruitment of students, graduate placement statistics, graduate certification and licensing results, and student lending activities, among other matters. Several other companies in the proprietary education industry have disclosed that they received similar inquiries. The Company intends to cooperate with the states involved and cannot predict the eventual scope, duration or outcome of the investigation at this time.

In January 2013, The New England Institute of Art received a civil investigative demand from the Commonwealth of Massachusetts Attorney General requesting information for the period from January 1, 2010 to the present pursuant to an investigation of practices by the school in connection with marketing and advertising job placement and student outcomes, the recruitment of students and the financing of education. The Company previously responded to a similar request that The New England Institute of Art received in June 2007 and intends to cooperate with the Attorney General in connection with its investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

As previously disclosed, on December 5, 2013, the Company entered into a Final Consent Judgment (the “Consent Judgment”) with the Colorado Attorney General’s Office for the purpose of resolving disputed claims, avoiding the expense of further litigation, and permitting the Company to focus on its education mission with regard to its students. Under the Consent Judgment, without admitting liability, the Company has agreed to pay the aggregate amount of approximately $3.4 million, consisting of $2.9 million to be distributed as restitution to eligible students and $0.5 million to the Colorado Department of Law to be used by the State of Colorado for consumer restitution and as reimbursement to the state for reasonable costs and attorney’s fees and for future consumer education, consumer fraud and antitrust enforcement efforts. The Company further agreed to a suspended civil penalty of $1.0 million, which becomes due and payable if the Company commits a knowing and

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willful material violation of the Consent Judgment within three years of the date of the Consent Judgment. The Company accrued a liability for the $3.4 million settlement within general and administrative expense in the accompanying consolidated statement of operations in the three months ended December 31, 2013.

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 proprietary post-secondary schools and that subpoenas were issued to six proprietary 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.

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 has engaged in settlement discussions with the City Attorney's office in order to explore a potential resolution of the investigation and recorded a liability at December 31, 2013 based on these discussions which the Company believes is immaterial to the financial statements. Settlement discussions continue with the City Attorney's office and the Company cannot predict at this time the eventual scope or timing of any settlement agreement or if such an agreement will be reached with the City Attorney or if any resolution of the matter will have a material impact on the Company’s financial statements or results of operations.

Securities and Exchange Commission Subpoenas

On March 20, 2013, the Company received a subpoena from the Division of Enforcement of the Securities and Exchange Commission requesting documents and information relating to the Company's valuation of goodwill and its bad debt allowance for student receivables. The Company received a second subpoena from the Division of Enforcement on May 13, 2013 which requests documents and information related to the letters of credit posted with the U.S. Department of Education. The Company intends to cooperate with the SEC in its investigation. The Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

Argosy University, Seattle APA Program Accreditation Lawsuits

In August 2013, a petition was filed in the Superior Court of the State of Washington (King County) in the case of Winters, et al. v. Argosy Education Group, et al. by 20 former students in the Clinical Psychology program offered by the Seattle campus of Argosy University. In December 2013, a similar petition was filed in the same court in the case of McMath, et al. v. Argosy Education Group, et al. by nine former students in the Clinical Psychology program offered by the Seattle campus of Argosy University. Both cases allege negligent misrepresentation due to the failure of the Clinical Psychology program to obtain accreditation from the American Psychology Association ("APA"), breach of contract, violation of the Washington State Consumer Protection Act, negligent infliction of emotional distress, negligence and lack of institutional control, negligent misrepresentation, breach of fiduciary duty, negligent failure to disclose and fraud.  The Seattle campus of Argosy University announced that it was teaching-out (i.e., not accepting new students into the program) the Clinical Psychology program in November 2011 due to the inability to obtain APA accreditation. The Company believes the claims in the lawsuits to be without merit and intends to vigorously defend itself.

Other Matters

20

The Company is a defendant in certain other legal proceedings arising out of the conduct of its business.  Additionally, the Company is subject to compliance reviews by various state and federal agencies which provide student financial aid programs, of which noncompliance may result in liability for educational benefits paid as well as fines and other corrective action.  The U.S. Department of Veterans Affairs is currently conducting a compliance review of one of the Company's schools and has advised the Company that it intends to conduct reviews of four additional schools during fiscal 2014. As disclosed in 2013 Annual Report on Form 10-K, with regard to the review that has begun, the U. S. Department of Veterans Affairs has not yet issued a report of its findings, but has informed the Company that it has identified instances in which the school failed to notify the U. S. Department of Veterans Affairs of circumstances where students receiving educational benefits failed to pursue a course, which the Company has been informed may in turn give rise to a refund obligation by students. The Company may be required, or may elect, to reimburse the U. S. Department of Veterans Affairs for adjustments to the amount of educational benefits paid by the U. S. Department of Veterans Affairs to the affected students. In the opinion of management, based upon an investigation of these matters and discussion with legal counsel, the ultimate outcome of such other legal proceedings and compliance reviews, individually and in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity. 

13. GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION

The PIK Notes described in Note 8, "Short-Term and Long-Term Debt," are fully and unconditionally guaranteed by EDMC and 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 “Guarantor Subsidiaries”). All other subsidiaries of EM LLC, either direct or indirect, (the “Non-Guarantor Subsidiaries”) do not guarantee the PIK Notes.

The following tables present the condensed consolidated financial position of EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and EDMC as of December 31, 2013, June 30, 2013 and December 31, 2012. The results of operations and comprehensive income (loss) for the three and six months ended December 31, 2013 and 2012 and the condensed statements of cash flows for the six months ended December 31, 2013 and 2012 are presented for EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and EDMC.

21

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2013 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	57,425	$	126		$	3,239		$	—		$	60,790		$	—		$	—		$	60,790
Restricted cash	46,176		—			224,096			—			270,272			—			—			270,272
Student and other receivables, net	9,814		(15		)	191,581			—			201,380			—			—			201,380
Other current assets	27,848		586			118,581			—			147,015			—			—			147,015
Total current assets	141,263		697			537,497			—			679,457			—			—			679,457
Property and equipment, net	61,134		5,836			410,252			—			477,222			—			—			477,222
Goodwill	7,328		—			661,762			—			669,090			—			—			669,090
Intangible assets, net	976		22			298,981			—			299,979			—			—			299,979
Other long-term assets	1,519		—			52,821			—			54,340			—			—			54,340
Inter-company balances	473,854		(30,765		)	(623,801		)	—			(180,712		)	180,712			—			—
Investment in subsidiaries	769,767		—			—			(769,767		)	—			75,917			(75,917		)	—
Total assets	$	1,455,841	$	(24,210	)	$	1,337,512		$	(769,767	)	$	1,999,376		$	256,629		$	(75,917	)	$	2,180,088
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,875	$	—		$	26		$	—		$	11,901		$	—		$	—		$	11,901
Other current liabilities	55,898		3,096			288,491			—			347,485			3			—			347,488
Total current liabilities	67,773		3,096			288,517			—			359,386			3			—			359,389
Long-term debt, less current portion	1,272,387		—			—			—			1,272,387			—			—			1,272,387
Other long-term liabilities	37,531		184			182,232			—			219,947			(2		)	—			219,945
Deferred income taxes	2,233		399			69,107			—			71,739			383			—			72,122
Total liabilities	1,379,924		3,679			539,856			—			1,923,459			384			—			1,923,843
Total shareholders’ equity (deficit)	75,917		(27,889		)	797,656			(769,767		)	75,917			256,245			(75,917		)	256,245
Total liabilities and shareholders’ equity (deficit)	$	1,455,841	$	(24,210	)	$	1,337,512		$	(769,767	)	$	1,999,376		$	256,629		$	(75,917	)	$	2,180,088

22

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	(10,777	)	$	139		$	141,110		$	—		$	130,472		$	223		$	—		$	130,695
Restricted cash	46,982			—			224,358			—			271,340			—			—			271,340
Student and other receivables, net	134			253			238,565			—			238,952			1			—			238,953
Other current assets	27,488			570			102,573			—			130,631			—			—			130,631
Total current assets	63,827			962			706,606			—			771,395			224			—			771,619
Property and equipment, net	65,018			5,984			454,623			—			525,625			—			—			525,625
Goodwill	7,328			—			661,762			—			669,090			—			—			669,090
Intangible assets, net	1,101			28			299,306			—			300,435			—			—			300,435
Other long-term assets	5,059			—			43,465			—			48,524			—			—			48,524
Inter-company balances	653,504			(31,016		)	(791,213		)	—			(168,725		)	168,725			—			—
Investment in subsidiaries	741,069			—			—			(741,069		)	—			81,532			(81,532		)	—
Total assets	$	1,536,906		$	(24,042	)	$	1,374,549		$	(741,069	)	$	2,146,344		$	250,481		$	(81,532	)	$	2,315,293
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt and revolving credit facility	$	86,850		$	—		$	226		$	—		$	87,076		$	—		$	—		$	87,076
Other current liabilities	51,558			3,018			344,397			—			398,973			49			—			399,022
Total current liabilities	138,408			3,018			344,623			—			486,049			49			—			486,098
Long-term debt, less current portion	1,273,214			—			—			—			1,273,214			(50		)	—			1,273,164
Other long-term liabilities	41,519			248			193,849			—			235,616			—			—			235,616
Deferred income taxes	2,233			399			67,301			—			69,933			383			—			70,316
Total liabilities	1,455,374			3,665			605,773			—			2,064,812			382			—			2,065,194
Total shareholders’ equity (deficit)	81,532			(27,707		)	768,776			(741,069		)	81,532			250,099			(81,532		)	250,099
Total liabilities and shareholders’ equity (deficit)	$	1,536,906		$	(24,042	)	$	1,374,549		$	(741,069	)	$	2,146,344		$	250,481		$	(81,532	)	$	2,315,293

23

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2012 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	183,968	$	180		$	3,679		$	—		$	187,827		$	1,215		$	—		$	189,042
Restricted cash	41,370		—			232,055			—			273,425			—			—			273,425
Student and other receivables, net	—		142			172,684			—			172,826			—			—			172,826
Other current assets	37,350		715			112,710			—			150,775			—			—			150,775
Total current assets	262,688		1,037			521,128			—			784,853			1,215			—			786,068
Property and equipment, net	65,231		7,454			489,499			—			562,184			—			—			562,184
Goodwill	7,328		—			956,222			—			963,550			—			—			963,550
Intangible assets, net	1,801		34			327,526			—			329,361			—			—			329,361
Other long-term assets	15,043		—			37,612			—			52,655			—			—			52,655
Inter-company balances	687,013		(29,674		)	(815,535		)	—			(158,196		)	158,196			—			—
Investment in subsidiaries	911,317		—			—			(911,317		)	—			364,090			(364,090		)	—
Total assets	$	1,950,421	$	(21,149	)	$	1,516,452		$	(911,317	)	$	2,534,407		$	523,501		$	(364,090	)	$	2,693,818
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,850	$	—		$	226		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	75,752		3,580			277,577			—			356,909			(3		)	—			356,906
Total current liabilities	87,602		3,580			277,803			—			368,985			(3		)	—			368,982
Long-term debt, less current portion	1,447,601		—			98			—			1,447,699			—			—			1,447,699
Other long-term liabilities	49,598		316			203,770			—			253,684			—			—			253,684
Deferred income taxes	1,530		515			97,904			—			99,949			(104		)	—			99,845
Total liabilities	1,586,331		4,411			579,575			—			2,170,317			(107		)	—			2,170,210
Total shareholders’ equity (deficit)	364,090		(25,560		)	936,877			(911,317		)	364,090			523,608			(364,090		)	523,608
Total liabilities and shareholders’ equity (deficit)	$	1,950,421	$	(21,149	)	$	1,516,452		$	(911,317	)	$	2,534,407		$	523,501		$	(364,090	)	$	2,693,818

24

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	1,677		$	591,996		$	—		$	593,673		$	—		$	—		$	593,673
Costs and expenses:
Educational services	26,231			2,280			317,076			—			345,587			—			—			345,587
General and administrative	(8,636		)	(525		)	185,575			—			176,414			—			—			176,414
Depreciation and amortization	7,124			156			31,313			—			38,593			—			—			38,593
Long-lived asset impairments	—			—			3,847			—			3,847			—			—			3,847
Total costs and expenses	24,719			1,911			537,811			—			564,441			—			—			564,441
Income (loss) before interest and income taxes	(24,719		)	(234		)	54,185			—			29,232			—			—			29,232
Interest expense (income), net	31,797			—			(182		)	—			31,615			—			—			31,615
Equity in subsidiaries	18,290			—			—			(18,290		)	—			1,090			(1,090		)	—
(Loss) Income before income taxes	(38,226		)	(234		)	54,367			(18,290		)	(2,383		)	1,090			(1,090		)	(2,383		)
Income tax (benefit) expense	(39,316		)	(170		)	36,013			—			(3,473		)	1			—			(3,472		)
Net income (loss)	$	1,090		$	(64	)	$	18,354		$	(18,290	)	$	1,090		$	1,089		$	(1,090	)	$	1,089
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,518		$	—		$	—		$	—		$	1,518		$	1,518		$	(1,518	)	$	1,518
Foreign currency translation loss	(163		)	—			(163		)	163			(163		)	(163		)	163			(163		)
Other comprehensive income (loss)	1,355			—			(163		)	163			1,355			1,355			(1,355		)	1,355
Comprehensive income (loss)	$	2,445		$	(64	)	$	18,191		$	(18,127	)	$	2,445		$	2,444		$	(2,445	)	$	2,444

25

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	1,738		$	653,157		$	—		$	654,895		$	—		$	—		$	654,895
Costs and expenses:																						—
Educational services	29,515			2,645			328,218			—			360,378			(1		)	—			360,377
General and administrative	(19,799		)	(85		)	191,074			—			171,190			—			—			171,190
Depreciation and amortization	7,281			152			31,822			—			39,255			—			—			39,255
Total costs and expenses	16,997			2,712			551,114			—			570,823			(1		)	—			570,822
Income (loss) before interest and income taxes	(16,997		)	(974		)	102,043			—			84,072			1			—			84,073
Interest expense (income), net	30,416			—			600			—			31,016			(7		)	—			31,009
Equity in subsidiaries	57,038			—			—			(57,038		)	—			31,136			(31,136		)	—
Income (loss) before income taxes	9,625			(974		)	101,443			(57,038		)	53,056			31,144			(31,136		)	53,064
Income tax expense (benefit)	(21,511		)	(344		)	43,775			—			21,920			—						21,920
Net income (loss)	$	31,136		$	(630	)	$	57,668		$	(57,038	)	$	31,136		$	31,144		$	(31,136	)	$	31,144
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,666		$	—		$	—		$	—		$	1,666		$	1,666		$	(1,666	)	$	1,666
Foreign currency translation loss	(98		)	—			(98		)	98			(98		)	(98		)	98			(98		)
Other comprehensive income (loss)	1,568			—			(98		)	98			1,568			1,568			(1,568		)	1,568
Comprehensive income (loss)	$	32,704		$	(630	)	$	57,570		$	(56,940	)	$	32,704		$	32,712		$	(32,704	)	$	32,712

26

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For the Six Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	3,894		$	1,170,159		$	—		$	1,174,053		$	—		$	—		$	1,174,053
Costs and expenses:
Educational services	47,608			5,092			650,574			—			703,274			2			—			703,276
General and administrative	(27,483		)	(1,022		)	377,088			—			348,583			—			—			348,583
Depreciation and amortization	14,063			306			62,829			—			77,198			—			—			77,198
Long-lived asset impairments	—			—			3,847						3,847									3,847
Total costs and expenses	34,188			4,376			1,094,338			—			1,132,902			2			—			1,132,904
Income (loss) before interest and income taxes	(34,188		)	(482		)	75,821			—			41,151			(2		)	—			41,149
Interest expense (income), net	63,719			—			(234		)	—			63,485			(4		)	—			63,481
Equity in subsidiaries	28,515			—			—			(28,515		)	—			(8,427		)	8,427			—
(Loss) income before income taxes	(69,392		)	(482		)	76,055			(28,515		)	(22,334		)	(8,425		)	8,427			(22,332		)
Income tax (benefit) expense	(60,965		)	(300		)	47,358			—			(13,907		)	1			—			(13,906		)
Net (loss) income	$	(8,427	)	$	(182	)	$	28,697		$	(28,515	)	$	(8,427	)	$	(8,426	)	$	8,427		$	(8,426	)
Net change in unrecognized loss on interest rate swaps, net of tax	$	2,628		$	—		$	—		$	—		$	2,628		$	2,628		$	(2,628	)	$	2,628
Foreign currency translation gain	183			—			183			(183		)	183			183			(183		)	183
Other comprehensive income	2,811			—			183			(183		)	2,811			2,811			(2,811		)	2,811
Comprehensive (loss) income	$	(5,616	)	$	(182	)	$	28,880		$	(28,698	)	$	(5,616	)	$	(5,615	)	$	5,616		$	(5,615	)

27

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the Six Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			EM LLC Consolidated		EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	4,159		$	1,260,300	$	—		$	1,264,459	$	—		$	—		$	1,264,459
Costs and expenses:
Educational services	64,315			5,290			672,069		—			741,674		(1		)	—			741,673
General and administrative	(31,377		)	(3,424		)	380,483		—			345,682		—			—			345,682
Depreciation and amortization	18,879			303			64,218		—			83,400		—			—			83,400
Total costs and expenses	51,817			2,169			1,116,770		—			1,170,756		(1		)	—			1,170,755
Income (loss) before interest and income taxes	(51,817		)	1,990			143,530		—			93,703		1			—			93,704
Interest expense (income), net	61,275			—			1,199		—			62,474		(13		)	—			62,461
Equity in subsidiaries	83,355			—			—		(83,355		)	—		18,037			(18,037		)	—
(Loss) Income before income taxes	(29,737		)	1,990			142,331		(83,355		)	31,229		18,051			(18,037		)	31,243
Income tax expense (benefit)	(47,774		)	841			60,125		—			13,192		—						13,192
Net income	$	18,037		$	1,149		$	82,206	$	(83,355	)	$	18,037	$	18,051		$	(18,037	)	$	18,051
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,252		$	—		$	—	$	—		$	1,252	$	1,252		$	(1,252	)	$	1,252
Foreign currency translation gain	59			—			59		(59		)	59		59			(59		)	59
Other comprehensive income	1,311			—			59		(59		)	1,311		1,311			(1,311		)	1,311
Comprehensive income	$	19,348		$	1,149		$	82,265	$	(83,414	)	$	19,348	$	19,362		$	(19,348	)	$	19,362

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(32,233	)	$	418		$	71,503		$	39,688		$	2		$	39,690
Cash flows from investing activities:
Expenditures for long-lived assets	(4,014		)	(383		)	(26,934		)	(31,331		)	—			(31,331		)
Other investing activities	—			—			(573		)	(573		)	—			(573		)
Net cash flows used in investing activities	(4,014		)	(383		)	(27,507		)	(31,904		)	—			(31,904		)
Cash flows from financing activities:
Net repayments of debt	(80,888		)	—			(200		)	(81,088		)				(81,088		)
Share-based payment activity	—			—			—			—			3,389			3,389
Inter-company transactions	185,337			(48		)	(181,675		)	3,614			(3,614		)	—
Net cash flows provided by (used in) financing activities	104,449			(48		)	(181,875		)	(77,474		)	(225		)	(77,699		)
Effect of exchange rate changes on cash and cash equivalents	—			—			8			8			—			8
Increase (decrease) in cash and cash equivalents	68,202			(13		)	(137,871		)	(69,682		)	(223		)	(69,905		)
Beginning cash and cash equivalents	(10,777		)	139			141,110			130,472			223			130,695
Ending cash and cash equivalents	$	57,425		$	126		$	3,239		$	60,790		$	—		$	60,790

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(46,583	)	$	(3,191	)	$	142,935		$	93,161		$	16		$	93,177
Cash flows from investing activities
Expenditures for long-lived assets	(4,578		)	(524		)	(34,356		)	(39,458		)	—			(39,458		)
Proceeds from sale of fixed assets	—			—			65,065			65,065			—			65,065
Other investing activities	(375		)	—			(3,516		)	(3,891		)	—			(3,891		)
Net cash flows provided by (used in) investing activities	(4,953		)	(524		)	27,193			21,716			—			21,716
Cash flows from financing activities
Net repayments of debt and other	(116,930		)	—			(136		)	(117,066		)	—			(117,066		)
Inter-company transactions	378,683			3,797			(380,480		)	2,000			(2,000		)	—
Net cash flows provided by (used in) financing activities	261,753			3,797			(380,616		)	(115,066		)	(2,000		)	(117,066		)
Effect of exchange rate changes on cash and cash equivalents	—			—			207			207			—			207
Increase (decrease) in cash and cash equivalents	210,217			82			(210,281		)	18			(1,984		)	(1,966		)
Beginning cash and cash equivalents	(26,249		)	98			213,960			187,809			3,199			191,008
Ending cash and cash equivalents	$	183,968		$	180		$	3,679		$	187,827		$	1,215		$	189,042

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14. SEGMENT REPORTING

The Company's principal business is providing post-secondary education. The Company manages its operations through four operating segments, which are The Art Institutes, Argosy University, Brown Mackie Colleges and South University.

During fiscal 2013, the Company created "The Center", which provides support services to its four education systems through the centralization and automation of certain non-student facing activities, including financial aid packaging, the qualification and transfer of prospective students to school admissions teams, student billing services, certain registrar services, support call center services for students and employees, and remote student advising services. Effective July 1, 2013, The Center allocates costs to each reportable segment based primarily on the level of transaction volume. In the prior fiscal year, similar costs were allocated to each reportable segment based primarily on net revenues. To ensure comparability among periods, EBITDA excluding certain expenses for each segment has been recast to report results for the three and six months ended December 31, 2012 as if The Center existed in prior periods and allocating its costs in a manner consistent with the current methodology. The creation of The Center and changes in the allocation methodology had no impact on previously reported consolidated EBITDA excluding certain expenses.

Earnings before interest, income taxes, depreciation and amortization ("EBITDA") excluding certain expenses is the measure used by the chief operating decision maker to evaluate segment performance and allocate resources. It is defined as net income before interest, income taxes, depreciation and amortization and certain expenses presented in the table below. EBITDA excluding certain expenses is not a recognized term under generally accepted accounting principles ("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 (loss) 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 December 31,						For the Six Months Ended December 31,
	2013			2012			2013			2012
Net revenues:
The Art Institutes	$	371,474		$	411,533		$	727,989		$	791,672
Argosy University	76,640			92,312			159,788			174,232
Brown Mackie Colleges	69,463			78,274			139,649			152,246
South University	76,096			72,776			146,627			146,309
Total EDMC	$	593,673		$	654,895		$	1,174,053		$	1,264,459
EBITDA excluding certain expenses:
The Art Institutes	$	87,992		$	113,429		$	147,089		$	182,848
Argosy University	2,547			15,231			5,931			15,401
Brown Mackie Colleges	7,123			8,980			13,407			18,186
South University	12,158			9,132			17,550			16,364
Corporate and other	(22,737		)	(23,444		)	(44,727		)	(46,550		)
Total EDMC	87,083			123,328			139,250			186,249
Reconciliation to consolidated (loss) income before income taxes:
Restructuring (A)	9,452			—			11,097			9,145
Settlement-related costs	5,959			—			5,959			—
Long-lived asset impairments (B)	3,847			—			3,847			—
Depreciation and amortization	38,593			39,255			77,198			83,400
Net interest expense	31,615			31,009			63,481			62,461
(Loss) income before income taxes	$	(2,383	)	$	53,064		$	(22,332	)	$	31,243

(A) Refer to Note 7, "Accrued Liabilities," for more information on these charges.

(B) Refer to Note 4, "Property and Equipment," for more information on these charges.

Total assets of each reportable segment were as follows (in thousands):

Assets: (+)	December 31, 2013		June 30, 2013		December 31, 2012
The Art Institutes	$	1,371,173	$	1,438,028	$	1,748,715
Argosy University	204,924		257,608		242,546
Brown Mackie Colleges	190,294		231,225		190,915
South University	203,945		226,041		202,341
Corporate and other	209,752		162,391		309,301
Total EDMC	$	2,180,088	$	2,315,293	$	2,693,818

(+) Excludes inter-company activity.

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

Key Trends, Developments and Challenges

We operate in a dynamic business environment. The following developments and trends present opportunities, challenges and risks to our business:

New regulations may have a significant impact on our business.

Our business is highly regulated and there has been an increased focus on regulations designed to address the rising costs of post-secondary education in order to make higher education more affordable. President Obama announced a plan to measure performance by post-secondary institutions through a new rating system designed to provide students and their families with information to select schools that provide the best value. The President's plan would permit Congress to tie federal student aid to performance by post-secondary institutions to allow students to maximize their federal aid at institutions that provide the best value. The U.S. Department of Education announced new proposed rulemaking topics, including a negotiated rulemaking panel to address the appropriateness of adopting standards for measuring whether programs offered by proprietary institutions such as ours lead to “gainful employment” in a recognized occupation. Under the Higher Education Act of 1965, as amended ("HEA"), with the exception of certain liberal arts degree programs, proprietary schools are eligible to participate in Title IV programs only with respect to educational programs that prepare a student for “gainful employment in a recognized occupation.” The U.S. Department of Education previously adopted regulations that were scheduled to become effective as of July 1, 2012 and that would have for the first time set forth standards for measuring whether programs lead to gainful employment in a recognized occupation. These regulations, which were vacated by a federal court decision, would have established three annual metrics related to student loan borrowing which would have imposed certain restrictions on programs up to and including the prohibition on participation in Title IV financial aid programs in the event that the metrics were not satisfied over a period of time. Draft regulatory language posted by the U. S. Department of Education on August 30, 2013 takes a similar approach to determining program eligibility as the vacated 2011 regulations except that one of the three program eligibility tests has been eliminated. The draft regulatory language includes a number of modifications to the provisions of the vacated regulation and some additional provisions, with many of these changes being more restrictive than the terms of the regulation proposed in 2011. Negotiated rulemaking sessions were held in November and December 2013, but the proposal distributed by the U. S. Department of Education for discussion at the last session did not reach consensus, and the Department is preparing to publish a notice of proposed rulemaking for public comment. If implemented as proposed as part of the negotiated rulemaking sessions, the regulatory language would have a material adverse impact on our business. On January 30, 2014, the Office of Information and Regulatory Affairs ("OIRA") at the Office of Management and Budget ("OMB") posted a notice that it had received a draft of the proposed gainful employment rule from the Department of Education. The draft regulation is reviewed by OIRA/OMB prior to a notice of proposed rulemaking being released for public comment.

In addition, the HEA is scheduled for reauthorization in 2014 and the reauthorization process may result in significant changes to the post-secondary education industry. Among other things, there have been proposals in Congress to amend the 90/10 rule in connection with the reauthorization of the HEA to prohibit proprietary institutions from receiving more than 85 percent of their revenues from federal funds, including veterans benefits and U.S. Department of Defense tuition assistance. Any revisions to the HEA, the regulations adopted by the U.S. Department of Education, or the 90/10 rule could have a material adverse impact on our business. An amendment to the U. S. Telephone Consumer Protection Act of 1991 became effective on October 16, 2013 which, among other things, requires specific prior written consent from consumers in order to place telemarketing calls to wireless phones using an automatic telephone dialing system. We use telephonic communications with prospective students and cannot estimate the impact of this new regulation, including compliance costs, on our business at this early stage of compliance.  However, we believe that it contributed to lower than anticipated application production across our organization for future academic terms due to delays in contacting prospective students.

In January 2014, the U.S. Department of Education commenced negotiated rulemaking sessions to implement changes to the Clery Act required by the Violence Against Women Act which, among other items, requires institutions to compile statistics for certain crimes reported to campus security authorities or local police agencies, and include such information in its annual security report. Finally, another series of negotiated rulemaking sessions to address program integrity and improvement issues will be held in February, March, and April 2014, and will address cash management of Title IV funds including use of debit cards and handling of Title IV credit balances; state authorization for programs offered through distance or correspondence education; state authorization for non-U.S. locations of educational institutions; clock to credit hour conversion; the definition of "adverse credit" for borrowers under the Federal Direct PLUS Loan Program; and the application of repeat coursework provisions to graduate and undergraduate programs.

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We have increased our focus on student affordability, which can have a negative impact on our net revenues.

In the past, we and other providers of a post-secondary education were able to pass along the rising cost of providing quality education through increases in tuition charged to students. As a result, the cost of a post-secondary degree increased substantially while incomes earned by families stagnated due to a weak economy. In order to make our programs more attractive to prospective students, we have introduced a number of initiatives to limit or decrease the cost of obtaining a degree from our institutions, including freezing tuition at The Art Institutes through 2015 for students who enrolled by October 2013, decreasing the number of credit hours necessary to complete certain programs, reducing certain fees and other charges, and substantially increasing the availability of scholarships to students. We have awarded approximately $70 million of scholarships in the six months ended December 31, 2013, an increase of approximately 50 percent compared to the six months ended December 31, 2012, with the majority of scholarships awarded at The Art Institutes. We anticipate awarding approximately $140 million in scholarships in fiscal 2014, an increase of approximately 45 percent from fiscal 2013. Due to this focus on decreasing the cost of education at our schools, we estimate that the average debt incurred by students graduating from the Art Institutes has decreased by approximately 15 percent since 2010. We believe that our limited ability to increase tuition will continue for the foreseeable future.

We have adopted a number of initiatives to make our business more efficient and to respond to changing market conditions and will continue to do so in the future.

We have adopted a number of measures designed to make our business more efficient in order to decrease the cost of an education for our students and to respond to changing market conditions. Primarily through process efficiencies and productivity improvements, we are targeting cost savings of $100 million to $125 million during fiscal 2014 as compared to fiscal 2013. For example, during fiscal 2013, we created The Center, which provides support services to our four education systems through the centralization and automation of certain non-student facing activities, including financial aid packaging, the qualification and transfer of prospective students to school admissions teams, student billing services, certain registrar services, support call center services for our students and employees, and remote student advising services. Additionally, during fiscal 2014, we have taken measures to decrease our reliance on third party lead generators and we anticipate these efforts will increase in the second half of the fiscal year. Some of these projected savings will offset cost increases in other areas of our business that we have incurred and expect to incur during the remainder of fiscal 2014. We believe that these affordability efforts, some of which increase the risk associated with our future operating results, contribute significantly to our core mission of educating students.

Changes in the availability of PLUS program loans contributed to a reduction in student enrollment and net revenues at The Art Institutes during fiscal 2013 and are likely to adversely impact new students in fiscal 2014 and beyond.

Approximately 50 percent of the campus-based students attending The Art Institutes education system are considered dependents for Title IV program purposes.  These traditional-age students often receive financial support from their parents to help pay for their education.  As part of this support, parents often participate in the PLUS program, which allows parents of a dependent student to borrow an amount not to exceed the difference between the total cost of that student's education and other aid to which that student is entitled.  During fiscal 2012, the U.S. Department of Education implemented more stringent underwriting criteria for PLUS program loans, which resulted in a decrease in the percentage of our net revenues we received from PLUS loans from 12.4 percent in fiscal 2012 to 8.3 percent in fiscal 2013. Total new students at The Art Institutes decreased approximately 12.8 percent in fiscal 2013 as compared to fiscal 2012, which we believe was due in part to the decrease in PLUS loan availability. 

We have undertaken a number of actions to address this issue including, among other measures, expanding our scholarship programs at The Art Institutes and extending greater amounts of credit to those Art Institute students who are denied PLUS program loans but who still enroll in school. Additionally, we increased the maximum length of payment plans we offer students from 36 months beyond graduation to 42 months beyond graduation effective in October 2012. Further, we commenced a new program under which we purchase loans awarded and disbursed to our students from a private lender during the fourth quarter of fiscal 2013. All of these initiatives have negatively impacted our liquidity. The changes we have made with respect to extension of credit to our students have resulted in higher gross long-term student receivable and purchased loan program balances, which were $67.2 million at December 31, 2013 and $43.0 million at December 31, 2012 and higher bad debt expense as a percentage of net revenues compared to prior periods. Bad debt expense was 7.2 percent and 7.1 percent of net revenues during the six months ended December 31, 2013 and 2012, respectively, and 6.9 percent and 5.9 percent during the fiscal years ended June 30, 2013 and 2012.

Investigations of proprietary education institutions, adverse publicity, and outstanding litigation have adversely impacted our operating results and student enrollment.

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 proprietary post-secondary education providers have been subject to

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increased regulatory scrutiny and litigation in recent years. On July 30, 2012, the majority staff of the US Senate Committee on Health, Education, Labor, & Pensions (the “HELP Committee") released a report, "For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success" which was drawn from hearings on the industry beginning in August 2010. While stating that proprietary colleges and universities have an important role to play in higher education and should be well-equipped to meet the needs of non-traditional students who now constitute the majority of the post-secondary educational population, the report was highly critical of these institutions. Additionally, a number of state Attorneys General have launched investigations into proprietary post-secondary institutions, including a number of our schools. We received subpoenas from the Attorneys General of Florida, Kentucky, New York, Colorado, and Massachusetts in October 2010, December 2010, August 2011, September 2012, and January 2013, respectively, and the San Francisco, California City Attorney in December 2011 in connection with investigations of our institutions and their business practices. As previously disclosed, on December 5, 2013, the Company entered into a Final Consent Judgment with the Colorado Attorney General’s Office, and we accrued the $3.4 million settlement within general and administrative expense in the accompanying consolidated statement of operations in the three months ended December 31, 2013. We also received inquiries from 13 states in January 2014 regarding our business practices, which will be coordinated through the Attorney General of the Commonwealth of Pennsylvania.

In addition, we received subpoenas from the Division of Enforcement of the Securities and Exchange Commission in March 2013 and May 2013 requesting documents and information relating to our valuation of goodwill in fiscal 2012, bad debt allowance for student receivables, and letters of credit we posted with the U.S. Department of Education. We also received a subpoena from the Office of Inspector General of the U.S. Department of Education in May 2013 requesting policies and procedures related to Argosy University's attendance, withdrawal, and return to Title IV policies. These investigations, together with the Washington qui tam lawsuit in which the U.S. Department of Justice and Attorneys General from five states have intervened, have led to a significant amount of negative publicity for the proprietary education industry and our schools. The Consumer Financial Protection Bureau and state attorneys general are also investigating student-lending practices at proprietary education institutions, which actions are expected to continue and could expand in 2014. On January 30, 2014, the Federal Trade Commission (the "FTC") announced a new system to handle complaints from military veterans and service members regarding higher education institutions, providing online reporting forms to file complaints directly with the U.S. Department of Veterans Affairs and the U.S. Department of Defense regarding issues such as cost of attendance, marketing, graduation rates, program quality employment prospects, and course credit. Students may also email similar complaints to the U.S. Department of Education. These complaints will be forwarded to the FTC's Consumer Sentinel Network database. These initiatives could result in additional litigation and investigations regarding proprietary education.

Student concerns regarding the assumption of additional debt in light of the current economic climate have given rise to reluctance to pursue further education.

Due to the effects of the current economic climate many prospective students are unable to make cash payments towards their education. Recently, there has been a significant amount of negative publicity surrounding the incurrence of excessive debt to pay for a post-secondary education. On July 19, 2012, the Consumer Financial Protection Bureau ("CFPB") and the U.S. Department of Education issued a report describing what they characterized as risky practices in the private student loan market over the past ten years, among other things. According to the CFPB's estimates, outstanding student loan debt in the United States exceeded $1 trillion in 2011, consisting of $864 billion of federal student debt and $150 billion of private student loan debt. A number of media outlets have published stories linking student loan indebtedness to the recent mortgage loan crisis. 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 a stagnant economy and challenged employment prospects, have led to a reluctance in a number of prospective students to enroll in our schools.

The education industry is rapidly evolving and highly competitive.

The U.S. higher education industry, including the proprietary sector, is experiencing unprecedented, rapidly developing changes due to technological developments, evolving needs and objectives of students and employers, economic constraints affecting educational institutions and students, price competition, increased focus on affordability, and other factors that challenge many of the core principles underlying the industry. Related to this, a substantial proportion of traditional colleges and universities and community colleges now offer some form of distance learning or online education programs, including programs geared towards the needs of working learners. As a result, we face increased competition for students, including from colleges with well-established brand names. In addition, we face competition from various emerging nontraditional, credit-bearing and noncredit-bearing education programs, offered by both proprietary and not-for-profit providers. These include massive open online courses (MOOCs) offered worldwide without charge by traditional educational institutions and other direct-to-consumer education services, which some educational institutions are now accepting for credit. Further, according to information published by the National Student Clearinghouse, enrollment in post-secondary institutions decreased by 1.5 percent from the Fall of 2012 to the Fall of 2013, and enrollment in four-year proprietary institutions decreased by 9.7 percent during the same time period. We must adapt our business to meet these rapidly evolving developments. We are wo

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rking to accelerate the enhancement of our offerings to remain competitive and to more effectively deliver a quality student experience at an attractive price.

Our business is highly leveraged, which requires us to use cash from operations to repay indebtedness and subjects us to market conditions to refinance debt.

At December 31, 2013, we had $1.28 billion of indebtedness outstanding. The terms of our debt agreements restrict us from certain activities such as incurring additional indebtedness and require us to comply with several financial ratios, which has become more difficult to do as a result of our weaker financial results in recent periods. We refinanced and repaid $375.0 million of 8.75 percent senior notes due June 1, 2014 and issued $203.0 million of senior notes, which are due on July 1, 2018. We are also required to post a letter of credit with the U.S. Department of Education due to our failure to meet certain financial responsibility standards. As of January 2014, this letter of credit requirement is set at 15 percent of the Title IV program funds received by students at our institutions during fiscal 2013, which is $302.2 million. Our significant indebtedness requires us to use a substantial portion of cash flows from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flows to fund our operations and invest further in our business. The factors described above, which have adversely impacted our business, have also made it more difficult to refinance our indebtedness due to investor uncertainty about our results from operations. We also are subject to market factors in connection with our efforts to refinance our indebtedness, including our revolving credit facility which expires on June 1, 2015 and a portion of our term loan which is due in 2016. We may not be able to obtain additional financing on acceptable terms, if at all, particularly because of our high levels of debt and the debt incurrence restrictions imposed by the agreements governing our debt. To the extent that we do refinance any portion of our debt, that refinanced debt is likely to be subject to higher interest rates and fees than our existing debt. In addition, 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. While Education Management LLC has continued to satisfy applicable financial covenant compliance ratios, due to declining operating performance, the margin between our results and the covenant requirements has decreased significantly over the past 12 months.

Federal government shut down.

On October 1, 2013, the U.S. Departments of Education, Defense, and Veterans Affairs began operating on a limited basis due to the partial federal government shutdown. The contingency plans for the U.S. Department of Education provided that Pell Grant and Direct Student Loan programs under Title IV of the Higher Education Act, which are funded through mandatory and carryover appropriations, would continue to operate as normal for the foreseeable future, and that the U.S. Department of Veterans Affairs benefits would be paid until current funds were exhausted. In some cases the U.S. Department of Defense ceased to provide educational benefits to students. The government shutdown ceased on October 17, 2013 when President Obama signed legislation to fund federal government agencies until January 15, 2014, and to raise the federal debt ceiling through February 7, 2014, and the U.S. Departments of Education, Defense and Veterans Affairs resumed normal activity. However, the February 7, 2014 deadline has passed and the U.S. Department of Treasury currently estimates that it will exhaust its borrowing capacity to fund the government in late February if the debt ceiling is not raised or suspended prior to such time. We are unable to anticipate whether a subsequent shutdown will occur in the future, the nature and scope of any related contingency plan, or the likelihood of another agreement to raise the debt ceiling, the occurrence or non-occurrence of each of which could negatively impact our revenues and adversely affect our business, results of operations, financial condition, and cash flows.

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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 December 31,				For the Six Months Ended December 31,
	2013		2012		2013		2012
Net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:
Educational services	58.3	%	55.0	%	59.9	%	58.7	%
General and administrative	29.7	%	26.1	%	29.7	%	27.3	%
Depreciation and amortization	6.5	%	6.0	%	6.6	%	6.6	%
Long-lived asset impairments	0.6	%	—	%	0.3	%	—	%
Total costs and expenses	95.1	%	87.1	%	96.5	%	92.6	%
Income before interest and taxes	4.9	%	12.9	%	3.5	%	7.4	%
Interest expense, net	5.3	%	4.8	%	5.4	%	5.0	%
(Loss) income before income taxes	(0.4	)%	8.1	%	(1.9	)%	2.4	%
Income tax (benefit) expense	(0.6	)%	3.3	%	(1.2	)%	1.0	%
Net income (loss)	0.2	%	4.8	%	(0.7	)%	1.4	%

Three Months Ended December 31, 2013 (current quarter) compared to Three Months Ended December 31, 2012 (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

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 majority of our net revenues comes from various government-sponsored student finance programs, and the amount of tuition revenue received from students varies based on our average enrolled student body, the average tuition charge per credit hour and average credit hours taken per student. Factors affecting our average enrolled student body include new students, students who withdraw and then return to school after withdrawal, student persistence, and graduates. These factors are impacted by the number of individuals seeking post-secondary education, the attractiveness of our program offerings, the quality of the student experience, the length of the education programs and our overall educational reputation. In addition to tuition and fees, net revenues consist of sales of related study materials, student housing fees, bookstore sales, restaurant sales in connection with culinary programs and workshop fees, all of which are largely a function of average enrolled student body.

Net revenues decreased 9.3 percent to $593.7 million in the current quarter compared to $654.9 million in the prior year quarter. The decrease in net revenues was due primarily to a 6.5 percent decrease in average enrolled student body to 122,990 students compared to the prior year quarter as well as our continued efforts to improve the affordability of the education we provide by awarding more scholarships to our students compared to the prior year quarter. In addition, there were less revenue days in the current quarter compared to the prior year quarter due primarily to The Art Institutes' fall academic term beginning on September 30, 2013.

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 decreased by $14.8 million, or 4.1 percent, to $345.6 million in the current quarter. We recognized $3.9 million of restructuring expenses in the current quarter related to a sublease we entered into after consolidating office space and employee severances that occurred primarily at our Art Institutes segment. After adjusting for restructuring expenses, educational services expense increased by 253 basis points as a percentage of net revenues compared to the prior year quarter due primarily to decreases in average class size due to lower average enrolled student body and the resulting loss of operating leverage,

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coupled with less revenue days recognized during the current quarter primarily as a result of the early Art Institutes' campus-based fall academic term start described below under "Analysis of Operating Results by Reportable Segment."

Costs that were most affected by the loss in operating leverage in the current quarter compared to the prior year quarter were employee-related costs, which increased by 184 basis points as a percentage of net revenues, and rent expense associated with school locations, which was relatively flat on an absolute basis, but increased 94 basis points as a percentage of net revenues. The increase in rent expense as a percentage of net revenues was also impacted by the higher number of leases as a result of the sale-leaseback transactions we entered into in the latter half of the second quarter of fiscal 2013 as well as the comparative effect of a favorable rent credit at one of our leased school locations in fiscal 2013. Bad debt expense was $39.6 million, or 6.7 percent of net revenues, in the current quarter compared to $40.8 million, or 6.2 percent of net revenues, in the prior year quarter, an increase of 44 basis points. Outside services costs also increased by 18 basis points compared to the prior year quarter.

Partially offsetting the above increases was lower cost of sales related to our bookstores, which decreased 57 basis points as a percentage of revenues compared to the prior year quarter primarily due to the impact of the aforementioned early Art Institutes' campus-based fall academic term. In addition, the comparative effect of a $3.5 million net loss recorded in the prior year quarter in connection with the aforementioned sale leaseback-transactions represented a decrease in educational services expense of 53 basis points as a percentage of revenues compared to the prior year quarter. The remaining net increase of 23 basis points resulted from changes in other costs, 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 and consulting services, corporate development and other departments that do not provide direct services to our students. General and administrative expense was $176.4 million in the current quarter, an increase of 3.1 percent from $171.2 million in the prior year quarter. During the three months ended December 31, 2013, we recognized $5.6 million of restructuring expenses relating to corporate-related employee severance charges and $6.0 million of settlement-related costs. After adjusting for these items, general and administrative expense increased by 164 basis points as a percentage of net revenues compared to the prior year quarter primarily due to the loss of operating leverage.

Marketing and admissions costs were 22.4 percent of net revenues in the current quarter and 21.3 percent of net revenues in the prior year quarter, representing an increase of 103 basis points; however, the overall marketing and admissions cost per new student decreased approximately 4 percent as admissions productivity more than offset higher marketing costs. Also contributing to the increase in general and administrative expense were legal and consulting services costs, which increased by 57 basis points compared to the prior year quarter, the latter of which was incurred in part to assist future process optimization and centralization efforts to support student affordability. The remaining net increase of four basis points as a percentage of net revenues 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 $38.6 million in the current quarter compared to $39.3 million in the prior year quarter, a decrease of 1.7 percent.

Long-lived asset impairments

During the three months ended December 31, 2013, we recorded long-lived asset impairments of $3.8 million at two of our Brown Mackie Colleges locations because anticipated future cash flows could not support the net book values of their property and equipment, which primarily consisted of leasehold improvement assets.

Interest expense, net

Net interest expense was $31.6 million in the current quarter, an increase of $0.6 million, or 2.0 percent, from the prior year quarter. The increase was primarily due to the higher rate on the PIK Notes issued in connection with a debt refinancing in March 2013 partially offset by a slightly lower rate on the Tranche C-2 term loan and lower letter of credit fees in the current quarter compared to the prior year quarter. Refer to Part II, Item 8 "Financial Statements and Supplementary Data," Note 8, "Short-Term and Long-Term Debt" of the June 30, 2013 Annual Report on Form 10-K for more information on the March 2013 debt refinancing.

Provision for income taxes

Our effective tax rate in the three months ended December 31, 2013 was impacted by the disproportionate impact on low earnings of discrete items as well as permanent tax differences, which have remained relatively consistent period over period. The effective tax rate for the three months ended December 31 2012 was 41.3 percent. The effective tax rates differ from the

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combined federal and state statutory rates due to valuation allowances, expenses that are non-deductible for tax purposes, discrete items and the 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 June 30, 2013 Annual Report on Form 10-K with respect to certain state deferred tax assets.

Six Months Ended December 31, 2013 (current year period) compared to the Six Months Ended December 31, 2012 (prior year period)

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

Net revenues

Net revenues decreased 7.1 percent to $1,174.1 million in the six months ended December 31, 2013 compared to $1,264.5 million in the six months ended December 31, 2012. The decrease in net revenues was due primarily to a 7.5 percent decrease in average enrolled student body to 120,360 students compared to the prior year period as well as our continued efforts to improve the affordability of the education we provide by awarding more scholarships to our students compared to the prior year quarter.

Educational services expense

Educational services expense decreased by $38.4 million, or 5.2 percent to $703.3 million in the current year period. We recognized $4.7 million and $8.2 million of restructuring expenses in the six months ended December 31, 2013 and 2012, respectively. After adjusting for these items, educational services expense increased by 149 basis points as a percentage of net revenues compared to the prior year period due primarily to decreases in average class size due to lower average enrolled student body compared to the prior year period and the resulting loss of operating leverage.

Costs that were most affected by the loss in operating leverage were employee-related costs, which increased by 60 basis points in the current year period compared to the prior year period, and rent expense associated with school locations, which increased 82 basis points as a percentage of net revenues compared to the prior year period. The increase in rent expense as a percentage of net revenues was due in part to more leases as a result of the sale-leaseback transactions we entered into in the latter half of the second quarter of fiscal 2013 as well as the comparative effect of a favorable rent credit at one of our leased school locations in fiscal 2013. Bad debt expense was $84.7 million, or 7.2 percent of net revenues, in the current year period compared to $89.8 million, or 7.1 percent of net revenues, in the prior year period, an increase of 11 basis points. The remaining net decrease of four basis points resulted from changes in other costs, none of which was individually significant.

General and administrative expense

General and administrative expense was $348.6 million in the current year period, an increase of 0.8 percent from $345.7 million in the prior year period. We recognized $6.4 million and $0.9 million of restructuring expenses in the six months ended December 31, 2013 and 2012, respectively. Additionally, we recognized $6.0 million of settlement-related costs in the current year period. After adjusting for these items, general and administrative expense increased by 138 basis points as a percentage of net revenues compared to the prior year period. Marketing and admissions costs were 23.3 percent of net revenues in the current year period and 22.5 percent of net revenues in the prior year period representing an increase of 82 basis points. Legal and consulting services costs increased by 61 basis points in the current year period compared to the prior year period, the latter of which was incurred in part to assist future process optimization and centralization efforts to support student affordability. The remaining net decrease of five basis points as a percentage of net revenues in the current year period relates to other items, none of which was individually significant.

Depreciation and amortization

Depreciation and amortization on long-lived assets was $77.2 million in the current year period compared to $83.4 million in the prior year period. The year over year decrease of 7.4 percent was primarily due to accelerated amortization of $4.6 million recorded in the prior year period due to a software related asset that no longer had a useful life.

Interest expense, net

Net interest expense was $63.5 million in the current year period, an increase of $1.0 million from the prior year period, or 1.6 percent. The increase was primarily due to the higher rate on the PIK Notes issued in connection with a debt refinancing in March 2013 partially offset by a slightly lower rate on the Tranche C-2 term loan and lower letter of credit fees in the current year period compared to the prior year period.

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Provision for income taxes

Our effective tax rate was a benefit of 62.3 percent in the current year period and an expense of 42.2 percent in the prior year period. The current year period reflects a deferred tax benefit of approximately $3.2 million recorded as a discrete item resulting from the July 2013 enactment of Pennsylvania House Bill No. 465, which, in addition to other amendments, changes how revenues from the sale of services are sourced for Pennsylvania income tax purposes.

Analysis of Operating Results by Reportable Segment

Each of our 110 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. Our operations are organized into four corresponding reportable segments, which are The Art Institutes, Argosy University, Brown Mackie Colleges and South University.

Student information by segment was as follows:

	For the Three Months Ended December 31,				For the Six Months Ended December 31,
New student enrollment: (1)	2013	2012	% Change		2013	2012	% Change
The Art Institutes	12,430	12,240	1.6	%	28,000	29,170	(4.0	)%
Argosy University	3,260	3,370	(3.3	)%	9,010	9,260	(2.7	)%
Brown Mackie Colleges	3,450	3,840	(10.2	)%	8,250	8,880	(7.1	)%
South University	4,680	4,530	3.3	%	9,330	9,440	(1.2	)%
Total EDMC	23,820	23,980	(0.7	)%	54,590	56,750	(3.8	)%
Average enrolled student body: (1) (2)
The Art Institutes	64,560	69,400	(7.0	)%	62,890	68,130	(7.7	)%
Argosy University	23,830	25,530	(6.7	)%	23,520	25,080	(6.2	)%
Brown Mackie Colleges	16,090	17,520	(8.2	)%	16,020	17,470	(8.3	)%
South University	18,510	19,030	(2.7	)%	17,930	19,420	(7.7	)%
Total EDMC	122,990	131,480	(6.5	)%	120,360	130,100	(7.5	)%

(1) The data above includes the number of students enrolled in fully-online programs at The Art Institute of Pittsburgh, Argosy University and South University.

(2) Average enrolled student body is the monthly average of the unique students who met attendance requirements within each month of the three and six months ended December 31, 2013 and 2012.

The measure used by the chief operating decision maker to evaluate segment performance and allocate resources is EBITDA excluding certain expenses, which we define as net income before interest, income taxes, depreciation and amortization and certain other expenses related to restructuring charges, settlement-related costs and long-lived asset impairments. EBITDA excluding certain expenses is not a recognized term under accounting principles generally accepted in the United States of America ("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 discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. We believe EBITDA excluding certain expenses is helpful in highlighting trends because it 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. We compensate 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, our 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.

To ensure comparability among periods, EBITDA excluding certain expenses for each segment has been recast to report results for the three and six months ended December 31, 2012 as if The Center existed in prior periods and allocating its costs in a manner consistent with the current methodology. The creation of The Center and changes in the allocation methodology had no impact on previously reported consolidated EBITDA excluding certain expenses. See Item 1, “Financial Statements,” Note 14, “Segment Reporting” for a reconciliation of EBITDA excluding certain expenses by reportable segment to consolidated income (loss) before income taxes.

Net revenues and EBITDA excluding certain expenses by reportable segment were as follows (in thousands):

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
Net revenues:	2013			2012			2013			2012
The Art Institutes	$	371,474		$	411,533		$	727,989		$	791,672
Argosy University	76,640			92,312			159,788			174,232
Brown Mackie Colleges	69,463			78,274			139,649			152,246
South University	76,096			72,776			146,627			146,309
Total EDMC	$	593,673		$	654,895		$	1,174,053		$	1,264,459
EBITDA excluding certain expenses:
The Art Institutes	$	87,992		$	113,429		$	147,089		$	182,848
Argosy University	2,547			15,231			5,931			15,401
Brown Mackie Colleges	7,123			8,980			13,407			18,186
South University	12,158			9,132			17,550			16,364
Corporate and other	(22,737		)	(23,444		)	(44,727		)	(46,550		)
Total EDMC	$	87,083		$	123,328		$	139,250		$	186,249

Depreciation and amortization expense, which is excluded from EBITDA excluding certain expenses, was as follows for each reportable segment (in thousands):

	For the Three Months Ended December 31,				For the Six Months Ended December 31,
Depreciation and Amortization:	2013		2012		2013		2012
The Art Institutes	$	19,527	$	19,702	$	39,449	$	39,280
Argosy University	3,752		4,162		7,609		8,459
Brown Mackie Colleges	5,322		5,438		10,432		11,613
South University	3,349		3,307		6,596		6,508
Corporate and other (+)	6,643		6,646		13,112		17,540
Total EDMC	$	38,593	$	39,255	$	77,198	$	83,400

(+) Includes a $4.6 million charge in the six months ended December 31, 2012 pertaining to software related assets that no longer had a useful life.

Three Months Ended December 31, 2013 (current quarter) Compared with the Three Months Ended December 31, 2012 (prior year quarter)

The Art Institutes

Net revenues decreased by $40.1 million, or 9.7 percent, to $371.5 million in the current quarter compared to the prior year quarter due primarily to a decrease in average enrolled student body of 7.0 percent, or approximately 4,840 students. The decrease in average enrolled student body was primarily the result of the factors described above under "Key Trends, Developments and Challenges." In addition, The Art Institutes awarded a larger amount of scholarships to students in the current quarter compared to the prior year quarter, which also contributed to the year-over-year decrease in net revenues. Furthermore, the campus-based fall academic term that typically begins in October for The Art Institutes began on September 30 in the current year, which resulted in one less revenue day in the current quarter compared to the prior year quarter.

The declines in average enrolled student body and net revenues contributed to the $25.4 million decrease in EBITDA excluding certain expenses, which fell to $88.0 million in the current quarter. Primarily as a result of our efforts to keep costs aligned with current enrollment levels, operating expenses, excluding depreciation and amortization, decreased by 4.9% year-over-year.

Operating expenses increased as a percentage of net revenues in the current quarter due primarily to reduced operating leverage in employee-related expenses, rent expense and investments in marketing that we believe will help stabilize our average enrolled student body as we progress through fiscal 2014. The overall marketing and admissions cost per new student decreased as admissions productivity more than offset higher marketing costs. Bad debt expense increased in the current quarter compared to the prior year quarter primarily due to higher short-term and long-term receivable balances resulting from

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the increased extension of credit to students. Also contributing to the increase were legal and consulting services costs, the latter of which was incurred in part to assist future process optimization and centralization efforts to support student affordability. Partially offsetting the above increases was the comparative effect of a net loss recorded in the prior year quarter in connection with the sale-leaseback transactions described above under "Results of Operations."

Argosy University

Net revenues decreased by $15.7 million, or 17.0 percent, to $76.6 million in the current quarter compared to the prior year quarter due to the decrease in average enrolled student body of 6.7 percent, or approximately 1,700 students. The decrease in net revenues is also due to a higher amount of scholarships awarded in the current quarter compared to the prior year quarter and the timing of the fall semester start year-over-year that resulted in less revenue days in the current quarter compared to the prior year quarter. The decrease in net revenues, coupled with reduced operating leverage, resulted in a $12.7 million decrease to EBITDA excluding certain expenses, which was $2.5 million in the current quarter.

Brown Mackie Colleges

Net revenues decreased $8.8 million, or 11.3 percent, to $69.5 million in the current quarter compared to the prior year quarter due primarily to a decrease in average enrolled student body of 8.2 percent, or approximately 1,430 students. The above decrease in net revenues coupled with reduced operating leverage resulted in a $1.9 million decrease in EBITDA excluding certain expenses to $7.1 million in the current quarter. In addition, the prior year quarter benefited from a favorable rent credit at one of its leased school locations that did not occur in the current quarter.

South University

Despite a decrease in average enrolled student body of 2.7 percent, or approximately 520 students, net revenues increased $3.3 million, or 4.6 percent, to $76.1 million in the current quarter compared to the prior year quarter. The decrease in average enrolled student body was more than offset by an increase in average revenue per student in the current quarter due primarily to a greater mix of campus-based students relative to fully-online students. The net revenue increase coupled with improved operating leverage resulted in a $3.0 million increase to EBITDA excluding certain expenses, which was $12.2 million in the current quarter.

Six Months Ended December 31, 2013 (current period) Compared with the Six Months Ended December 31, 2012 (prior year period)

The Art Institutes

Net revenues decreased by $63.7 million, or 8.0 percent, to $728.0 million in the current period compared to the prior year period due primarily to a decrease in average enrolled student body of 7.7 percent, or approximately 5,240 students. The Art Institutes also awarded a larger amount of scholarships to students in the current period compared to the prior year period, which also contributed to the year-over-year decrease in net revenues. The declines in average enrolled student body and net revenues contributed to the $35.8 million decrease in EBITDA excluding certain expenses, which fell to $147.1 million in the current period along with reduced operating leverage in salaries and rent expense and higher bad debt expense as well as legal and consulting services costs in the current year period, the latter of which was incurred in part to assist future process optimization and centralization efforts to support student affordability.

Argosy University

Net revenues decreased by $14.4 million, or 8.3 percent, to $159.8 million in the current period compared to the prior year period due primarily to a decrease in average enrolled student body of 6.2 percent, or approximately 1,560 students as well as the higher amount of scholarships awarded. The decrease in net revenues coupled with reduced operating leverage resulted in a $9.5 million decrease in EBITDA excluding certain expenses, which was $5.9 million in the current period.

Brown Mackie Colleges

Net revenues decreased $12.6 million, or 8.3 percent, to $139.6 million in the current period compared to the prior year period due primarily to a decrease in average enrolled student body of 8.3 percent, or approximately 1,450 students. The above decrease in net revenues coupled with reduced operating leverage resulted in a $4.8 million decrease in EBITDA excluding certain expenses to $13.4 million in the current period. In addition, the prior year period benefited from a favorable rent credit at one of its leased school locations that did not occur in the current year period.

South University

Despite a decrease in average enrolled student body of 7.7 percent, or approximately 1,490 students, net revenues increased $0.3 million, or 0.2 percent, to $146.6 million in the current period compared to the prior year period. The decrease in average enrolled student body was more than offset by an increase in average revenue per student in the current period due primarily to a greater mix of campus-based students relative to fully-online students. The net revenue increase coupled with

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improved operating leverage resulted in a $1.2 million increase to EBITDA excluding certain expenses, which was $17.6 million in the current year period.

Liquidity and Funds of Capital Resources

We finance our operating activities primarily by cash generated from operations, and our primary source of cash is tuition collected from our students. Most of the students at our institutions based in the United States 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. However, our ability to extend the maturity of our $200.0 million cash secured letter of credit facilities, which mature in July 2014, or refinance our $328.3 million revolving credit facility that matures on June 1, 2015 on terms acceptable to us could be adversely impacted by our financial performance in fiscal 2014. If we cannot extend the maturity of or refinance these financial instruments, it could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Operating cash flows

Cash flows provided by operating activities for the six months ended December 31, 2013 were $39.7 million compared to $93.2 million for the six months ended December 31, 2012. The decrease in operating cash flow was primarily due to lower operating results.

The substantial majority of our consolidated net revenues is derived from the receipt by students of Title IV financial aid program funds during the six months ended December 31, 2013, but the extent to which we extend credit to our students has increased in recent years due to decreases in the availability of PLUS program and private loans for students. We expect this trend to continue in the future. 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. The repayment period for financing made available to students is currently set at a maximum of 42 months beyond graduation, and the total amount of gross receivables that extend beyond twelve months was $67.2 million at December 31, 2013 and $43.0 million at December 31, 2012, which includes amounts awarded under a new program that commenced in the fourth quarter of fiscal 2013 under which we purchase loans awarded and disbursed to our students from a private lender. We do not expect future loan purchases to have a material impact on our cash flow from operations in fiscal 2014 because there would be greater use of our payment plans absent this program.

Bad debt expense as a percentage of net revenues was 7.2 percent during the six months ended December 31, 2013 and 7.1 percent for the six months ended December 31, 2012. If students continue to utilize the funding sources described above, our bad debt expense as a percentage of net revenues will remain high and our cash flow from operations will continue to be impacted negatively due to delayed receipts of cash from students. Because these funding sources are not federal student loans, these plans do not directly affect our published federal student loan cohort default rates. However, these funding sources 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 flows from operations, net accounts receivable, unearned tuition and advance payment balances. The changes to start dates of academic terms did not have a significant impact to cash flow from operations for the six months ended December 31, 2013 as compared to the six months ended December 31, 2012.

The significant majority of our facilities are leased under operating lease agreements, and 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.

Direct Loan Programs and Private Student Loans

On a consolidated basis, cash received from students attending our institutions that was derived from Title IV programs represented approximately 73 percent of our total cash receipts during the fiscal year ended June 30, 2013. These receipts include $368.4 million of stipends, which are receipts by students of financing that exceed the tuition and fees paid to our institutions. Stipends are disbursed to students to use for living and other expenses incurred while attending school and are not included in our consolidated net revenues. For purposes of the 90/10 Rule, which tests receipts from Title IV programs on a cash basis and excludes certain receipts such as stipends, the percentage of revenues derived by our institutions from Title IV

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programs during the fiscal year ended June 30, 2013 ranged from 56 percent to approximately 82 percent, with a weighted average of approximately 76 percent.

Our students' ability to obtain private loans has decreased substantially during the last three fiscal years due to adverse market conditions for consumer student loans. While we are taking steps to address the private loan needs of our students as described above, 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.

Investing cash flows

Capital expenditures were $31.3 million, or 2.7 percent of net revenues, in the six months ended December 31, 2013, compared to $39.5 million, or 3.1 percent of net revenues, in the six months ended December 31, 2012. We expect capital expenditures to approximate $80.0 million for the fiscal year ending June 30, 2014.

We completed five sale-leaseback transactions with unrelated third parties in the prior year for net proceeds of $65.1 million. Reimbursements for tenant improvements represent cash paid for capital expenditures in which the terms of the applicable lease agreements require the lessors to reimburse the Company for leasehold improvements.

Financing cash flows

As a result of the Transaction, we are highly leveraged and our debt service requirements are significant. As of December 31, 2013, we had $1.3 billion in aggregate indebtedness outstanding. The largest portion of our debt is a senior secured credit facility, which currently consists of a $1.1 billion term loan and a $328.3 million revolving credit facility, that we obtained in connection with the Transaction. We borrowed $75.0 million under the revolving credit facility at June 30, 2013 in order to satisfy year-end regulatory financial ratios, which was repaid on July 1, 2013 from cash on hand at fiscal year-end. We did not borrow against the revolving credit facility at any other point during fiscal 2013 or in the six months ended December 31, 2013.

At December 31, 2013, we had issued an aggregate of $354.0 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 favor of the U.S. Department of Education was $348.6 million at December 31, 2013, which equals 15 percent of the total Title IV aid received by students attending our institutions during the fiscal year ended June 30, 2012. In January 2014, the U.S. Department of Education decreased its letter of credit requirement from $348.6 million to $302.2 million, which equals 15 percent of total Title IV aid received by students who attended our institutions during the fiscal year ended June 30, 2013.

In order to fund the letter of credit obligation to the U.S. Department of Education at December 31, 2013, we used all $200.0 million of capacity under our two cash secured letter of credit facilities and $148.6 million of letter of credit capacity under the revolving credit facility. Letters of credit outstanding under the revolving credit facility reduce the amount available for borrowing; therefore, the amount available to borrow under the revolving credit facility was $174.3 million at December 31, 2013.

In the six months ended December 31, 2013, we classified $6.1 million as a financing cash inflow related to share-based payment exercise and vesting activity and any associated excess tax benefits. In connection with the vesting of restricted stock units that occurred during the current period, we paid $2.7 million in minimum tax withholdings on behalf of our employees; in exchange, we retained shares equal to the value of the required tax withholding payments on the vesting dates.

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. The amounts involved may be material.

Covenant Compliance

Under its senior secured credit facilities, our subsidiary, EM LLC, is required to satisfy a maximum total leverage ratio, a minimum interest coverage ratio and other financial conditions tests. As of December 31, 2013, EM LLC was in compliance with the financial and non-financial covenants. Our excess coverage on the financial covenants is typically at its lowest as of December 31 and June 30 each year as a result of cash being used in the second and fourth quarters of our fiscal year due to the timing of the starts of our academic terms. While we have continued to satisfy applicable financial covenant compliance ratios, due to declining operating performance, the margin between actual results and the covenant requirements has decreased significantly over the past 12 months. Our continued ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests in the future.

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

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borrowed amounts immediately due and payable. Any such acceleration also would result in a default under our indenture governing the PIK Notes. Additionally, under the credit agreement governing our senior secured credit facilities and the indenture governing the PIK 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 is a non-GAAP measure used to determine our compliance with certain covenants contained in the indenture governing the PIK 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 PIK Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to demonstrate compliance with our financial covenants.

Adjusted EBITDA does not represent net income or cash flows from operations which are terms defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Adjusted EBITDA also does not represent EBITDA excluding certain expenses, which is the measure used by the chief operating decision maker to evaluate segment performance and allocate resources. 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. Although 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 PIK 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 EM 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 December 31, 2013
Net loss	$	(294.1	)
Interest expense, net	125.7
Income tax benefit	(15.5		)
Depreciation and amortization	158.6
EBITDA	(25.3		)
Long-lived asset impairments (1)	327.5
Non-cash compensation (2)	19.4
Severance and relocation	16.7
Settlement-related costs	6.0
Loss on debt refinancing (3)	5.2
Other	5.0
Adjusted EBITDA - Covenant Compliance	$	354.5

(1) We recorded long-lived asset impairments of $323.7 million in the quarter ended March 31, 2013 primarily consisting of a goodwill impairment at The Art Institutes. In addition, we recorded an impairment of $3.8 million at two of our locations in the quarter ended December 31, 2013 as estimated future cash flows were insufficient to support the carrying values of their property and equipment.

(2) Represents non-cash expense primarily for stock options and restricted stock units.

(3) In March 2013, we recorded a $5.2 million loss on debt refinancing in connection with the refinancing of the 8.75 percent senior notes originally due June 2014.

Our financial covenant requirements under the senior secured credit facilities and actual ratios for the twelve month period ended December 31, 2013 were as follows:

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	Covenant Requirements	Actual Ratios
Senior secured credit facility
Adjusted EBITDA to Consolidated Interest Expense ratio	Minimum of 2.75x	3.01x
Consolidated Total Debt to Adjusted EBITDA ratio	Maximum of 3.50x	3.44x

New Negotiated Rulemaking

On April 16, 2013, the U.S. Department of Education announced its intention to establish one or more negotiated rulemaking committees to propose additional new regulations under the HEA. In January 2014, the U.S. Department of Education commenced negotiated rulemaking sessions to implement changes to the Clery Act required by the Violence Against Women Act which, among other items, requires institutions to compile statistics for certain crimes reported to campus security authorities or local police agencies, and include such information in its annual security report. Additionally, another series of negotiated rulemaking sessions to address program integrity and improvement issues will be held in February, March, and April 2014, and will address cash management of Title IV funds including use of debit cards and handling of Title IV credit balances; state authorization for programs offered through distance or correspondence education; state authorization for non-U.S. locations of educational institutions; clock to credit hour conversion; the definition of "adverse credit" for borrowers under the Federal Direct PLUS Loan Program; and the application of repeat coursework provisions to graduate and undergraduate programs. These negotiated rulemaking initiatives are expected to produce new regulations in a variety of areas. The effective date of any such regulations cannot be determined at this time, but it is likely that the rules, if adopted, would be effective on or after July 1, 2015.

The U.S. Department of Education also held negotiated rulemaking sessions to discuss a proposed "gainful employment" rule in September, November, and December 2013.  On August 30, 2013, the U.S. Department of Education issued a draft gainful employment regulation that would determine program eligibility and student notice requirements based on whether the program satisfies annual metrics related to student loan borrowing and earnings of graduates. The draft regulatory language, which was subsequently modified by the U.S. Department of Education, contains a number of modifications to the provisions of the previous regulation that was vacated by the U. S. District Court for the District of Columbia on June 30, 2012 in Association of Private Colleges and Universities v. Duncan, as well as some additional provisions, with many of these being more restrictive than the vacated regulation. If implemented as proposed, the regulatory language would have a material adverse impact on our business.

We are evaluating the potential impact of the draft regulation, which may be significantly revised in the future. The negotiated rulemaking sessions did not reach consensus, which allows the U.S. Department of Education to further modify the rule proposal in its discretion. On January 30, 2014, the OIRA at the OMB posted a notice that it had received a draft of the proposed gainful employment rule from the U.S. Department of Education. The draft regulation is reviewed by OIRA/OMB prior to a notice of proposed rulemaking being released for public comment. See Part I, Item 1 “Business — Student Financial Assistance — New Negotiated Rulemaking" of our June 30, 2013 Annual Report on Form 10-K and http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfulemployment.html for more information.

The U.S. Department of Education has also conducted listening tours to solicit public feedback building on President Obama’s call for a national college rating system. The Secretary of the Department has publicly stated that draft ratings system are expected to be issued in early 2014, but a system is not expected to be effective for several years.

Use of Estimates and Critical Accounting Policies

As disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Use of Estimates and Critical Accounting Policies" of our 2013 Annual Report on Form 10-K, the fair value of The Art Institutes reporting unit exceeded its carrying value by more than 15 percent at March 31, 2013. During the quarter ended December 31, 2013, we observed declining application trends for future academic terms, particularly at The Art Institutes reporting unit, and performed a sensitivity analysis of its fair value using the most recently completed long range forecast and available earnings multiples of our peer group.

As a result of the sensitivity analysis performed in the current quarter, we continue to believe that the fair value of The Art Institutes exceeds its carrying value by more than 10 percent at December 31, 2013; accordingly, we do not believe that it is more-likely-than-not that the fair value of The Art Institutes has decreased below its carrying value at December 31, 2013. We also considered the results of the most recently completed long range forecast and available earnings multiples for the potential impact on the fair values of the Argosy University and South University reporting units and, based on our analysis, we do not believe that it is more-likely-than-not that the fair values of these reporting units have decreased below their carrying values at December 31, 2013. Consequently, we concluded that none of our reporting units experienced any triggering event that would have required a step one interim goodwill impairment analysis at December 31, 2013.

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Contingencies

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

Off Balance Sheet Arrangements

We lease most of our facilities under operating lease agreements and anticipate that future commitments on existing leases will be satisfied by 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.

At December 31, 2013, we have provided $20.1 million of surety bonds primarily to state regulatory agencies through four different surety providers. We believe that these surety bonds will expire without being funded; therefore, the commitments are not expected to affect our financial condition.

New Accounting Standards Not Yet Adopted

None.

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,” “may,” “will,” “should,” “seeks,” “approximately, ” “plans,” “projects” 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; student retention; our ability to maintain eligibility to participate in Title IV programs; changes in government spending; 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, including settlement amounts related to litigation; the results of program reviews and audits; changes in accreditation standards; the implementation of new operating procedures for our fully-online programs; the potential impact of the gainful employment regulation expected to be issued by the U. S. Department of Education; adjustments to our programmatic offerings to comply with the 90/10 rule; modifications to our marketing programs to respond to market conditions and as part of our cost saving initiatives; our high degree of leverage and our ability to generate sufficient cash to service all of our debt obligations and other liquidity needs; our ability to refinance our existing indebtedness, including our revolving credit facility which expires on June 1, 2015; 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 II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors,” in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2013. 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, 2013. For a discussion of our exposure to market risk, refer to Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our June 30, 2013 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, "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

In addition to the other information set forth below, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2013 and in our Form 10-Q for the quarter ended September 30, 2013, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K and our Quarterly Report on Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also adversely affect our business or financial performance.

We currently are subject to lawsuits filed under the federal False Claims Act, and in the future, government and regulatory and accrediting agencies may conduct compliance reviews, bring claims or initiate other litigation against us, which may adversely impact our licensing or accreditation status, or Title IV eligibility, and thereby adversely affect our results of operations and cash flows.

From time to time, we may be subject to program reviews, audits, investigations, claims of non-compliance or lawsuits by governmental or accrediting agencies or third parties, which may allege statutory violations, regulatory infractions or common law causes of action. For example, we are the subject of two qui tam actions filed under the federal False Claims Act, as discussed above in Item 1, "Financial Statements," Note 12, "Contingencies." In the Washington case, the U.S. Department of Justice and five states have intervened under their respective False Claims Acts related to our compliance with the U.S. Department of Education's prior incentive compensation rule. The Sobek case alleges that we violated the U.S. Department of Education's substantial misrepresentation regulation and did not properly track student academic progress. In both cases, the relators seek to recover treble the amount of actual damages allegedly sustained by the federal government as a result of the alleged activity, plus civil monetary damages. Consequently, while we believe these claims are without merit and intend to vigorously defend ourselves, an outcome adverse to us could result in a substantial judgment against us that could have a materially adverse effect on our financial condition. See Item 3, “Legal Proceedings" of our Annual Report on Form 10-K for the year ended June 30, 2013 and Quarterly Reports on Form 10-Q filed thereafter.

We are also the subject of a subpoena from the Office of Inspector General of the U.S. Department of Education requesting policies and procedures related to Argosy University's attendance, withdrawal and return to Title IV policies during the period of July 1, 2010 through December 31, 2011 and detailed information on a number of students who enrolled in Argosy University's Bachelor's of Psychology degree program. We are cooperating with the Office of Inspector General in connection with its investigation. Additionally, the U.S. Department of Justice recently notified us that we are being investigated by the U.S. Attorney's Office for the Middle District of Tennessee in connection with a claim under the federal False Claims Act. Further, the U.S. Department of Education may take emergency action to suspend any of our schools' certification without advance notice if it receives reliable information that a school is violating Title IV requirements and determines that immediate action is necessary to prevent the misuse of Title IV program funds.

If the results of any such proceedings are unfavorable to us, we may lose or have limitations imposed on our accreditation, state licensing, state grant or Title IV program participation, be required to pay monetary damages or be subject to fines, penalties, injunctions or other censure that could materially and adversely affect our business. We also may be limited in our ability to open new schools or add new program offerings and may be adversely impacted by the negative publicity surrounding an investigation or lawsuit. Even if we adequately address the issues raised by an agency review or investigation or successfully defend a third-party lawsuit, we may suffer interruptions in cash flows due to, among other things, transfer from the advance funding to the “reimbursement” or “heightened cash monitoring” method of Title IV program funding, and we may have to devote significant money and management resources to address these issues, which could harm our business. We cannot predict that litigation with respect to which we are in settlement discussions will be settled and, if so, in amounts expected or within estimated accruals for loss contingencies, or if such settlements will be covered by insurance. Additionally,

48

we may experience adverse collateral consequences, including declines in the number of students enrolling at our schools and the willingness of third parties to deal with us or our schools, as a result of any negative publicity associated with such reviews, claims or litigation.

Increased scrutiny of post-secondary education providers by Congress, state Attorneys General and various governmental agencies may lead to increased regulatory burdens and costs.

We and other proprietary post-secondary education providers have been subject to increased regulatory scrutiny and litigation in recent years. State Attorneys General, the U. S. Department of Education, members and committees of Congress and other parties have increasingly focused on allegations of improper recruiter compensation practices and deceptive marketing practices, among other issues. For example, on July 30, 2012, the majority staff of the HELP Committee issued a report, "For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success." While stating that proprietary colleges and universities have an important role to play in higher education and should be well-equipped to meet the needs of non-traditional students who now constitute the majority of the post-secondary educational population, the majority staff report was highly critical of these institutions. The report contended that these institutions have a high cost of attendance, engage in aggressive and deceptive recruiting, have high drop-out rates, provide insufficient student support services, and are responsible for high levels of student debt and loan defaults, among other things. The report called for increased disclosure of information about student outcomes at proprietary colleges and universities, prohibiting institutions from using federal financial aid funding to market, advertise and recruit, amending the 90/10 Rule to prohibit these institutions from receiving more than 85% of their revenues from federal funds, prohibiting the use of mandatory binding arbitration clauses in enrollment agreements, and other measures ostensibly to protect students and taxpayers.

On January 30, 2014, the FTC announced a new system to handle complaints from military veterans and service members regarding higher education institutions, providing customized online reporting forms to file complaints directly with the U.S. Department of Veterans Affairs and the U.S. Department of Defense regarding issues such as cost of attendance, marketing, graduation rates, program quality employment prospects, and course credit. Students may also email similar complaints to the U.S. Department of Education. These complaints will be forwarded to the FTC's Consumer Sentinel Network database. In November 2013, the FTC published revised Guides for Private Vocational and Distance Education Schools expanding the scope of potential liability of proprietary schools and setting forth more stringent restrictions on advertising and recruitment practices by expanding the activities that the FTC considers "deceptive." The FTC actions are intended to comply with the Improving Transparency of Educational Opportunities for Veterans Act of 2012 which requires the FTC to partner with the U.S. Department of Veterans Affairs and other agencies to improve outreach and transparency regarding the quality of instruction, recruiting practices, and post-graduate employment by higher education institutions.

Additionally, a number of state Attorneys General have launched investigations into proprietary post-secondary education institutions, including some of our schools. We received subpoenas or requests for documents from the Attorneys General of Florida, Kentucky, New York, Colorado, and Massachusetts in October 2010, December 2010, August 2011, September 2012, and January 2013 respectively, and the San Francisco, CA City Attorney in December 2011 in connection with investigations of our institutions and their business practices. We have nine schools located in Florida, three schools located in Kentucky, one school located in New York, two schools in Colorado, and one school in Massachusetts. In July 2011, the Attorney General of Kentucky announced a national bipartisan effort including 19 states to examine potential abuses by proprietary educational institutions. While the initial goal of the joint investigation is sharing information among the Attorneys General about potential violations of consumer protection laws, the Attorney General of Kentucky indicated that the Attorneys General may ultimately attempt to compel proprietary institutions located in their respective jurisdictions to revise their recruiting practices.

In January 2014, we received inquiries from 13 states regarding our business practices. The Attorney General of the Commonwealth of Pennsylvania informed us that it will serve as the point of contact for the inquiries related to us. The inquiries focus on our practices relating to the recruitment of students, graduate placement statistics, graduate certification and licensing results, and student lending activities, among other matters. Several other companies in the proprietary education industry have disclosed that they received similar inquiries. Further, in December 2013 the office of enforcement of the Consumer Financial Protection Bureau notified two publicly traded companies in the education industry that it is considering recommending that that the Bureau take legal action against the companies.

We cannot predict the extent to which, or whether, these regulatory actions, hearings, and investigations will result in legislation, further rulemaking affecting our participation in Title IV programs, or litigation alleging statutory violations, regulatory infractions or common law causes of action. The adoption of any law or regulation that reduces funding for federal student financial aid programs or the ability of our schools or students to participate in these programs could have a material adverse effect on our student population and revenue. Legislative action also may increase our administrative costs and require us to modify our practices in order for our schools to comply with applicable requirements.Additionally, actions by state Attorneys General and other governmental agencies could damage our reputation and limit our ability to recruit and enroll

49

students, which could reduce student demand for our programs and adversely impact our revenue and cash flow from operations.

Our regulatory environment and our reputation may be negatively influenced by the actions of other post-secondary education institutions and the current media environment.

In recent years, there have been a number of regulatory investigations and civil litigation matters targeting post-secondary education institution, including the HELP Committee hearings on the proprietary education sector during 2010 and 2011 and the resulting report issued by the majority staff of the HELP Committee on July 30, 2012. In addition, a number of State Attorneys General have launched investigations into post-secondary institutions, including some of our schools. Moreover, the Consumer Financial Protection Bureau and state attorneys general are also investigating student-lending practices at proprietary institutions, which actions are expected to continue and could expand in 2014. Private parties have recently filed a number of significant lawsuits against post-secondary institutions alleging wrongdoing, including the misstatement of graduate job placement rates. The HELP Committee hearings, along with other recent investigations and lawsuits, have included allegation of, among other things, deceptive trade practices, false claims against the United States and non-compliance with state and U.S. Department of Education regulations. These allegations have attracted significant adverse media coverage. The intervention by the U.S. Department of Justice and five states in a qui tam case involving our alleged violation of the U.S. Department of Education’s prior incentive compensation rules has also drawn significant media attention. Allegations against the post-secondary education sectors may impact general public perceptions of educational institutions, including us, in a negative manner. Adverse media coverage regarding other educational institutions or regarding us directly could damage our reputation, reduce student demand for our programs, adversely impact our net revenues, cash flows and operating profit or result in increased regulatory scrutiny.

Government laws and regulations are evolving and unfavorable changes could harm our business.

We are subject to general business regulations and laws, as well as regulations and laws specifically governing the post-secondary industry. Existing and future laws, regulations, and executive orders may impede our growth. These regulations, laws, and orders may cover consumer protection, taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, electronic device certification, electronic waste, electronic contracts and other communications and Internet services. We are also subject to federal and state lobbying regulation as well as new federal disclosure requirements regarding the use of conflict minerals (commonly referred to as tantalum, tin, tungsten, and gold), which are mined from the Democratic Republic of the Congo and surrounding countries. Legislation, regulation, and executive orders in the United States as well as international laws and regulations could result in compliance costs which may reduce our revenue and income and/or result in reputational damage, as well as governmental action should our compliance measures not be deemed satisfactory.

Our debt agreements contain restrictions that limit our flexibility in operating our business, and our risk of failing to satisfy one or more of the financial covenants under our debt agreements is greater in light of recent changes to those covenants and our recent and projected results of operations.

Our senior secured credit facilities and the indenture governing our PIK Notes contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit certain of our subsidiaries' ability to, among other things:

• incur additional indebtedness or issue certain preferred shares;

• pay dividends on, repurchase or make distributions in respect of capital stock or make other restricted payments;

• make certain investments, including capital expenditures;

• sell certain assets;

• create liens;

• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

• enter into certain transactions with affiliates.

In addition, 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 December 31, 2013, it was in compliance with the financial and non-financial covenants. However, 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. Furthermore, on September 30, 2012, the Consolidated Total Debt to Adjusted EBITDA ratio decreased from 4.00x to 3.50x and the minimum interest coverage ratio increased from 2.50:1 to 2.75:1, which makes it more difficult for us to comply with these covenants in the future. While we have continued to satisfy applicable financial covenant compliance

50

ratios, due to declining operating performance, the margin between our results and the covenant requirements has decreased significantly over the past 12 months.

A breach of any of these covenants could result in a default under the senior secured credit agreement. Upon the occurrence of an event of default under the senior secured credit agreement, the lenders could elect to declare all amounts outstanding under the senior secured credit agreement immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the senior secured credit facilities could proceed against the collateral granted to them to secure that indebtedness. Certain of our subsidiaries have pledged a significant portion of our assets as collateral under the senior secured credit agreement. If the lenders accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our indebtedness under our senior secured credit facilities, as well as our unsecured indebtedness. In addition, the indenture governing the PIK Notes includes a cross-default provision to debt with a principal amount of greater than $50.0 million, which would require the PIK Notes to be prepaid or redeemed in the event of a default with respect to such debt.

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*	Waiver and Release of Claims dated December 26, 2013 between Education Management LLC and John Kline
10.2*	Education Management Corporation Amended 2012 Long Term Incentive Plan
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 Mick J. Beekhuizen 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 Mick J. Beekhuizen 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.

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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/    MICK J. BEEKHUIZEN

Mick J. Beekhuizen

Executive Vice President and Chief Financial Officer

Date: February 10, 2014

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EX-10.1

EXHIBIT 10.1

WAIVER AND RELEASE OF CLAIMS

1.In consideration of the payments and benefits to be made under the Employment Agreement, dated as of August 11, 2009 (the “Employment Agreement”), and the additional benefits set forth on Exhibit A to which John R. Kline (the “Executive”) and Education Management LLC (the “Company”) (each of the Executive and the Company, a “Party” and collectively, the “Parties”) are parties, the sufficiency of which the Executive acknowledges, the Executive, with the intention of binding himself and his heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge the Company and each of its parents, subsidiaries and affiliates (the “Company Affiliated Group”), their present and former officers, directors, executives, shareholders, agents, attorneys, employees and employee benefit plans (and the fiduciaries thereof), and the successors, predecessors and assigns of each of the foregoing (collectively, the “Company Released Parties”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected, which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, arising on or prior to the date hereof, against any Company Released Party that arises out of, or relates to, the Employment Agreement, the Executive’s employment with the Company, or any termination of such employment, including claims (i) for severance or vacation benefits, unpaid wages, salary or incentive payments, (ii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort, (iii) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and unfair labor and employment practices)and (iv) for employment discrimination under any applicable federal, state or local statute, provision, order or regulation, and including, without limitation, any claim under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Civil Rights Act of 1988, the Fair Labor Standards Act, the Americans with Disabilities Act (“ADA”), the Executive Retirement Income Security Act of 1974, as amended (“ERISA”), the Age Discrimination in Employment Act (“ADEA”), and any similar or analogous state statute, excepting only:

(A) rights of the Executive arising under, or preserved by, this Agreement (including Exhibit A hereto) or Section 7 of the Employment Agreement;

(B) the right of the Executive to receive COBRA continuation coverage in accordance with applicable law;

(C) claims for benefits under any health, disability, retirement, life insurance or other, similar employee benefit plan (within the meaning of Section 3(3) of ERISA) of the Company Affiliated Group; and

(D) rights to indemnification the Executive has or may have under the by-laws, limited liability company agreement or certificate of incorporation of any member of the Company Affiliated Group or as an insured under any director’s and officer’s liability insurance policy now or previously in force.

2.The Employee acknowledges and agrees that the release of claims set forth in this Agreement is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied.

3.The release of claims set forth in this Agreement applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages, damages for pain or suffering, costs, and attorneys’ fees and expenses.

4.The Executive specifically acknowledges that his acceptance of the terms of the release of claims set forth in this Agreement is, among other things, a specific waiver of his rights, claims and causes of action under Title VII, ADEA, ADA and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein shall be deemed, nor does anything contained herein purport, to be a waiver of any right or claim or cause of action which by law the Executive is not permitted to waive.

5.As to rights, claims and causes of action arising under the ADEA, the Executive acknowledges that he has been given but not utilized a period of twenty-one (21) days to consider whether to execute this Agreement. If the Executive accepts the terms hereof and executes this Agreement, he may thereafter, for a period of seven (7) days following (and not including) the date of execution, revoke this Agreement as it relates to the release of claims arising under the ADEA. If no such revocation occurs, this Agreement shall become irrevocable in its entirety, and binding and enforceable against the Executive, on the day next following the day on which the foregoing seven-day period has elapsed. If such a revocation occurs, the Executive shall irrevocably forfeit any right to payment of the Severance Payment (as such term is defined in the Employment Agreement), but the remainder of the Employment Agreement shall continue in full force.

6.Other than as to rights, claims and causes of action arising under the ADEA, the release of claims set forth in this Agreement shall be immediately effective upon execution by the Executive.

7.The Executive acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints, charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.

8.The Executive acknowledges that he has been advised to seek, and has had the opportunity to seek, the advice and assistance of an attorney with regard to the release of claims set forth in this Agreement, and has been given a sufficient period within which to consider the release of claims set forth in this Agreement.

9.The Executive acknowledges that the release of claims set forth in this Agreement relates only to claims which exist as of the date of this Agreement.

10.The Executive acknowledges that the Severance Payments and/or Pro-Rata Annual Bonus Payment set forth on Exhibit A he is receiving in connection with the release of claims set forth in this Agreement and his obligations under this Agreement are in addition to anything of value to which the Executive is entitled from the Company and that such payments and the other benefits set forth on Exhibit A satisfy the Company’s obligations to the Executive under the Employment Agreement in connection with the termination of the Executive’s employment with the Company. The Executive acknowledges that he will continue to be subject to the provisions set forth in Sections 4 (Unauthorized Disclosure; Non-Solicitation; Non-Competition; Proprietary Rights) and 6 (Non-Disparagement) pursuant to the terms of the Employment Agreement.

11.Each provision hereof is severable from this Agreement, and if one or more provisions hereof are declared invalid, the remaining provisions shall nevertheless remain in full force and

effect. If any provision of this Agreement is so broad, in scope, or duration or otherwise, as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

12.This Agreement constitutes the complete agreement of the Parties in respect of the subject matter hereof and shall supersede all prior agreements between the Parties in respect of the subject matter hereof except to the extent set forth herein.

13.The failure to enforce at any time any of the provisions of this Agreement or to require at any time performance by another party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect the validity of this Agreement, or any part hereof, or the right of any party thereafter to enforce each and every such provision in accordance with the terms of this Agreement.

14.This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Signatures delivered by facsimile shall be deemed effective for all purposes.

15.This Agreement shall be binding upon any and all successors and assigns of the Executive and the Company.

16.Except for issues or matters as to which federal law is applicable, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the conflicts of law principles thereof.

17.Capitalized terms used herein have the meanings given them in the Employment Agreement unless otherwise defined herein.

[signature page follows]

IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the Parties, all as of December ___, 2013.

______________________________ John R. Kline, Individually EDUCATION MANAGEMENT LLC By:______________________________ Name: Edward H. West Title: President and Chief Executive Officer

EXHIBIT A

Pursuant to the Executive’s Employment Agreement, and as otherwise agreed to by the Company in connection with his termination of employment effective December 31, 2013 (“Termination Date”), the Company shall provide the Executive the payments and benefits as follows:

1.Executive will receive his base salary through the Termination Date and other items of compensation accrued through that date (less applicable withholding taxes), which amounts shall be paid on the first normal payroll cycle after the expiration of the seven day waiting period set forth in the Waiver and Release Agreement;

2.Executive will receive severance payments equal to: (a) Executive’s current Base Salary of $345,173.00 for twelve (12) months (less applicable withholding taxes); plus (b) an additional Bonus payment of $310,655.70 equal to 90% of Executive’s current Base Salary (less applicable withholding taxes); plus (c) a one-time Pro Rata Annual Bonus Payment. With the exception of the Pro Rata Annual Bonus Payment, the severance payments will be made over a six (6) month period beginning six (6) months and a day following the Termination Date. Accordingly, on July 1, 2014, the Company will pay Executive (i) a lump-sum payment of $484,518.87 (less applicable withholding taxes) representing the prior six months of delayed installment payments plus the Pro Rata Annual Bonus Payment, with the balance of the severance payments to be paid over the following six (6) months, and (ii) a cash payment in lieu of Key Executive Outplacement Services equal to the estimated cost thereof of $15,000.00.

3.Executive will receive continuation of medical, dental and vision benefits for twelve (12) months from the Termination Date (the Company will pay the same pro rata portion of Executive’s monthly premium as it pays for Executive as an active employee).

4.The parties will enter into a Consulting Agreement pursuant to which the Executive will provide up to fifty (50) hours of consulting services per month for a six month period after the Termination Date.

5.Executive’s stock option grants will continue to vest for one year after the Termination Date.

6.A waiver of tuition for Executive and/or his wife through graduation to complete a course of study at an institution owned by the Company under the Company’s Tuition Voucher Program (the “TVP”).  To qualify to participate in the TVP, Executive and/or his wife must (i) inform Kathy Molnar, kmolnar@edmc.edu, 412-995-7555 of the program of study which he or she has selected, and (ii) complete the program of study by January 1, 2016.  The Company will provide Executive and/or his wife with instructions on how to enroll promptly upon being notified that they wish to do so.  Executive acknowledges and agrees that participation in the TVP may be subject him and/or his wife to additional tax liability pursuant to Internal Revenue Service and state regulations.

EX-10.2

EXHIBIT 10.2

EDUCATION MANAGEMENT CORPORATION

AMENDED 2012 OMNIBUS LONG-TERM INCENTIVE PLAN

EDUCATION MANAGEMENT CORPORATION, a Pennsylvania corporation (the “Company”), sets forth herein the terms of its Amended 2012 Omnibus Long-Term Incentive Plan (the “Plan”), as follows:

1.PURPOSE

The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability to attract and retain highly qualified officers, non-employee members of the Board, key employees, consultants and advisors, and to motivate such officers, non-employee members of the Board, key employees, consultants and advisors to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, annual incentive awards other stock-based awards and cash awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of performance goals in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein.

2.DEFINITIONS

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

2.1. “Affiliate” means any company or other trade or business that “controls,” is “controlled by” or is “under common control” with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.

2.2. “Annual Incentive Award” means an Award that has a performance period that generally is the Company’s fiscal year (currently July 1^st through June 30^th).

2.3. “Annual Incentive Target” means the amount of the Annual Incentive Award payable under the Plan for a particular performance period upon attainment of 100% of the performance goals. The Annual Incentive Target may be expressed as a percentage of Base Salary or a fixed amount of cash.

2.4. “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Annual Incentive Award, other Stock-based Award or cash award under the Plan.

2.5. “Award Agreement” means a written agreement between the Company and a Grantee, or notice from the Company or an Affiliate to a Grantee that evidences and sets out the terms and conditions of an Award.

2.6. “Base Salary” means the Grantee’s annualized rate of base cash salary in effect on the 90^th day of the performance period, provided however that Base Salary (a) excludes bonuses, incentive compensation, employer contributions to employee benefit plans, and other forms of irregular payments, reimbursements and fringe benefits, and (b) includes any compensation that is deferred by the Grantee under an employee benefit plan for the performance period. If a Grantee’s rate of base cash salary

changes after the 90^th day of the performance period, the Grantee’s Base Salary will be pro-rated accordingly.

2.7. “Board” means the Board of Directors of the Company.

2.8. “Business Combination” shall have the meaning set forth in Section 16.2.

2.9. “Cause” shall be defined as that term is defined in a Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Cause” means, as determined by the Company and unless otherwise provided in an applicable Award Agreement with the Company or an Affiliate: (i) engaging in any act, or failure to act, or misconduct that is injurious to the Company or its Affiliates; (ii) gross negligence or willful misconduct in connection with the performance of duties; (iii) conviction of (or entering a plea of guilty or nolo contendere to) a criminal offense (other than minor traffic offenses); (iv) fraud, embezzlement or misappropriation of funds or property of the Company or an Affiliate; (v) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Company or an Affiliate; (vi) the entry of an order duly issued by any regulatory agency (including federal, state and local regulatory agencies and self-regulatory bodies) having jurisdiction over the Company or an Affiliate requiring the removal from any office held by the Service Provider with the Company or prohibiting a Service Provider from participating in the business or affairs of the Company or any Affiliate; or (vii) the revocation or threatened revocation of any of the Company’s or any Affiliate’s government licenses, permits or approvals, which is primarily due to the Service Provider’s action or inaction and such revocation or threatened revocation would be alleviated or mitigated in any material respect by the termination of the Service Provider’s Services.

2.10. “Change in Control” shall have the meaning set forth in Section 16.2.

2.11. “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

2.12. “Committee” means the Compensation Committee of the Board, or such other committee as determined by the Board. The Compensation Committee of the Board may, in its discretion, designate a subcommittee of its members to serve as the Committee (to the extent the Board has not designated another person, committee or entity as the Committee). The Board will cause the Committee to satisfy the applicable requirements of any stock exchange on which the Common Stock may then be listed. For purposes of Awards to Covered Employees intended to constitute Performance Awards, to the extent required by Code Section 162(m), “Committee” means all of the members of the Compensation Committee who are “outside directors” within the meaning of Section 162(m) of the Code. For purposes of Awards to Grantees who are subject to Section 16 of the Exchange Act, “Committee” means all of the members of the Compensation Committee who are “non-employee directors” within the meaning of Rule 16b-3 adopted under the Exchange Act.

2.13. “Company” means Education Management Corporation, a Pennsylvania corporation, or any successor corporation.

2.14. “Common Stock” or “Stock” means a share of common stock of the Company, par value $0.01 per share. 

2.15. “Covered Employee” means a Grantee who is a “covered employee” within the meaning of Section 162(m)(3) of the Code as qualified by Section 13.4 herein.

2.16. “Disability” means, as determined by the Company and unless otherwise provided in an applicable Award Agreement with the Company or an Affiliate, that the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee’s Service, “Disability” means “permanent and total disability” as set forth in Section 22(e)(3) of the Code.

2.17. “Effective Date” means September 27, 2013.

2.18. “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

2.19. “Fair Market Value” of a share of Common Stock as of a particular date shall mean (1) if the Common Stock is listed on a national securities exchange, the closing or last price of the Common Stock on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, the trading day immediately preceding the applicable date, or (2) if the shares of Common Stock are not then listed on a national securities exchange or national market system, or the value of such shares is not otherwise determinable, such value as determined by the Board in good faith in its sole discretion (but in any event not less than fair market value within the meaning of Section 409A).

2.20. “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the applicable individual, any person sharing the applicable individual’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the applicable individual) control the management of assets, and any other entity in which one or more of these persons (or the applicable individual) own more than fifty percent of the voting interests.

2.21. “Grant Date” means, as determined by the Committee, the latest to occur of (i) the date as of which the Committee approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 hereof, or (iii) such other date as may be specified by the Committee in the Award Agreement.

2.22. “Grantee” means a person who receives or holds an Award under the Plan.

2.23. “Incentive Stock Option” means an “incentive stock option” within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

2.24. “Incumbent Board” shall have the meaning set forth in Section 16.2.

2.25. “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.

2.26. “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

2.27. “Option Price” means the exercise price for each share of Stock subject to an Option.

2.28. “Outside Director” means a member of the Board who is not an officer or employee of the Company or an Affiliate, determined in accordance with the requirements of Section 162(m) of the Code.

2.29. “Outstanding Company Common Stock” shall have the meaning set forth in Section 16.2.

2.30. “Outstanding Company Voting Securities” shall have the meaning set forth in Section 16.2.

2.31. “Performance Award” means an Award made subject to the attainment of performance goals (as described in Section 12) over a performance period of from one (1) to five (5) years.

2.32. “Person” shall have the meaning set forth in Section 16.2.

2.33. “Plan” means this Education Management Corporation Amended 2012 Omnibus Long-Term Incentive Plan.

2.34. “Principal Stockholders” means GS Capital Partners V Fund, L.P., a Delaware limited partnership, GS Capital Partners V Offshore Fund, L.P., a Cayman Islands exempted limited partnership, GS Capital Partners V GmbH & Co. KG, a limited partnership formed under the laws of the Federal Republic of Germany, GS Capital Partners V Institutional, L.P., a Delaware limited partnership, Providence Equity Partners V L.P., a Delaware limited partnership, Providence Equity Partners V-A L.P., a Delaware limited partnership, Providence Equity Partners IV L.P., a Delaware limited partnership, Providence Equity Operating Partners IV L.P., a Delaware limited partnership and Leeds Equity Partners IV, L.P., a Delaware limited partnership.

2.35. “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of Restricted Stock.

2.36. “Reporting Person” means a person who is required to file reports under Section 16(a) of the Exchange Act.

2.37. “Restricted Stock” means shares of Stock awarded to a Grantee pursuant to Section 10 hereof.

2.38. “Restricted Stock Unit” means a bookkeeping entry representing the equivalent of shares of Stock, awarded to a Grantee pursuant to Section 10 hereof.

2.39. “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee under Section 9 hereof.

2.40. “SEC” means the United States Securities and Exchange Commission.

2.41. “Section 409A” shall mean Section 409A of the Code and all formal guidance and regulations promulgated thereunder.

2.42. “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

2.43. “Separation from Service” means a termination of Service by a Service Provider, as determined by the Committee, which determination shall be final, binding and conclusive; provided if any

Award governed by Section 409A is to be distributed on a Separation from Service, then the definition of Separation from Service for such purposes shall comply with the definition provided in Section 409A.

2.44. “Service” means service as a Service Provider to the Company or an Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an Affiliate.

2.45. “Service Provider” means an employee, officer, non-employee member of the Board, consultant or advisor of the Company or an Affiliate.

2.46. “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under Section 9 hereof.

2.47. “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code. 

2.48. “Substitute Award” means any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a Subsidiary or with which the Company or an Affiliate combines.

2.49. “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied.

2.50. “Termination Date” means the date that is ten (10) years after the Effective Date, unless the Plan is earlier terminated by the Board under Section 5.2 hereof.

2.51. “Transaction” shall have the meaning set forth in Section 16.1.

3.ADMINISTRATION OF THE PLAN

3.1. General.

The Committee shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation and bylaws and applicable law. Except as specifically provided in Section 15 or as otherwise may be required by applicable law, regulatory requirement or the articles of incorporation or the bylaws of the Company, the Committee shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Committee deems to be necessary or appropriate to the administration of the Plan; provided, that the Board shall retain the right to exercise the authority of the Committee to the extent consistent with applicable law and the applicable requirements of any securities exchange on which the Common Stock may then be listed. The interpretation and construction by the Committee of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive. Without limitation, the Committee shall have full and final authority, subject to the other terms and conditions of the Plan, to: 

(i) designate Grantees;

(ii) determine the type or types of Awards to be made to a Grantee;

(iii) determine the number of shares of Stock to be subject to an Award;

(iv) establish the terms and conditions of each Award (including, but not limited to, the Option Price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options);

(v) prescribe the form of each Award Agreement; and

(vi) amend, modify, or supplement the terms of any outstanding Award including the authority, in order to effectuate the purposes of the Plan, to modify Awards to foreign nationals or individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom.

To the extent permitted by applicable law, the Committee may delegate its authority as identified herein to any individual or committee of individuals (who need not be directors), including without limitation the authority to make Awards to Grantees who are not subject to Section 16 of the Exchange Act or who are not Covered Employees. To the extent that the Committee delegates its authority to make Awards as provided by this Section 3.1, all references in the Plan to the Committee’s authority to make Awards and determinations with respect thereto shall be deemed to include the Committee’s delegate. Any such delegate shall serve at the pleasure of, and may be removed at any time by the Committee.

3.2. Restrictions; No Repricing.

Notwithstanding the foregoing, no amendment or modification may be made to an outstanding Option or SAR that causes the Option or SAR to become subject to Section 409A, without the Grantee’s written prior approval. Notwithstanding any provision herein to the contrary, the repricing of Options or SARs is prohibited without prior approval of the Company’s stockholders. For this purpose, a “repricing” means any of the following (or any other action that has the same effect as any of the following): (A) changing the terms of an Option or SAR to lower its Option Price or SAR Exercise Price; (B) any other action that is treated as a “repricing” under generally accepted accounting principles; and (C) repurchasing for cash or canceling an Option or SAR at a time when its Option Price or SAR Exercise Price is greater than the Fair Market Value of the underlying shares in exchange for another Award, unless the cancellation and exchange occurs in connection with a change in capitalization or similar change under Section 16. Such cancellation and exchange would be considered a “repricing” regardless of whether it is treated as a “repricing” under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Grantee.

3.3. Award Agreements.

The grant of any Award may be contingent upon the Grantee executing the appropriate Award Agreement. The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable.

If any of the Company’s financial statements are required to be restated, the Company may recover all or a portion of any Award made to any Grantee with respect to any fiscal year of the Company the financial results of which are negatively affected by such restatement. The amount to be recovered shall be the amount, as determined by the Committee, by which the affected Award exceeds the amount that would have been payable had the financial statements been initially filed as restated. In no event shall the amount to be recovered by the Company be less than the amount required to be repaid or recovered as a matter of law.

3.4. Deferral Arrangement.

The Committee may permit or require the deferral of any Award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish and in accordance with Section 409A, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock units.

3.5. No Liability.

No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award or Award Agreement.

3.6. Book Entry.

Notwithstanding any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the delivery of stock certificates through the use of book-entry.

4.STOCK SUBJECT TO THE PLAN

Subject to adjustment as provided in Section 16 hereof, the maximum number of shares of Stock available for issuance under the Plan shall be 20,900,000, plus a number of shares equal to the number of shares subject to stock options granted under the Company’s 2006 Stock Plan and the Company’s Omnibus Long-Term Incentive Plan that are canceled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number of shares underlying such stock options or otherwise terminated without delivery of shares to the grantees (excluding any shares that are canceled as the result of the 2012 Option Exchange Program). 8,450,000 of such shares of Stock available for issuance under the Plan shall be available for issuance pursuant to Incentive Stock Options. Stock issued or to be issued under the Plan shall be authorized but unissued shares; or, to the extent permitted by applicable law, issued shares that have been reacquired by the Company. Subject to adjustments in accordance with Section 15, the maximum number of each type of Award (other than cash-based Performance Awards) intended to constitute “performance-based compensation” under Code Section 162(m) granted to any Grantee in any thirty-six (36) month period shall not exceed the following: Options: 20,900,000; SARs: 20,900,000; Restricted Stock: 12,540,000; Restricted Stock Units: 12,540,000 and other Stock-based Performance Awards (including Annual Incentive Awards): 10,450,000.

The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or Substitute Awards) and make adjustments in accordance with Section 16. If the Option Price of any Option granted under the Plan, or if pursuant to Section 18.3 the withholding obligation of any Grantee with respect to an Option or other Award, is satisfied by tendering shares of Stock to the Company (by either actual delivery or by attestation) or by withholding shares of Stock, the number of shares of Stock issued net of the shares of Stock tendered or withheld shall be deemed delivered for purposes of determining the maximum number of shares of Stock

available for delivery under the Plan. To the extent that an Award under the Plan or a stock option granted under the Company’s 2006 Stock Option Plan or the Company’s Omnibus Long-Term Incentive Plan is canceled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number underlying the Award or stock option, or otherwise terminated without delivery of shares to the Grantee (excluding any shares that are canceled as the result of the 2012 Option Exchange Program), the shares retained by or returned to the Company will be available under the Plan; and shares that are withheld from such an Award or stock option granted under the Company’s 2006 Stock Option Plan or the Company’s Omnibus Long-Term Incentive Plan, or separately surrendered by the Grantee in payment of any exercise price or taxes relating to such an Award or stock option shall be deemed to constitute shares not delivered to the Grantee and will be available under Plan. In addition, in the case of any Substitute Award, such Substitute Award shall not be counted against the number of shares reserved under the Plan. References in this Section 4 to the “2012 Option Exchange Program” are references to the option exchange program described in the related Schedule 14C Information Statement to be filed with the SEC.

5.EFFECTIVE DATE, DURATION, AND AMENDMENTS

5.1. Term; Stockholder Approval.

The Plan shall be effective as of the Effective Date. The Plan shall terminate automatically on the ten (10) year anniversary of the Effective Date and may be terminated on any earlier date as provided in Section 5.2. The Plan is subject to approval by the stockholders of the Company, which approval must occur, if at all, within 12 months of the Effective Date. Awards granted prior to such stockholder approval shall be conditioned upon and shall be effective only upon approval of the Plan by such stockholders on or before such date.

5.2. Amendment and Termination of the Plan.

The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any Awards which have not been made. An amendment shall be contingent on approval of the Company’s stockholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements. Notwithstanding the foregoing, any amendment to Section 3.2 shall be contingent upon the approval of the Company’s stockholders. No Awards shall be made after the Termination Date. The applicable terms of the Plan, and any terms and conditions applicable to Awards granted prior to the Termination Date shall survive the termination of the Plan and continue to apply to such Awards. No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, materially impair rights or obligations under any Award theretofore awarded.

6.AWARD ELIGIBILITY AND LIMITATIONS

6.1. Service Providers.

Subject to this Section 6, Awards may be made to any Service Provider, including any Service Provider who is an officer, Non-employee member of the Board, consultant or advisor of the Company or of any Affiliate, as the Committee shall determine and designate from time to time in its discretion.

6.2. Successive Awards.

An eligible person may receive more than one Award, subject to such restrictions as are provided herein.

6.3. Stand-Alone, Additional, Tandem, and Substitute Awards.

Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, the Committee

shall have the right to require the surrender of such other Award in consideration for the grant of the new Award. The Committee shall have the right, in its discretion, to make Awards in substitution or exchange for any other award under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the value of Stock subject to the Award is equivalent in value to the cash compensation (for example, Restricted Stock Units or Restricted Stock).

7.AWARD AGREEMENT

Each Award shall be evidenced by an Award Agreement, in such form or forms as the Committee shall from time to time determine. Without limiting the foregoing, an Award Agreement may be provided in the form of a notice which provides that acceptance of the Award constitutes acceptance of all terms of the Plan and the notice. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.

8.TERMS AND CONDITIONS OF OPTIONS

8.1. Option Price.

The Option Price of each Option shall be fixed by the Committee and stated in the related Award Agreement. The Option Price of each Option (except those that constitute Substitute Awards) shall be at least the Fair Market Value of a share of Stock on the Grant Date; provided, however, that in the event that a Grantee is a Ten Percent Stockholder as of the Grant Date, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a share of Stock.

8.2. Vesting.

Subject to Section 8.3 hereof, each Option shall become exercisable at such times and under such conditions (including, without limitation, performance requirements) as shall be determined by the Committee and stated in the Award Agreement.

8.3. Term.

Each Option shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten (10) years from the Grant Date, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated in the related Award Agreement; provided, however, that in the event that the Grantee is a Ten Percent Stockholder, an

Option granted to such Grantee that is intended to be an Incentive Stock Option at the Grant Date shall not be exercisable after the expiration of five (5) years from its Grant Date.

8.4. Limitations on Exercise of Option.

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, (i) prior to the date the Plan is approved by the stockholders of the Company as provided herein or (ii) after the occurrence of an event which results in termination of the Option.

8.5. Method of Exercise.

An Option that is exercisable may be exercised by the Grantee’s delivery to the Company of written notice of exercise on any business day, at the Company’s principal office, on the form specified by the Company. Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to an Award. The minimum number of shares of Stock with respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser of (i) the number set forth in the related Award Agreement and (ii) the maximum number of shares available for purchase under the Option at the time of exercise.

8.6. Rights of Holders of Options.

Unless otherwise stated in the related Award Agreement, an individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid and issued to him. Except as provided in Section 16 hereof or the related Award Agreement, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

8.7. Delivery of Stock Certificates.

Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option.

8.8. Limitations on Incentive Stock Options.

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted.

9.TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

9.1. Right to Payment.

An SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one share of Stock on the date of exercise over (ii) the SAR Exercise Price, as determined by the Committee. The Award Agreement for an SAR shall specify the SAR Exercise Price, which shall be fixed at the Fair Market Value of a share of Stock on the Grant Date. SARs may be granted alone or in conjunction with all or part of an Option or at any subsequent time during the term of such Option or in conjunction with all or part of any other Award. An SAR granted in tandem with an outstanding Option following the Grant Date of such Option shall have a grant price that is equal to the Option Price; provided, however, that the SAR’s grant price may not be less than the Fair Market Value of a share of Stock on the Grant Date of the SAR.

9.2. Other Terms.

The Committee shall determine at the Grant Date or thereafter, the time or times at which and the circumstances under which an SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following Separation from Service or upon other conditions, the method of exercise, whether or not an SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

9.3. Term of SARs.

The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.

9.4. Payment of SAR Amount.

Upon exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in cash or Stock, as determined by the Committee) in an amount determined by multiplying:

(i) the difference between the Fair Market Value of a share of Stock on the date of exercise over the SAR Exercise Price; by

(ii) the number of shares of Stock with respect to which the SAR is exercised.

10.TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

10.1. Restrictions.

At the time of grant, the Committee may, in its sole discretion, establish a period of time (a “restricted period”) and any additional restrictions including the satisfaction of corporate or individual performance objectives applicable to an Award of Restricted Stock or Restricted Stock Units in accordance with Section 13.1 and 13.2. Each Award of Restricted Stock or Restricted Stock Units may be subject to a different restricted period and additional restrictions. Neither Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other applicable restrictions.

10.2. Restricted Stock Certificates.

The Company shall issue stock, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates or other evidence of ownership representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Committee may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee; provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

10.3. Rights of Holders of Restricted Stock.

Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock shall have rights as stockholders of the Company.

10.4. Rights of Holders of Restricted Stock Units.

10.4.1. Settlement of Restricted Stock Units.

Restricted Stock Units may be settled in cash or Stock, as determined by the Committee and set forth in the Award Agreement. The Award Agreement shall also set forth whether the Restricted Stock Units shall be settled (i) within the time period specified in Section 18.9.1 for short term deferrals or (ii) otherwise within the requirements of Section 409A, in which case the Award Agreement shall specify upon which dates or events such Restricted Stock Units shall be settled.

10.4.2. Voting and Dividend Rights.

Unless otherwise stated in the applicable Award Agreement, holders of Restricted Stock Units shall not have rights as stockholders of the Company.

10.4.3. Creditor’s Rights.

A holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

10.5. Purchase of Restricted Stock.

The Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a form described in Section 11 or, in the discretion of the Committee, in consideration for past Services rendered.

10.6. Delivery of Stock.

Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to shares of Restricted Stock or Restricted Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

11.FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

11.1. General Rule.

Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company, except as provided in this Section 11.

11.2. Surrender of Stock.

To the extent the Award Agreement so provides, payment of the Option Price for shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be made all or in part through the tender to the Company of shares of Stock, which shares shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price for Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or surrender. Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to make payment in the form of already owned shares of Stock may be authorized only at the time of grant.

11.3. Cashless Exercise.

With respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price may be made all or in part by delivery (on a form acceptable to the Committee) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 18.3.

11.4. Other Forms of Payment.

To the extent the Award Agreement so provides, payment of the Option Price or the Purchase Price for Restricted Stock may be made in any other form that is consistent with applicable laws, regulations and rules, including, but not limited to, the Company’s withholding of shares of Stock otherwise due to the exercising Grantee.

12.TERMS AND CONDITIONS OF ANNUAL INCENTIVE AWARDS

12.1. Grant of Annual Incentive Awards.

Subject to the terms of the Plan, Annual Incentive Awards may be granted to Grantees in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee, subject to the terms of this Section 12.

12.2. Eligibility to Receive Annual Incentive Awards.

Except as otherwise provided in this Plan for Covered Employees, employees shall become Grantees of an Annual Incentive Award only if they are employed on or before March 15^th of the applicable performance period or such other time as the Committee, in its discretion, may designate, and are approved by the Committee or any delegatee of the Committee to receive an Annual Incentive Award.

12.3. Performance Period for Annual Incentive Awards.

Unless otherwise determined by the Committee, the performance period for any Annual Incentive Award generally shall be the Company’s fiscal year, which currently begins July 1^st and ends June 30^th.

12.4. Determination of Annual Incentive Targets.

The Committee shall establish an Annual Incentive Target, the payment of which shall be conditioned on achievement of 100% of the performance goals for the performance period and the employment requirements set forth in this Plan.

12.5. Determination of Performance Goals.

Each performance period, the Committee shall establish the performance goals based on one or more of the business criteria as selected by the Committee for the Plan Year. The Committee also shall establish a formula for determining the percentage of the Annual Incentive Target that may become payable based upon the level of attainment of each performance goal for the performance period. In no event, however, may the percentage of the Annual Incentive Target exceed the maximum amount payable for Performance Awards as described under Section 13.2.4. Annual Incentive Targets, performance goals, and business criteria may differ from Grantee to Grantee.

12.6. Communication of Grants of Annual Incentive Awards.

Grants of Annual Incentive Awards shall be evidenced by Award Agreements with Grantees in such form as the Committee shall, from time to time, approve. Award Agreements shall state the Annual Incentive Target, the performance goals, the percentages of the Annual Incentive Target that may become payable upon achievement of different levels of the performance goals, and the terms and conditions of payment of the Annual Incentive Award. Award Agreements shall be delivered to Grantees on or as soon as administratively practicable after the start of the performance period.

12.7. Determination of Annual Incentive Awards.

After the completion of each performance period, the Committee shall determine the extent to which the performance goals have been achieved or exceeded. If the minimum threshold established by the Committee for payments under all Annual Incentive Awards is not achieved, if applicable, no Annual Incentive Awards will be payable to Grantees. To the extent performance goals are achieved, the Committee or its delegatee shall approve the extent to which the performance goals applicable to each Grantee have been achieved and shall then determine, in accordance with the prescribed formula, the amount of each Grantee’s Award. Notwithstanding any provision of the Plan to the contrary, the Committee may decrease or eliminate the amount of an Award if, in the Committee’s sole discretion, the Committee believes such adjustment is appropriate.

12.8. Performance Awards and Code Section 162(m).

If the grant of any Annual Incentive Awards are intended to be Performance Awards that qualify under Code Section 162(m), the Committee shall follow the procedures set forth in Section 13 of the Plan with respect to such Annual Incentive Awards.

13.TERMS AND CONDITIONS OF PERFORMANCE AWARDS

13.1. Performance Conditions.

The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance conditions, except as limited under Section 13.2 hereof in the case of a Performance Award intended to qualify under Code Section 162(m).

13.2. Performance Awards Granted to Designated Covered Employees.

If and to the extent that the Committee determines that a Performance Award to be granted to a Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 13.2.

13.2.1. Performance Goals Generally.

The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 13.2. Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. Performance goals may, in the discretion of the Committee, be established on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or business segments, as applicable. Performance goals may be absolute or relative (to the performance of one or more comparable companies or indices). Measurement of performance goals may exclude (in the discretion of the Committee) the impact of charges for restructuring, discontinued operations, extraordinary items, other unusual non-recurring items, and the cumulative effects of tax or accounting changes (each as defined by generally accepted accounting principles and as identified in the Company’s financial statements or other SEC filings), and any other specific unusual or nonrecurring events or objectively determinable category thereof as identified in writing by the Committee, in its sole discretion, in the first 90 days of the performance period. Performance goals may differ for Performance Awards granted to any one Grantee or to different Grantees.

13.2.2. Business Criteria.

One or more of the following business criteria for the Company, on a consolidated basis, and/or specified subsidiaries or business units of the Company (except with respect to the total

stockholder return and earnings per share criteria), shall be used exclusively by the Committee in establishing performance goals for such Performance Awards: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre-or after-tax income (before or after allocation of corporate overhead and bonuses; net earnings; basic or diluted earnings per share (before or after taxes); net income (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of, share price; market share; gross profits; earnings (including, earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reduction in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins; gross margins or cash margin; year-end cash; debt reductions; shareholder equity; regulatory performance; academic performances; student loan performance; student retention; curriculum and education program improvement; accreditation; no audit finding under Title IV of the Higher Education Act, as amended; implementation, completion or attainment of measurable objectives with respect to research, development, products or projects and recruiting and maintaining personnel; and other objective criteria established by the Committee in writing in the first 90 days of the performance period.

13.2.3. Timing for Establishing Performance Goals.

Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Code Section 162(m).

13.2.4. Settlement of Performance Awards; Other Terms.

Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards. The maximum amount of each cash-based Performance Award intended to constitute “performance-based compensation” under Code Section 162(m) granted to any Grantee in any twelve (12) month period shall not exceed Five Million Dollars ($5,000,000).

13.3. Written Determinations.

All determinations by the Committee as to the designation of Covered Employees, establishment of performance goals and extraordinary events described in Section 13.2.1 that are to be excluded when measuring achievement of the performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards, shall be made in writing in the case of any Award intended to qualify under Code Section 162(m), to the extent required by Code Section 162(m). To the extent permitted by Code Section 162(m), the Committee may delegate any responsibility relating to such Performance Awards.

13.4. Status of Section 13.2 Awards under Code Section 162(m).

It is the intent of the Company that Performance Awards under Section 13.2 hereof granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute

“qualified performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Section 13.2, including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Grantee will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of Performance Awards, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement relating to such Performance Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

14.OTHER STOCK-BASED AWARDS

14.1. Grant of Other Stock-based Awards.

Other Stock-based Awards, consisting of Stock units, or other Awards, valued in whole or in part by reference to, or otherwise based on, Common Stock, may be granted either alone or in addition to or in conjunction with other Awards under the Plan. Other Stock-based Awards may be granted in lieu of other cash or other compensation to which a Service Provider is entitled from the Company or may be used in the settlement of amounts payable in shares of Common Stock under any other compensation plan or arrangement of the Company, including without limitation, the Company’s Incentive Compensation Plan. Subject to the provisions of the Plan, the Committee shall have the sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards, and all other conditions of such Awards. Unless the Committee determines otherwise, any such Award shall be confirmed by an Award Agreement, which shall contain such provisions as the Committee determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award.

14.2. Terms of Other Stock-based Awards.

Any Common Stock subject to Awards made under this Section 14 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

15.REQUIREMENTS OF LAW

14.1. General.

The Company shall not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such shares would constitute a violation by the Grantee, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect

the date of termination of the Award. Specifically, in connection with the Securities Act, upon the exercise of any Option or the delivery of any shares of Stock underlying an Award, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Award, the Company shall not be required to sell or issue such shares unless the Committee has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Committee shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option shall not be exercisable until the shares of Stock covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

15.2. Rule 16b-3.

During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards and the exercise of Options granted to officers and directors hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board or Committee does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

16.EFFECT OF CHANGES IN CAPITALIZATION

16.1. Changes in Capitalization.

16.1.1. Changes in Stock.

If (i) the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date or (ii) there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by the Company, the number and kinds of shares for which grants of Options and other Stock-based Awards may be made under the Plan (including the per-Grantee maximums set forth in Section 4) shall be equitably adjusted by the Company such that the rights of the holders of grants of Options and other Stock-based Awards are neither enlarged nor diminished; provided that any such adjustment shall comply with Section 409A and, in the case of Incentive Stock Options, with Code Section 424. In addition, in the event of any such increase or decrease in the number of outstanding shares or other transaction described in clause (ii) above, the number and kind of shares for which Awards are outstanding and the Option Price per share of outstanding options and SAR Exercise Price per share of outstanding SARs shall be equitably adjusted; provided that any such adjustment shall comply with Section 409A.

16.1.2. Effect of Certain Transactions.

Except as otherwise provided in an Award Agreement, in the event of (a) the liquidation or dissolution of the Company or (b) a reorganization, merger, exchange or consolidation of the Company or involving the shares of Common Stock (a “Transaction”), the Plan and the Awards issued hereunder shall continue in effect in accordance with their respective terms, except that following a Transaction either (i) each outstanding Award shall be treated as provided for in the agreement entered into in connection with the Transaction or (ii) if not so provided in such agreement, each Grantee shall be entitled to receive in respect of each share of Common Stock subject to any outstanding Awards, upon exercise or payment or transfer in respect of any Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a share of Common Stock was entitled to receive in the Transaction in respect of a share of Common stock; provided, however, that, unless otherwise determined by the Committee, such stock, securities, cash, property or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to the Awards prior to such Transaction. Without limiting the generality of the foregoing, the treatment of outstanding Options and SARs pursuant to this Section 16.1.2 in connection with a Transaction in which the consideration paid or distributed to the Company’s stockholders is not entirely shares of common stock of the acquiring or resulting corporation may include the cancellation of outstanding Options and SARs upon consummation of the Transaction as long as, at the election of the Committee, (x) the holders of affected Options and SARs have been given a period of at least fifteen days prior to the date of the consummation of the Transaction to exercise the Options or SARs (whether or not they were otherwise exercisable) or (y) the holders of the affected Options and SARs are paid (in cash or cash equivalents) in respect of each share of Stock covered by the Option or SAR being canceled an amount equal to the excess, if any, of the per share price paid or distributed to stockholders in the transaction (the value of any non-cash consideration to be determined by the Committee in its sole discretion) over the Option Price or SAR Exercise Price, as applicable. For avoidance of doubt, (1) the cancellation of Options and SARs pursuant to clause (y) of the preceding sentence may be effected notwithstanding anything to the contrary contained in this Plan or any Award Agreement and (2) if the amount determined pursuant to clause (y) of the preceding sentence is zero or less, the affected Option or SAR may be cancelled without any payment therefore. The treatment of any Award as provided in this Section 16.1.2 shall be conclusively presumed to be appropriate for purposes of Section 16.1.1.

16.2. Definition of Change in Control.

“Change in Control” means:

(1) Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d 3 promulgated under the Exchange Act) of 30% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section 16.2, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition pursuant to a transaction that complies with Sections 16.2(3)(A), (B) and (C) or (v) any acquisition by any of the Principal Stockholders or their Affiliates other than in connection with a going private

transaction within the meaning of Rule 13e-3 of the Exchange Act consummated more than 12 months after the completion of the 2012 Option Exchange Program.

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(3) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

(4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, if it is determined that an Award hereunder is subject to the requirements of Section 409A, the Company will not be deemed to have undergone a Change in Control unless the Company is deemed to have undergone a “change in control event” pursuant to the definition of such term in Section 409A.

16.3. Effect of Change in Control.

The Committee shall determine the effect of a Change in Control upon Awards, and such effect may be set forth in the appropriate Award Agreement. Without limiting the foregoing, the Committee may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the

Grantee, the actions that will be taken upon the occurrence of a Change in Control, including, but not limited to, accelerated vesting, termination or assumption. The Committee may also provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 16.1 and 16.2.

16.4. Reorganization Which Does Not Constitute a Change in Control.

If the Company undergoes any reorganization, merger, or consolidation of the Company with one or more other entities which does not constitute a Change in Control, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price of the shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation.

16.5. Adjustments.

Adjustments under this Section 16 related to shares of Stock or securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.

17.NO LIMITATIONS ON COMPANY

The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.

18.TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN

18.1. Disclaimer of Rights.

No provision in the Plan or in any Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Company either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a Service Provider. The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.

18.2. Nonexclusivity of the Plan.

Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals), including, without limitation, the granting of stock options as the Board in its discretion determines desirable.

18.3. Withholding Taxes.

The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to an Award, (ii) upon the issuance of any shares of Stock upon the exercise of an Option or SAR, or (iii) otherwise due in connection with an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the Affiliate, which may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or the Affiliate to withhold the minimum required number of shares of Stock otherwise issuable to the Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or the Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 18.3 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

18.4. Captions.

The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or any Award Agreement.

18.5. Other Provisions.

Each Award Agreement may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Committee, in its sole discretion.

18.6. Number and Gender.

With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.

18.7. Severability.

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

18.8. Governing Law.

The Plan shall be governed by and construed 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. 

18.9. Section 409A.

18.9.1. Short-Term Deferrals.

For each Award intended to comply with the short-term deferral exception provided for under Section 409A, the related Award Agreement shall provide that such Award shall be paid out by the later of (i) the 15^th day of the third month following the Grantee’s first taxable year in which the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15^th day of the third month following the end of the Company’s first taxable year in which the Award is no longer subject to a substantial risk of forfeiture.

18.9.2. Adjustments.

To the extent that the Committee determines that a Grantee would be subject to the additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of any provision of any Award, to the extent permitted by Section 409A, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The Committee shall determine the nature and scope of such amendment.

18.10. Stockholder Approval; Effective Date of Plan.

The Plan shall be effective as of the Effective Date. Any Option that is designated as an Incentive Stock Option shall be a Nonqualified Stock Option if the Plan is not approved by the shareholders of the Company within twelve (12) months after the Effective Date of the Plan. No award that is intended to qualify as performance-based compensation within the meaning of Code Section 162(m) shall be effective unless and until the Plan is approved by the stockholders of the Company.

18.11. Separation from Service.

The Committee shall determine the effect of a Separation from Service upon Awards, and such effect shall be set forth in the appropriate Award Agreement. Without limiting the foregoing, the Committee may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, the actions that will be taken upon the occurrence of a Separation from Service, including, but not limited to, accelerated vesting or termination, depending upon the circumstances surrounding the Separation from Service.

18.12. Transferability of Awards.

18.12.1. Transfers in General.

Except as provided in Section 18.12.2, no Award shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution, and, during the lifetime of the Grantee, only the Grantee personally (or the Grantee’s personal representative) may exercise rights under the Plan.

18.12.2. Family Transfers.

If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Award (other than Incentive Stock Options) to any Family Member. For the purpose of this Section 18.12.2, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 18.12.2, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Awards are prohibited except to Family Members of the original Grantee in accordance with this Section 18.12.2 or by will or the laws of descent and distribution.

18.13. Dividends and Dividend Equivalent Rights.

If specified in the Award Agreement, the recipient of an Award under this Plan may be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the Common Stock or other securities covered by an Award. The terms and conditions of a dividend equivalent right may be set forth in the Award Agreement. Dividend equivalents credited to a Grantee may be paid currently or may be deemed to be reinvested in additional shares of Stock or other securities of the Company at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend was paid to shareholders, as determined in the sole discretion of the Committee.

In witness whereof, Education Management Corporation has caused this 2013 Omnibus Incentive Plan to be executed in its name, by its duly authorized officer, effective as of the Effective Date.

EDUCATION MANAGEMENT CORPORATION

By: ________________________________________

Title: _______________________________________

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 December 31, 2013 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 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: February 10, 2014

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

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Mick J. Beekhuizen, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2013 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 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: February 10, 2014

By:	/S/ MICK J. BEEKHUIZEN
	Mick J. Beekhuizen
	Executive Vice President and 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 December 31, 2013 (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: February 10, 2014

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 December 31, 2013 (the “Report”), I, Mick J. Beekhuizen, Executive Vice President and 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: February 10, 2014

By:	/S/ MICK J. BEEKHUIZEN
	Mick J. Beekhuizen
	Executive Vice President and Chief Financial Officer

XML

Goodwill And Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended		6 Months Ended																	12 Months Ended			12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013	Jun. 01, 2006	Dec. 31, 2013 Minimum [Member]	Dec. 31, 2013 Maximum [Member]	Dec. 31, 2013 Curriculum and programs [Member]	Jun. 30, 2013 Curriculum and programs [Member]	Dec. 31, 2012 Curriculum and programs [Member]	Dec. 31, 2013 Student contracts, application and relationships [Member]	Jun. 30, 2013 Student contracts, application and relationships [Member]	Dec. 31, 2012 Student contracts, application and relationships [Member]	Dec. 31, 2013 Favorable leases and other [Member]	Jun. 30, 2013 Favorable leases and other [Member]	Dec. 31, 2012 Favorable leases and other [Member]	Dec. 31, 2013 Tradename-Art Institute [Member]	Jun. 30, 2013 Tradename-Art Institute [Member]	Dec. 31, 2012 Tradename-Art Institute [Member]	Dec. 31, 2013 Licensing, accreditation and Title IV program participation [Member]	Jun. 30, 2013 Licensing, accreditation and Title IV program participation [Member]	Dec. 31, 2012 Licensing, accreditation and Title IV program participation [Member]	Jun. 30, 2013 The Art Institutes [Member]	Dec. 31, 2013 The Art Institutes [Member] Rate	Mar. 31, 2013 The Art Institutes [Member] Rate	Jun. 30, 2013 Argosy University [Member]	Jun. 30, 2013 South University [Member]
Goodwill and Intangible Assets [Line Items]
Reporting Unit, Percentage of Fair Value in Excess of Carrying Amount																									10.00%	15.00%
Indefinte-lived Intangible Assets, Licenses and Accreditations							1 year	10 years
Goodwill [Roll Forward]
Goodwill, Beginning Balance			$ 669,090	$ 963,550	$ 963,550	$ 2,600,000																		$ 861,619			$ 63,445	$ 38,486
Goodwill impairment					294,460																			(294,460)			0	0
Goodwill, Ending Balance	669,090	963,550	669,090	963,550	669,090	2,600,000																		567,159			63,445	38,486
Finite-Lived Intangible Assets, Net [Abstract]
Gross Carrying Amount - Indefinite-Lived Intangible Assets																		190,000	190,000	218,000	95,862	95,862	95,862
Gross Carrying Amount - Finite-Lived Intangible Assets									45,315	43,575	41,172	39,511	39,511	39,511	19,403	19,424	19,435
Gross Carrying Amount - Intangible Assets, Net	390,091	413,980	390,091	413,980	388,372
Accumulated Amortization	(90,112)	(84,619)	(90,112)	(84,619)	(87,937)				(33,800)	(32,596)	(30,392)	(37,937)	(37,381)	(36,826)	(18,375)	(17,960)	(17,401)	0	0	0	0	0	0
Amortization of intangible assets	1,500	1,600	3,017	3,159
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
2014 (remainder)	2,882		2,882
2015	5,266		5,266
2016	3,910		3,910
2017	2,008		2,008
2018	$ 51		$ 51

XML

Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012		Jun. 30, 2013
Segment Reporting Information [Line Items]
Net revenues	$ 593,673		$ 654,895		$ 1,174,053		$ 1,264,459
EBITDA Excluding Certain Expenses	87,083		123,328		139,250		186,249
Reconciliation to Consolidated (Loss) Income Before Income Taxes [Abstract]
Restructuring	(9,452)	[1]	0	[1]	(11,097)	[1]	(9,145)	[1]
Settlement-related charges	5,959		0		5,959		0
Long-lived asset impairments	(3,847)	[2]	0	[2]	(3,847)	[2]	0	[2]
Depreciation and amortization	(38,593)		(39,255)		(77,198)		(83,400)
Net interest expense	(31,615)		(31,009)		(63,481)		(62,461)
(Loss) income before income taxes	(2,383)		53,064		(22,332)		31,243
Assets	2,180,088	[3]	2,693,818	[3]	2,180,088	[3]	2,693,818	[3]	2,315,293	[3]
The Art Institutes [Member]
Reconciliation to Consolidated (Loss) Income Before Income Taxes [Abstract]
Assets	1,371,173	[3]	1,748,715	[3]	1,371,173	[3]	1,748,715	[3]	1,438,028	[3]
Argosy University [Member]
Reconciliation to Consolidated (Loss) Income Before Income Taxes [Abstract]
Assets	204,924	[3]	242,546	[3]	204,924	[3]	242,546	[3]	257,608	[3]
Brown Mackie Colleges [Member]
Reconciliation to Consolidated (Loss) Income Before Income Taxes [Abstract]
Assets	190,294	[3]	190,915	[3]	190,294	[3]	190,915	[3]	231,225	[3]
South University [Member]
Reconciliation to Consolidated (Loss) Income Before Income Taxes [Abstract]
Assets	203,945	[3]	202,341	[3]	203,945	[3]	202,341	[3]	226,041	[3]
Corporate and Other [Member]
Reconciliation to Consolidated (Loss) Income Before Income Taxes [Abstract]
Assets	209,752	[3]	309,301	[3]	209,752	[3]	309,301	[3]	162,391	[3]
Operating Segments [Member] | The Art Institutes [Member]
Segment Reporting Information [Line Items]
Net revenues	371,474		411,533		727,989		791,672
EBITDA Excluding Certain Expenses	87,992		113,429		147,089		182,848
Operating Segments [Member] | Argosy University [Member]
Segment Reporting Information [Line Items]
Net revenues	76,640		92,312		159,788		174,232
EBITDA Excluding Certain Expenses	2,547		15,231		5,931		15,401
Operating Segments [Member] | Brown Mackie Colleges [Member]
Segment Reporting Information [Line Items]
Net revenues	69,463		78,274		139,649		152,246
EBITDA Excluding Certain Expenses	7,123		8,980		13,407		18,186
Operating Segments [Member] | South University [Member]
Segment Reporting Information [Line Items]
Net revenues	76,096		72,776		146,627		146,309
EBITDA Excluding Certain Expenses	12,158		9,132		17,550		16,364
Corporate, Non-Segment [Member] | Corporate and Other [Member]
Segment Reporting Information [Line Items]
EBITDA Excluding Certain Expenses	$ (22,737)		$ (23,444)		$ (44,727)		$ (46,550)

[1] Refer to Note 7, "Accrued Liabilities," for more information on these charges.

[2] Refer to Note 4, "Property and Equipment," for more information on these charges.

[3] Excludes inter-company activity.

XML

Contingencies (Details) (USD $)	1 Months Ended	3 Months Ended	6 Months Ended		3 Months Ended			1 Months Ended					6 Months Ended	3 Months Ended
	Jan. 31, 2014	Dec. 31, 2013	Dec. 31, 2013 Qui Tam Matters [Member] Plantiffs	Dec. 31, 2013 Qui Tam Matters [Member] Pending Litigation [Member]	Dec. 31, 2013 State of Colorado Attorney General [Member]	Dec. 31, 2013 State of Colorado Attorney General [Member] Eligible Students [Member]	Dec. 31, 2013 State of Colorado Attorney General [Member] Colorado Department of Law [Member]	Dec. 31, 2010 Attorney General of the Commonwealth of Kentucky [Member] Threatened Litigation [Member] Subpoenas Education_Systems	Oct. 31, 2010 Florida Attorney General [Member] Threatened Litigation [Member] Education_Systems	Dec. 31, 2011 City Attorney of the City of San Francisco, California [Member] Threatened Litigation [Member]	Dec. 31, 2013 AU Seattle APA Program Accreditation Lawsuit [Member] Threatened Litigation [Member] Plantiffs	Aug. 31, 2013 AU Seattle APA Program Accreditation Lawsuit [Member] Threatened Litigation [Member] Plantiffs	Dec. 31, 2013 U.S. Department of Veterans Affairs [Member] Threatened Litigation [Member] Education_Systems	Dec. 31, 2013 General and Administrative Expense [Member] State of Colorado Attorney General [Member]
Loss Contingencies [Line Items]
Number of plaintiffs			5								9	20
Loss Contingency, Damages Sought, Value				$ 11,000,000,000
Number of states included in investigation of potential issues	13
Litigation Settlement, Amount					3,400,000	2,900,000	500,000							3,400,000
Litigation Settlement Amount, Suspended Civil Penalties							$ 1,000,000
Litigation Settlement Amount, Suspended Civil Penalty, Suspension Period		3 years
Loss Contingency, Number of Locations Impacted								3	9	7			4
Loss Contingency, Number of Schools Impacted by Subpoena								6

XML

Guarantor Subsidiaries Financial Information (Tables)

3 Months Ended

6 Months Ended

Dec. 31, 2013

Dec. 31, 2013

Dec. 31, 2012

Gurantor Subsidiaries Financial Information [Abstract]

Schedule of Condensed Balance Sheet

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2013 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	57,425	$	126		$	3,239		$	—		$	60,790		$	—		$	—		$	60,790
Restricted cash	46,176		—			224,096			—			270,272			—			—			270,272
Student and other receivables, net	9,814		(15		)	191,581			—			201,380			—			—			201,380
Other current assets	27,848		586			118,581			—			147,015			—			—			147,015
Total current assets	141,263		697			537,497			—			679,457			—			—			679,457
Property and equipment, net	61,134		5,836			410,252			—			477,222			—			—			477,222
Goodwill	7,328		—			661,762			—			669,090			—			—			669,090
Intangible assets, net	976		22			298,981			—			299,979			—			—			299,979
Other long-term assets	1,519		—			52,821			—			54,340			—			—			54,340
Inter-company balances	473,854		(30,765		)	(623,801		)	—			(180,712		)	180,712			—			—
Investment in subsidiaries	769,767		—			—			(769,767		)	—			75,917			(75,917		)	—
Total assets	$	1,455,841	$	(24,210	)	$	1,337,512		$	(769,767	)	$	1,999,376		$	256,629		$	(75,917	)	$	2,180,088
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,875	$	—		$	26		$	—		$	11,901		$	—		$	—		$	11,901
Other current liabilities	55,898		3,096			288,491			—			347,485			3			—			347,488
Total current liabilities	67,773		3,096			288,517			—			359,386			3			—			359,389
Long-term debt, less current portion	1,272,387		—			—			—			1,272,387			—			—			1,272,387
Other long-term liabilities	37,531		184			182,232			—			219,947			(2		)	—			219,945
Deferred income taxes	2,233		399			69,107			—			71,739			383			—			72,122
Total liabilities	1,379,924		3,679			539,856			—			1,923,459			384			—			1,923,843
Total shareholders’ equity (deficit)	75,917		(27,889		)	797,656			(769,767		)	75,917			256,245			(75,917		)	256,245
Total liabilities and shareholders’ equity (deficit)	$	1,455,841	$	(24,210	)	$	1,337,512		$	(769,767	)	$	1,999,376		$	256,629		$	(75,917	)	$	2,180,088

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	(10,777	)	$	139		$	141,110		$	—		$	130,472		$	223		$	—		$	130,695
Restricted cash	46,982			—			224,358			—			271,340			—			—			271,340
Student and other receivables, net	134			253			238,565			—			238,952			1			—			238,953
Other current assets	27,488			570			102,573			—			130,631			—			—			130,631
Total current assets	63,827			962			706,606			—			771,395			224			—			771,619
Property and equipment, net	65,018			5,984			454,623			—			525,625			—			—			525,625
Goodwill	7,328			—			661,762			—			669,090			—			—			669,090
Intangible assets, net	1,101			28			299,306			—			300,435			—			—			300,435
Other long-term assets	5,059			—			43,465			—			48,524			—			—			48,524
Inter-company balances	653,504			(31,016		)	(791,213		)	—			(168,725		)	168,725			—			—
Investment in subsidiaries	741,069			—			—			(741,069		)	—			81,532			(81,532		)	—
Total assets	$	1,536,906		$	(24,042	)	$	1,374,549		$	(741,069	)	$	2,146,344		$	250,481		$	(81,532	)	$	2,315,293
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt and revolving credit facility	$	86,850		$	—		$	226		$	—		$	87,076		$	—		$	—		$	87,076
Other current liabilities	51,558			3,018			344,397			—			398,973			49			—			399,022
Total current liabilities	138,408			3,018			344,623			—			486,049			49			—			486,098
Long-term debt, less current portion	1,273,214			—			—			—			1,273,214			(50		)	—			1,273,164
Other long-term liabilities	41,519			248			193,849			—			235,616			—			—			235,616
Deferred income taxes	2,233			399			67,301			—			69,933			383			—			70,316
Total liabilities	1,455,374			3,665			605,773			—			2,064,812			382			—			2,065,194
Total shareholders’ equity (deficit)	81,532			(27,707		)	768,776			(741,069		)	81,532			250,099			(81,532		)	250,099
Total liabilities and shareholders’ equity (deficit)	$	1,536,906		$	(24,042	)	$	1,374,549		$	(741,069	)	$	2,146,344		$	250,481		$	(81,532	)	$	2,315,293

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2012 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	183,968	$	180		$	3,679		$	—		$	187,827		$	1,215		$	—		$	189,042
Restricted cash	41,370		—			232,055			—			273,425			—			—			273,425
Student and other receivables, net	—		142			172,684			—			172,826			—			—			172,826
Other current assets	37,350		715			112,710			—			150,775			—			—			150,775
Total current assets	262,688		1,037			521,128			—			784,853			1,215			—			786,068
Property and equipment, net	65,231		7,454			489,499			—			562,184			—			—			562,184
Goodwill	7,328		—			956,222			—			963,550			—			—			963,550
Intangible assets, net	1,801		34			327,526			—			329,361			—			—			329,361
Other long-term assets	15,043		—			37,612			—			52,655			—			—			52,655
Inter-company balances	687,013		(29,674		)	(815,535		)	—			(158,196		)	158,196			—			—
Investment in subsidiaries	911,317		—			—			(911,317		)	—			364,090			(364,090		)	—
Total assets	$	1,950,421	$	(21,149	)	$	1,516,452		$	(911,317	)	$	2,534,407		$	523,501		$	(364,090	)	$	2,693,818
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,850	$	—		$	226		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	75,752		3,580			277,577			—			356,909			(3		)	—			356,906
Total current liabilities	87,602		3,580			277,803			—			368,985			(3		)	—			368,982
Long-term debt, less current portion	1,447,601		—			98			—			1,447,699			—			—			1,447,699
Other long-term liabilities	49,598		316			203,770			—			253,684			—			—			253,684
Deferred income taxes	1,530		515			97,904			—			99,949			(104		)	—			99,845
Total liabilities	1,586,331		4,411			579,575			—			2,170,317			(107		)	—			2,170,210
Total shareholders’ equity (deficit)	364,090		(25,560		)	936,877			(911,317		)	364,090			523,608			(364,090		)	523,608
Total liabilities and shareholders’ equity (deficit)	$	1,950,421	$	(21,149	)	$	1,516,452		$	(911,317	)	$	2,534,407		$	523,501		$	(364,090	)	$	2,693,818

Schedule of Income Statement

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	1,677		$	591,996		$	—		$	593,673		$	—		$	—		$	593,673
Costs and expenses:
Educational services	26,231			2,280			317,076			—			345,587			—			—			345,587
General and administrative	(8,636		)	(525		)	185,575			—			176,414			—			—			176,414
Depreciation and amortization	7,124			156			31,313			—			38,593			—			—			38,593
Long-lived asset impairments	—			—			3,847			—			3,847			—			—			3,847
Total costs and expenses	24,719			1,911			537,811			—			564,441			—			—			564,441
Income (loss) before interest and income taxes	(24,719		)	(234		)	54,185			—			29,232			—			—			29,232
Interest expense (income), net	31,797			—			(182		)	—			31,615			—			—			31,615
Equity in subsidiaries	18,290			—			—			(18,290		)	—			1,090			(1,090		)	—
(Loss) Income before income taxes	(38,226		)	(234		)	54,367			(18,290		)	(2,383		)	1,090			(1,090		)	(2,383		)
Income tax (benefit) expense	(39,316		)	(170		)	36,013			—			(3,473		)	1			—			(3,472		)
Net income (loss)	$	1,090		$	(64	)	$	18,354		$	(18,290	)	$	1,090		$	1,089		$	(1,090	)	$	1,089
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,518		$	—		$	—		$	—		$	1,518		$	1,518		$	(1,518	)	$	1,518
Foreign currency translation loss	(163		)	—			(163		)	163			(163		)	(163		)	163			(163		)
Other comprehensive income (loss)	1,355			—			(163		)	163			1,355			1,355			(1,355		)	1,355
Comprehensive income (loss)	$	2,445		$	(64	)	$	18,191		$	(18,127	)	$	2,445		$	2,444		$	(2,445	)	$	2,444

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	1,738		$	653,157		$	—		$	654,895		$	—		$	—		$	654,895
Costs and expenses:																						—
Educational services	29,515			2,645			328,218			—			360,378			(1		)	—			360,377
General and administrative	(19,799		)	(85		)	191,074			—			171,190			—			—			171,190
Depreciation and amortization	7,281			152			31,822			—			39,255			—			—			39,255
Total costs and expenses	16,997			2,712			551,114			—			570,823			(1		)	—			570,822
Income (loss) before interest and income taxes	(16,997		)	(974		)	102,043			—			84,072			1			—			84,073
Interest expense (income), net	30,416			—			600			—			31,016			(7		)	—			31,009
Equity in subsidiaries	57,038			—			—			(57,038		)	—			31,136			(31,136		)	—
Income (loss) before income taxes	9,625			(974		)	101,443			(57,038		)	53,056			31,144			(31,136		)	53,064
Income tax expense (benefit)	(21,511		)	(344		)	43,775			—			21,920			—						21,920
Net income (loss)	$	31,136		$	(630	)	$	57,668		$	(57,038	)	$	31,136		$	31,144		$	(31,136	)	$	31,144
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,666		$	—		$	—		$	—		$	1,666		$	1,666		$	(1,666	)	$	1,666
Foreign currency translation loss	(98		)	—			(98		)	98			(98		)	(98		)	98			(98		)
Other comprehensive income (loss)	1,568			—			(98		)	98			1,568			1,568			(1,568		)	1,568
Comprehensive income (loss)	$	32,704		$	(630	)	$	57,570		$	(56,940	)	$	32,704		$	32,712		$	(32,704	)	$	32,712

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For the Six Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	3,894		$	1,170,159		$	—		$	1,174,053		$	—		$	—		$	1,174,053
Costs and expenses:
Educational services	47,608			5,092			650,574			—			703,274			2			—			703,276
General and administrative	(27,483		)	(1,022		)	377,088			—			348,583			—			—			348,583
Depreciation and amortization	14,063			306			62,829			—			77,198			—			—			77,198
Long-lived asset impairments	—			—			3,847						3,847									3,847
Total costs and expenses	34,188			4,376			1,094,338			—			1,132,902			2			—			1,132,904
Income (loss) before interest and income taxes	(34,188		)	(482		)	75,821			—			41,151			(2		)	—			41,149
Interest expense (income), net	63,719			—			(234		)	—			63,485			(4		)	—			63,481
Equity in subsidiaries	28,515			—			—			(28,515		)	—			(8,427		)	8,427			—
(Loss) income before income taxes	(69,392		)	(482		)	76,055			(28,515		)	(22,334		)	(8,425		)	8,427			(22,332		)
Income tax (benefit) expense	(60,965		)	(300		)	47,358			—			(13,907		)	1			—			(13,906		)
Net (loss) income	$	(8,427	)	$	(182	)	$	28,697		$	(28,515	)	$	(8,427	)	$	(8,426	)	$	8,427		$	(8,426	)
Net change in unrecognized loss on interest rate swaps, net of tax	$	2,628		$	—		$	—		$	—		$	2,628		$	2,628		$	(2,628	)	$	2,628
Foreign currency translation gain	183			—			183			(183		)	183			183			(183		)	183
Other comprehensive income	2,811			—			183			(183		)	2,811			2,811			(2,811		)	2,811
Comprehensive (loss) income	$	(5,616	)	$	(182	)	$	28,880		$	(28,698	)	$	(5,616	)	$	(5,615	)	$	5,616		$	(5,615	)

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the Six Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			EM LLC Consolidated		EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	4,159		$	1,260,300	$	—		$	1,264,459	$	—		$	—		$	1,264,459
Costs and expenses:
Educational services	64,315			5,290			672,069		—			741,674		(1		)	—			741,673
General and administrative	(31,377		)	(3,424		)	380,483		—			345,682		—			—			345,682
Depreciation and amortization	18,879			303			64,218		—			83,400		—			—			83,400
Total costs and expenses	51,817			2,169			1,116,770		—			1,170,756		(1		)	—			1,170,755
Income (loss) before interest and income taxes	(51,817		)	1,990			143,530		—			93,703		1			—			93,704
Interest expense (income), net	61,275			—			1,199		—			62,474		(13		)	—			62,461
Equity in subsidiaries	83,355			—			—		(83,355		)	—		18,037			(18,037		)	—
(Loss) Income before income taxes	(29,737		)	1,990			142,331		(83,355		)	31,229		18,051			(18,037		)	31,243
Income tax expense (benefit)	(47,774		)	841			60,125		—			13,192		—						13,192
Net income	$	18,037		$	1,149		$	82,206	$	(83,355	)	$	18,037	$	18,051		$	(18,037	)	$	18,051
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,252		$	—		$	—	$	—		$	1,252	$	1,252		$	(1,252	)	$	1,252
Foreign currency translation gain	59			—			59		(59		)	59		59			(59		)	59
Other comprehensive income	1,311			—			59		(59		)	1,311		1,311			(1,311		)	1,311
Comprehensive income	$	19,348		$	1,149		$	82,265	$	(83,414	)	$	19,348	$	19,362		$	(19,348	)	$	19,362

Schedule of Condensed Cash Flow Statement

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(32,233	)	$	418		$	71,503		$	39,688		$	2		$	39,690
Cash flows from investing activities:
Expenditures for long-lived assets	(4,014		)	(383		)	(26,934		)	(31,331		)	—			(31,331		)
Other investing activities	—			—			(573		)	(573		)	—			(573		)
Net cash flows used in investing activities	(4,014		)	(383		)	(27,507		)	(31,904		)	—			(31,904		)
Cash flows from financing activities:
Net repayments of debt	(80,888		)	—			(200		)	(81,088		)				(81,088		)
Share-based payment activity	—			—			—			—			3,389			3,389
Inter-company transactions	185,337			(48		)	(181,675		)	3,614			(3,614		)	—
Net cash flows provided by (used in) financing activities	104,449			(48		)	(181,875		)	(77,474		)	(225		)	(77,699		)
Effect of exchange rate changes on cash and cash equivalents	—			—			8			8			—			8
Increase (decrease) in cash and cash equivalents	68,202			(13		)	(137,871		)	(69,682		)	(223		)	(69,905		)
Beginning cash and cash equivalents	(10,777		)	139			141,110			130,472			223			130,695
Ending cash and cash equivalents	$	57,425		$	126		$	3,239		$	60,790		$	—		$	60,790

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(46,583	)	$	(3,191	)	$	142,935		$	93,161		$	16		$	93,177
Cash flows from investing activities
Expenditures for long-lived assets	(4,578		)	(524		)	(34,356		)	(39,458		)	—			(39,458		)
Proceeds from sale of fixed assets	—			—			65,065			65,065			—			65,065
Other investing activities	(375		)	—			(3,516		)	(3,891		)	—			(3,891		)
Net cash flows provided by (used in) investing activities	(4,953		)	(524		)	27,193			21,716			—			21,716
Cash flows from financing activities
Net repayments of debt and other	(116,930		)	—			(136		)	(117,066		)	—			(117,066		)
Inter-company transactions	378,683			3,797			(380,480		)	2,000			(2,000		)	—
Net cash flows provided by (used in) financing activities	261,753			3,797			(380,616		)	(115,066		)	(2,000		)	(117,066		)
Effect of exchange rate changes on cash and cash equivalents	—			—			207			207			—			207
Increase (decrease) in cash and cash equivalents	210,217			82			(210,281		)	18			(1,984		)	(1,966		)
Beginning cash and cash equivalents	(26,249		)	98			213,960			187,809			3,199			191,008
Ending cash and cash equivalents	$	183,968		$	180		$	3,679		$	187,827		$	1,215		$	189,042

XML

Earnings Per Share (Tables)

6 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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

	For the Three Months Ended December 31,				For the Six Months Ended December 31,
	2013		2012		2013			2012
Net income (loss)	$	1,089	$	31,144	$	(8,426	)	$	18,051
Weighted average number of shares outstanding:
Basic	125,450		124,560		125,053			124,519
Effect of stock-based awards	5,560		202		—			101
Diluted	131,010		124,762		125,053			124,620
Earnings (loss) per share
Basic	$	0.01	$	0.25	$	(0.07	)	$	0.14
Diluted	$	0.01	$	0.25	$	(0.07	)	$	0.14

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Short-Term And Long-Term Debt (Details) (USD $)				6 Months Ended						6 Months Ended			6 Months Ended																							6 Months Ended	3 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2013 Revolving Credit Facility [Member]	Dec. 31, 2013 Letter of Credit [Member]	Jan. 31, 2014 U.S. Department of Education [Member]	Dec. 31, 2013 U.S. Department of Education [Member]	Dec. 31, 2013 U.S. Department of Education [Member] Revolving Credit Facility [Member]	Dec. 31, 2013 Revolving Credit Facility Due 2015 [Member] Revolving Credit Facility [Member]	Dec. 31, 2013 Senior Secured Term Loan Facility Due 2016 [Member] Rate	Jun. 30, 2013 Senior Secured Term Loan Facility Due 2016 [Member] Rate	Dec. 31, 2012 Senior Secured Term Loan Facility Due 2016 [Member] Rate	Dec. 31, 2013 Credit Agreement [Member] Term Loan [Member]	Dec. 31, 2013 Senior Secured Notes Due 2018 [Member] Rate	Dec. 31, 2012 Senior Secured Notes Due 2018 [Member] Rate	Jun. 30, 2012 Senior Secured Notes Due 2018 [Member] Rate	Dec. 31, 2013 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Jun. 30, 2013 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Dec. 31, 2012 Term Loan [Member] Senior Secured Term Loan Facility Due 2016 [Member]	Dec. 31, 2013 Term Loan [Member] Senior Secured Term Loan Facility, Due in March 2018 [Member]	Jun. 30, 2013 Term Loan [Member] Senior Secured Term Loan Facility, Due in March 2018 [Member]	Dec. 31, 2012 Term Loan [Member] Senior Secured Term Loan Facility, Due in March 2018 [Member]	Dec. 31, 2013 Term Loan [Member] Senior cash pay/PIK notes [Domain]	Jun. 30, 2013 Term Loan [Member] Senior cash pay/PIK notes [Domain]	Dec. 31, 2013 Senior Cash Pay/PIK [Member] Senior cash pay/PIK notes [Member]	Jun. 30, 2013 Senior Cash Pay/PIK [Member] Senior cash pay/PIK notes [Member]	Dec. 31, 2012 Senior Cash Pay/PIK [Member] Senior cash pay/PIK notes [Member]	Mar. 05, 2013 Senior Cash Pay/PIK [Member] Rate	Dec. 31, 2013 Senior Notes [Member] Senior Notes Due 2014 [Member]	Jun. 30, 2013 Senior Notes [Member] Senior Notes Due 2014 [Member]	Dec. 31, 2012 Senior Notes [Member] Senior Notes Due 2014 [Member] Rate	Dec. 31, 2013 Other Long-term Debt [Member]	Jun. 30, 2013 Other Long-term Debt [Member]	Dec. 31, 2012 Other Long-term Debt [Member]	Dec. 31, 2013 Minimum [Member]	Dec. 31, 2013 Maximum [Member] Credit Agreement [Member] Term Loan [Member] Rate	Dec. 31, 2013 Prime Rate [Member] Revolving Credit Facility Due 2015 [Member] Revolving Credit Facility [Member]	Jan. 31, 2014 Subsequent Event [Member] U.S. Department of Education [Member]
Line of Credit Facility [Line Items]
Letters of Credit Outstanding, Amount	$ 354,000,000						$ 348,600,000																															$ 302,200,000
Letters of Credit Oustanding, Percentage of Total Title IV Aid Received by Students						15.00%	15.00%
Line of Credit Facility, Cash Secured					210,000,000
Cash Collateral for Borrowed Securities, Required Percentage of Aggregate																																			105.00%
Line of Credit Facility, Maximum Borrowing Capacity				328,300,000				148,600,000
Cash Collateral for Borrowed Securities	200,000,000
Short-term Debt				75,000,000
Line of Credit Facility, Remaining Borrowing Capacity				174,300,000
Line of Credit Facility, Interest Rate at Period End									6.25%
Basis Spread on Variable Rate										4.00%																										7.00%	3.00%
Line of Credit Facility, Commitment Fee Percentage				0.375%
Stated percentage																												15.00%			8.75%					1.25%
Debt Instrument, Description of Variable Rate Basis													LIBOR																							LIBOR
Original Issue Discount																												13.00%
Effective Percentage																												19.80%
Capitalized discount																				2,593,000	2,898,000	3,203,000	25,024,000	27,712,000
Interest Rate at Period End										4.25%	4.31%	4.38%		8.25%	8.25%	8.25%
Long-term Debt, Excluding Current Maturities [Abstract]
Long-term Debt																	732,412,000	736,454,000	740,497,000	340,776,000	342,364,000	343,954,000			211,073,000	206,242,000	0		0	0	375,000,000	27,000	180,000	324,000
Long-term Debt, Net of Discount	1,284,288,000	1,285,240,000	1,459,775,000
Less current portion	(11,901,000)	(12,076,000)	(12,076,000)
Total long-term debt, less current portion	$ 1,272,387,000	$ 1,273,164,000	$ 1,447,699,000

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Share-Based Compensation (Details) (USD $)	0 Months Ended	1 Months Ended	3 Months Ended		6 Months Ended
	Nov. 08, 2013 Rate	Oct. 31, 2009	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Options Outstanding, Number			14,800,000		14,800,000
Unrecognized Compensation Expense			$ 41,700,000		$ 41,700,000
Exercisable			3,600,000		3,600,000
Award Vesting, Percent	25.00%
Share-based Compensation	16,500,000
Share-based Compensation			5,700,000	4,100,000	9,828,000	7,679,000
Stock Issued During Period, Shares, New Issues		23,000,000
Gross excess tax benefit from share-based compensation					3,391,000	0
Time-based shares [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number granted	1,500,000
Fair value per unit	$ 7.66
Exercise price	$ 12.74
Expected dividend yield	0.00%
Expected volatility	64.00%
Risk free interest rate	1.86%
Expected term (yrs)	6 years 3 months
Options Outstanding, Number			11,300,000		11,300,000
Unrecognized Compensation Expense			27,000,000		27,000,000
Exercisable			3,600,000		3,600,000
Weighted Average Exercise Price / Share Price			$ 3.58		$ 3.58
Award Vesting Period	4 years
Restricted Stock Units (RSUs) [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number granted	600,000
Fair value per unit	$ 12.74
Options Outstanding, Number			2,500,000		2,500,000
Unrecognized Compensation Expense			12,600,000		12,600,000
Weighted Average Exercise Price / Share Price			$ 5.90		$ 5.90
Performance-based options [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Options Outstanding, Number			1,000,000		1,000,000
Unrecognized Compensation Expense			$ 2,100,000		$ 2,100,000
Exercisable			0		0
Weighted Average Exercise Price / Share Price			$ 3.59		$ 3.59
Director [Member] | Restricted Stock Units (RSUs) [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Number granted	100,000
Award Vesting Period	1 year
Common Stock [Member]
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Issued During Period, Shares, New Issues					1,500,000
2012 Omnibus Plan [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized for issuance			4,000,000
Common Stock shares reserved for issuance			5,600,000		5,600,000

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Guarantor Subsidiaries Financial Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended				12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012		Jun. 30, 2013		Jun. 30, 2012	Jun. 01, 2006
Balance Sheet
Cash and cash equivalents	$ 60,790		$ 189,042		$ 60,790		$ 189,042		$ 130,695		$ 191,008
Restricted cash	270,272		273,425		270,272		273,425		271,340
Student and other receivables, net	163,741		156,294		163,741		156,294		206,406
Other current assets	34,709		48,107		34,709		48,107		32,850
Total current assets	679,457		786,068		679,457		786,068		771,619
Property and equipment, net	477,222		562,184		477,222		562,184		525,625
Goodwill	669,090		963,550		669,090		963,550		669,090		963,550	2,600,000
Intangible assets, net (Note 5)	299,979		329,361		299,979		329,361		300,435
Other long-term assets	54,340		52,655		54,340		52,655		48,524
Total assets	2,180,088	[1]	2,693,818	[1]	2,180,088	[1]	2,693,818	[1]	2,315,293	[1]
Current portion of long-term debt (Note 8)	11,901		12,076		11,901		12,076		12,076
Total current liabilities	359,389		368,982		359,389		368,982		486,098
Long-term debt, less current portion (Note 8)	1,272,387		1,447,699		1,272,387		1,447,699		1,273,164
Other long-term liabilities	30,772		41,599		30,772		41,599		34,414
Total shareholders' equity	256,245		523,608		256,245		523,608		250,099		496,564
Total liabilities and shareholders’ equity	2,180,088		2,693,818		2,180,088		2,693,818		2,315,293
Income Statement
Net revenues	593,673		654,895		1,174,053		1,264,459
Educational services	(345,587)		(360,377)		(703,276)		(741,673)
General and administrative	(176,414)		(171,190)		(348,583)		(345,682)
Depreciation and amortization	38,593		39,255		77,198		83,400
Long-lived asset impairments									(294,460)
Total costs and expenses	564,441		570,822		1,132,904		1,170,755
Income (loss) before interest and income taxes	29,232		84,073		41,149		93,704
Net interest expense	31,615		31,009		63,481		62,461
(Loss) income before income taxes	(2,383)		53,064		(22,332)		31,243
(Benefit from) provision for income taxes	(3,472)		21,920		(13,906)		13,192
Net income (loss)	1,089		31,144		(8,426)		18,051		(267,976)
Net change in unrecognized loss on interest rate swaps, net of tax	(459)		(249)		(1,300)		(2,432)
Foreign currency translation (loss) gain	(163)		(98)		183		59
Other comprehensive income	1,355		1,568		2,811		1,311		4,396
Comprehensive income (loss)	2,444		32,712		(5,615)		19,362
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					39,690		93,177
Expenditures for long-lived assets					(31,331)		(39,458)
Proceeds from sale of fixed assets			65,100		0		65,065
Other investing activities					(573)		(3,891)
Net cash flows (used in) provided by investing activities					(31,904)		21,716
Share-based payment activity					2,722		3
Net cash flows used in financing activities					(77,699)		(117,066)
Effect of exchange rate changes on cash and cash equivalents					8		207
Net change in cash and cash equivalents					(69,905)		(1,966)
EM LLC [Member]
Balance Sheet
Cash and cash equivalents	57,425		183,968		57,425		183,968		(10,777)		(26,249)
Restricted cash	46,176		41,370		46,176		41,370		46,982
Student and other receivables, net	9,814		0		9,814		0		134
Other current assets	27,848		37,350		27,848		37,350		27,488
Total current assets	141,263		262,688		141,263		262,688		63,827
Property and equipment, net	61,134		65,231		61,134		65,231		65,018
Goodwill	7,328		7,328		7,328		7,328		7,328
Intangible assets, net (Note 5)	976		1,801		976		1,801		1,101
Other long-term assets	1,519		15,043		1,519		15,043		5,059
Intercompany balances	473,854		687,013		473,854		687,013		653,504
Investments in subsidiaries	769,767		911,317		769,767		911,317		741,069
Total assets	1,455,841		1,950,421		1,455,841		1,950,421		1,536,906
Current portion of long-term debt (Note 8)	11,875		11,850		11,875		11,850		86,850
Other current liabilities	55,898		75,752		55,898		75,752		51,558
Total current liabilities	67,773		87,602		67,773		87,602		138,408
Long-term debt, less current portion (Note 8)	1,272,387		1,447,601		1,272,387		1,447,601		1,273,214
Other long-term liabilities	37,531		49,598		37,531		49,598		41,519
Deferred income taxes	2,233		1,530		2,233		1,530		2,233
Total liabilities	1,379,924		1,586,331		1,379,924		1,586,331		1,455,374
Total shareholders' equity	75,917		364,090		75,917		364,090		81,532
Total liabilities and shareholders’ equity	1,455,841		1,950,421		1,455,841		1,950,421		1,536,906
Income Statement
Net revenues	0		0		0		0
Educational services	(26,231)		(29,515)		(47,608)		(64,315)
General and administrative	8,636		19,799		27,483		31,377
Depreciation and amortization	7,124		7,281		14,063		18,879
Long-lived asset impairments	0				0
Total costs and expenses	24,719		16,997		34,188		51,817
Income (loss) before interest and income taxes	(24,719)		(16,997)		(34,188)		(51,817)
Net interest expense	31,797		30,416		63,719		61,275
Income (Loss) from Equity Method Investments	18,290		57,038		28,515		83,355
(Loss) income before income taxes	(38,226)		9,625		(69,392)		(29,737)
(Benefit from) provision for income taxes	(39,316)		(21,511)		(60,965)		(47,774)
Net income (loss)	1,090		31,136		(8,427)		18,037
Net change in unrecognized loss on interest rate swaps, net of tax	1,518		1,666		2,628		1,252
Foreign currency translation (loss) gain	(163)		(98)		183		59
Other comprehensive income	1,355		1,568		2,811		1,311
Comprehensive income (loss)	2,445		32,704		(5,616)		19,348
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					(32,233)		(46,583)
Expenditures for long-lived assets					(4,014)		(4,578)
Proceeds from sale of fixed assets							0
Other investing activities					0		(375)
Net cash flows (used in) provided by investing activities					(4,014)		(4,953)
Net borrowings of debt and other					(80,888)		(116,930)
Share-based payment activity					0
Intercompany transactions					185,337		378,683
Net cash flows used in financing activities					104,449		261,753
Effect of exchange rate changes on cash and cash equivalents					0		0
Net change in cash and cash equivalents					68,202		210,217
Guarantor Subsidiaries [Member]
Balance Sheet
Cash and cash equivalents	126		180		126		180		139		98
Restricted cash	0		0		0		0		0
Student and other receivables, net	(15)		142		(15)		142		253
Other current assets	586		715		586		715		570
Total current assets	697		1,037		697		1,037		962
Property and equipment, net	5,836		7,454		5,836		7,454		5,984
Goodwill	0		0		0		0		0
Intangible assets, net (Note 5)	22		34		22		34		28
Other long-term assets	0		0		0		0		0
Intercompany balances	(30,765)		(29,674)		(30,765)		(29,674)		(31,016)
Investments in subsidiaries	0		0		0		0		0
Total assets	(24,210)		(21,149)		(24,210)		(21,149)		(24,042)
Current portion of long-term debt (Note 8)	0		0		0		0		0
Other current liabilities	3,096		3,580		3,096		3,580		3,018
Total current liabilities	3,096		3,580		3,096		3,580		3,018
Long-term debt, less current portion (Note 8)	0		0		0		0		0
Other long-term liabilities	184		316		184		316		248
Deferred income taxes	399		515		399		515		399
Total liabilities	3,679		4,411		3,679		4,411		3,665
Total shareholders' equity	(27,889)		(25,560)		(27,889)		(25,560)		(27,707)
Total liabilities and shareholders’ equity	(24,210)		(21,149)		(24,210)		(21,149)		(24,042)
Income Statement
Net revenues	1,677		1,738		3,894		4,159
Educational services	(2,280)		(2,645)		(5,092)		(5,290)
General and administrative	525		85		1,022		3,424
Depreciation and amortization	156		152		306		303
Long-lived asset impairments	0				0
Total costs and expenses	1,911		2,712		4,376		2,169
Income (loss) before interest and income taxes	(234)		(974)		(482)		1,990
Net interest expense	0		0		0		0
Income (Loss) from Equity Method Investments	0		0		0		0
(Loss) income before income taxes	(234)		(974)		(482)		1,990
(Benefit from) provision for income taxes	(170)		(344)		(300)		841
Net income (loss)	(64)		(630)		(182)		1,149
Net change in unrecognized loss on interest rate swaps, net of tax	0		0		0		0
Foreign currency translation (loss) gain	0		0		0		0
Other comprehensive income	0		0		0		0
Comprehensive income (loss)	(64)		(630)		(182)		1,149
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					418		(3,191)
Expenditures for long-lived assets					(383)		(524)
Proceeds from sale of fixed assets							0
Other investing activities					0		0
Net cash flows (used in) provided by investing activities					(383)		(524)
Net borrowings of debt and other					0		0
Share-based payment activity					0
Intercompany transactions					(48)		3,797
Net cash flows used in financing activities					(48)		3,797
Effect of exchange rate changes on cash and cash equivalents					0		0
Net change in cash and cash equivalents					(13)		82
Non-Guarantor Subsidiaries [Member]
Balance Sheet
Cash and cash equivalents	3,239		3,679		3,239		3,679		141,110		213,960
Restricted cash	224,096		232,055		224,096		232,055		224,358
Student and other receivables, net	191,581		172,684		191,581		172,684		238,565
Other current assets	118,581		112,710		118,581		112,710		102,573
Total current assets	537,497		521,128		537,497		521,128		706,606
Property and equipment, net	410,252		489,499		410,252		489,499		454,623
Goodwill	661,762		956,222		661,762		956,222		661,762
Intangible assets, net (Note 5)	298,981		327,526		298,981		327,526		299,306
Other long-term assets	52,821		37,612		52,821		37,612		43,465
Intercompany balances	(623,801)		(815,535)		(623,801)		(815,535)		(791,213)
Investments in subsidiaries	0		0		0		0		0
Total assets	1,337,512		1,516,452		1,337,512		1,516,452		1,374,549
Current portion of long-term debt (Note 8)	26		226		26		226		226
Other current liabilities	288,491		277,577		288,491		277,577		344,397
Total current liabilities	288,517		277,803		288,517		277,803		344,623
Long-term debt, less current portion (Note 8)	0		98		0		98		0
Other long-term liabilities	182,232		203,770		182,232		203,770		193,849
Deferred income taxes	69,107		97,904		69,107		97,904		67,301
Total liabilities	539,856		579,575		539,856		579,575		605,773
Total shareholders' equity	797,656		936,877		797,656		936,877		768,776
Total liabilities and shareholders’ equity	1,337,512		1,516,452		1,337,512		1,516,452		1,374,549
Income Statement
Net revenues	591,996		653,157		1,170,159		1,260,300
Educational services	(317,076)		(328,218)		(650,574)		(672,069)
General and administrative	(185,575)		(191,074)		(377,088)		(380,483)
Depreciation and amortization	31,313		31,822		62,829		64,218
Long-lived asset impairments	3,847				3,847
Total costs and expenses	537,811		551,114		1,094,338		1,116,770
Income (loss) before interest and income taxes	54,185		102,043		75,821		143,530
Net interest expense	(182)		600		(234)		1,199
Income (Loss) from Equity Method Investments	0		0		0		0
(Loss) income before income taxes	54,367		101,443		76,055		142,331
(Benefit from) provision for income taxes	36,013		43,775		47,358		60,125
Net income (loss)	18,354		57,668		28,697		82,206
Net change in unrecognized loss on interest rate swaps, net of tax	0		0		0		0
Foreign currency translation (loss) gain	(163)		(98)		183		59
Other comprehensive income	(163)		(98)		183		59
Comprehensive income (loss)	18,191		57,570		28,880		82,265
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					71,503		142,935
Expenditures for long-lived assets					(26,934)		(34,356)
Proceeds from sale of fixed assets							65,065
Other investing activities					(573)		(3,516)
Net cash flows (used in) provided by investing activities					(27,507)		27,193
Net borrowings of debt and other					(200)		(136)
Share-based payment activity					0
Intercompany transactions					(181,675)		(380,480)
Net cash flows used in financing activities					(181,875)		(380,616)
Effect of exchange rate changes on cash and cash equivalents					8		207
Net change in cash and cash equivalents					(137,871)		(210,281)
Eliminations [Member]
Balance Sheet
Cash and cash equivalents	0		0		0		0		0
Restricted cash	0		0		0		0		0
Student and other receivables, net	0		0		0		0		0
Other current assets	0		0		0		0		0
Total current assets	0		0		0		0		0
Property and equipment, net	0		0		0		0		0
Goodwill	0		0		0		0		0
Intangible assets, net (Note 5)	0		0		0		0		0
Other long-term assets	0		0		0		0		0
Intercompany balances	0		0		0		0		0
Investments in subsidiaries	(769,767)		(911,317)		(769,767)		(911,317)		(741,069)
Total assets	(769,767)		(911,317)		(769,767)		(911,317)		(741,069)
Current portion of long-term debt (Note 8)	0		0		0		0		0
Other current liabilities	0		0		0		0		0
Total current liabilities	0		0		0		0		0
Long-term debt, less current portion (Note 8)	0		0		0		0		0
Other long-term liabilities	0		0		0		0		0
Deferred income taxes	0		0		0		0		0
Total liabilities	0		0		0		0		0
Total shareholders' equity	(769,767)		(911,317)		(769,767)		(911,317)		(741,069)
Total liabilities and shareholders’ equity	(769,767)		(911,317)		(769,767)		(911,317)		(741,069)
Income Statement
Net revenues	0		0		0		0
Educational services	0		0		0		0
General and administrative	0		0		0		0
Depreciation and amortization	0		0		0		0
Long-lived asset impairments	0
Total costs and expenses	0		0		0		0
Income (loss) before interest and income taxes	0		0		0		0
Net interest expense	0		0		0		0
Income (Loss) from Equity Method Investments	(18,290)		(57,038)		(28,515)		(83,355)
(Loss) income before income taxes	(18,290)		(57,038)		(28,515)		(83,355)
(Benefit from) provision for income taxes	0		0		0		0
Net income (loss)	(18,290)		(57,038)		(28,515)		(83,355)
Net change in unrecognized loss on interest rate swaps, net of tax	0		0		0		0
Foreign currency translation (loss) gain	163		98		(183)		(59)
Other comprehensive income	163		98		(183)		(59)
Comprehensive income (loss)	(18,127)		(56,940)		(28,698)		(83,414)
EM LLC Consolidated [Member]
Balance Sheet
Cash and cash equivalents	60,790		187,827		60,790		187,827		130,472		187,809
Restricted cash	270,272		273,425		270,272		273,425		271,340
Student and other receivables, net	201,380		172,826		201,380		172,826		238,952
Other current assets	147,015		150,775		147,015		150,775		130,631
Total current assets	679,457		784,853		679,457		784,853		771,395
Property and equipment, net	477,222		562,184		477,222		562,184		525,625
Goodwill	669,090		963,550		669,090		963,550		669,090
Intangible assets, net (Note 5)	299,979		329,361		299,979		329,361		300,435
Other long-term assets	54,340		52,655		54,340		52,655		48,524
Intercompany balances	(180,712)		(158,196)		(180,712)		(158,196)		(168,725)
Investments in subsidiaries	0		0		0		0		0
Total assets	1,999,376		2,534,407		1,999,376		2,534,407		2,146,344
Current portion of long-term debt (Note 8)	11,901		12,076		11,901		12,076		87,076
Other current liabilities	347,485		356,909		347,485		356,909		398,973
Total current liabilities	359,386		368,985		359,386		368,985		486,049
Long-term debt, less current portion (Note 8)	1,272,387		1,447,699		1,272,387		1,447,699		1,273,214
Other long-term liabilities	219,947		253,684		219,947		253,684		235,616
Deferred income taxes	71,739		99,949		71,739		99,949		69,933
Total liabilities	1,923,459		2,170,317		1,923,459		2,170,317		2,064,812
Total shareholders' equity	75,917		364,090		75,917		364,090		81,532
Total liabilities and shareholders’ equity	1,999,376		2,534,407		1,999,376		2,534,407		2,146,344
Income Statement
Net revenues	593,673		654,895		1,174,053		1,264,459
Educational services	(345,587)		(360,378)		(703,274)		(741,674)
General and administrative	(176,414)		(171,190)		(348,583)		(345,682)
Depreciation and amortization	38,593		39,255		77,198		83,400
Long-lived asset impairments	3,847				3,847
Total costs and expenses	564,441		570,823		1,132,902		1,170,756
Income (loss) before interest and income taxes	29,232		84,072		41,151		93,703
Net interest expense	31,615		31,016		63,485		62,474
Income (Loss) from Equity Method Investments	0		0		0		0
(Loss) income before income taxes	(2,383)		53,056		(22,334)		31,229
(Benefit from) provision for income taxes	(3,473)		21,920		(13,907)		13,192
Net income (loss)	1,090		31,136		(8,427)		18,037
Net change in unrecognized loss on interest rate swaps, net of tax	1,518		1,666		2,628		1,252
Foreign currency translation (loss) gain	(163)		(98)		183		59
Other comprehensive income	1,355		1,568		2,811		1,311
Comprehensive income (loss)	2,445		32,704		(5,616)		19,348
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					39,688		93,161
Expenditures for long-lived assets					(31,331)		(39,458)
Proceeds from sale of fixed assets							65,065
Other investing activities					(573)		(3,891)
Net cash flows (used in) provided by investing activities					(31,904)		21,716
Net borrowings of debt and other					(81,088)		(117,066)
Share-based payment activity					0
Intercompany transactions					3,614		2,000
Net cash flows used in financing activities					(77,474)		(115,066)
Effect of exchange rate changes on cash and cash equivalents					8		207
Net change in cash and cash equivalents					(69,682)		18
EDMC [Member]
Balance Sheet
Cash and cash equivalents	0		1,215		0		1,215		223		3,199
Restricted cash	0		0		0		0		0
Student and other receivables, net	0		0		0		0		1
Other current assets	0		0		0		0		0
Total current assets	0		1,215		0		1,215		224
Property and equipment, net	0		0		0		0		0
Goodwill	0		0		0		0		0
Intangible assets, net (Note 5)	0		0		0		0		0
Other long-term assets	0		0		0		0		0
Intercompany balances	180,712		158,196		180,712		158,196		168,725
Investments in subsidiaries	75,917		364,090		75,917		364,090		81,532
Total assets	256,629		523,501		256,629		523,501		250,481
Current portion of long-term debt (Note 8)	0		0		0		0		0
Other current liabilities	3		(3)		3		(3)		49
Total current liabilities	3		(3)		3		(3)		49
Long-term debt, less current portion (Note 8)	0		0		0		0		(50)
Other long-term liabilities	(2)		0		(2)		0		0
Deferred income taxes	383		(104)		383		(104)		383
Total liabilities	384		(107)		384		(107)		382
Total shareholders' equity	256,245		523,608		256,245		523,608		250,099
Total liabilities and shareholders’ equity	256,629		523,501		256,629		523,501		250,481
Income Statement
Net revenues	0		0		0		0
Educational services	0		1		(2)		1
General and administrative	0		0		0		0
Depreciation and amortization	0		0		0		0
Long-lived asset impairments	0
Total costs and expenses	0		(1)		2		(1)
Income (loss) before interest and income taxes	0		1		(2)		1
Net interest expense	0		(7)		(4)		(13)
Income (Loss) from Equity Method Investments	1,090		31,136		(8,427)		18,037
(Loss) income before income taxes	1,090		31,144		(8,425)		18,051
(Benefit from) provision for income taxes	1		0		1		0
Net income (loss)	1,089		31,144		(8,426)		18,051
Net change in unrecognized loss on interest rate swaps, net of tax	1,518		1,666		2,628		1,252
Foreign currency translation (loss) gain	(163)		(98)		183		59
Other comprehensive income	1,355		1,568		2,811		1,311
Comprehensive income (loss)	2,444		32,712		(5,615)		19,362
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					2		16
Expenditures for long-lived assets					0		0
Proceeds from sale of fixed assets							0
Other investing activities					0		0
Net cash flows (used in) provided by investing activities					0		0
Net borrowings of debt and other							0
Share-based payment activity					3,389
Intercompany transactions					(3,614)		(2,000)
Net cash flows used in financing activities					(225)		(2,000)
Effect of exchange rate changes on cash and cash equivalents					0		0
Net change in cash and cash equivalents					(223)		(1,984)
Consolidation, Eliminations [Member]
Balance Sheet
Cash and cash equivalents	0		0		0		0		0
Restricted cash	0		0		0		0		0
Student and other receivables, net	0		0		0		0		0
Other current assets	0		0		0		0		0
Total current assets	0		0		0		0		0
Property and equipment, net	0		0		0		0		0
Goodwill	0		0		0		0		0
Intangible assets, net (Note 5)	0		0		0		0		0
Other long-term assets	0		0		0		0		0
Intercompany balances	0		0		0		0		0
Investments in subsidiaries	(75,917)		(364,090)		(75,917)		(364,090)		(81,532)
Total assets	(75,917)		(364,090)		(75,917)		(364,090)		(81,532)
Current portion of long-term debt (Note 8)	0		0		0		0		0
Other current liabilities	0		0		0		0		0
Total current liabilities	0		0		0		0		0
Long-term debt, less current portion (Note 8)	0		0		0		0		0
Other long-term liabilities	0		0		0		0		0
Deferred income taxes	0		0		0		0		0
Total liabilities	0		0		0		0		0
Total shareholders' equity	(75,917)		(364,090)		(75,917)		(364,090)		(81,532)
Total liabilities and shareholders’ equity	(75,917)		(364,090)		(75,917)		(364,090)		(81,532)
Income Statement
Net revenues	0		0		0		0
Educational services	0		0		0		0
General and administrative	0		0		0		0
Depreciation and amortization	0		0		0		0
Long-lived asset impairments	0
Total costs and expenses	0		0		0		0
Income (loss) before interest and income taxes	0		0		0		0
Net interest expense	0		0		0		0
Income (Loss) from Equity Method Investments	(1,090)		(31,136)		8,427		(18,037)
(Loss) income before income taxes	(1,090)		(31,136)		8,427		(18,037)
(Benefit from) provision for income taxes	0				0
Net income (loss)	(1,090)		(31,136)		8,427		(18,037)
Net change in unrecognized loss on interest rate swaps, net of tax	(1,518)		(1,666)		(2,628)		(1,252)
Foreign currency translation (loss) gain	163		98		(183)		(59)
Other comprehensive income	(1,355)		(1,568)		(2,811)		(1,311)
Comprehensive income (loss)	(2,445)		(32,704)		5,616		(19,348)
Consolidated Entities [Member]
Balance Sheet
Cash and cash equivalents	60,790		189,042		60,790		189,042		130,695		191,008
Restricted cash	270,272		273,425		270,272		273,425		271,340
Student and other receivables, net	201,380		172,826		201,380		172,826		238,953
Other current assets	147,015		150,775		147,015		150,775		130,631
Total current assets	679,457		786,068		679,457		786,068		771,619
Property and equipment, net	477,222		562,184		477,222		562,184		525,625
Goodwill	669,090		963,550		669,090		963,550		669,090
Intangible assets, net (Note 5)	299,979		329,361		299,979		329,361		300,435
Other long-term assets	54,340		52,655		54,340		52,655		48,524
Intercompany balances	0		0		0		0		0
Investments in subsidiaries	0		0		0		0		0
Total assets	2,180,088		2,693,818		2,180,088		2,693,818		2,315,293
Current portion of long-term debt (Note 8)	11,901		12,076		11,901		12,076		87,076
Other current liabilities	347,488		356,906		347,488		356,906		399,022
Total current liabilities	359,389		368,982		359,389		368,982		486,098
Long-term debt, less current portion (Note 8)	1,272,387		1,447,699		1,272,387		1,447,699		1,273,164
Other long-term liabilities	219,945		253,684		219,945		253,684		235,616
Deferred income taxes	72,122		99,845		72,122		99,845		70,316
Total liabilities	1,923,843		2,170,210		1,923,843		2,170,210		2,065,194
Total shareholders' equity	256,245		523,608		256,245		523,608		250,099
Total liabilities and shareholders’ equity	2,180,088		2,693,818		2,180,088		2,693,818		2,315,293
Income Statement
Net revenues	593,673		654,895		1,174,053		1,264,459
Educational services	(345,587)		(360,377)		(703,276)		(741,673)
General and administrative	(176,414)		(171,190)		(348,583)		(345,682)
Depreciation and amortization	38,593		39,255		77,198		83,400
Long-lived asset impairments	3,847				3,847
Total costs and expenses	564,441		570,822		1,132,904		1,170,755
Income (loss) before interest and income taxes	29,232		84,073		41,149		93,704
Net interest expense	31,615		31,009		63,481		62,461
Income (Loss) from Equity Method Investments	0		0		0		0
(Loss) income before income taxes	(2,383)		53,064		(22,332)		31,243
(Benefit from) provision for income taxes	(3,472)		21,920		(13,906)		13,192
Net income (loss)	1,089		31,144		(8,426)		18,051
Net change in unrecognized loss on interest rate swaps, net of tax	1,518		1,666		2,628		1,252
Foreign currency translation (loss) gain	(163)		(98)		183		59
Other comprehensive income	1,355		1,568		2,811		1,311
Comprehensive income (loss)	2,444		32,712		(5,615)		19,362
Statement of Cash Flows [Abstract]
Net cash provided by (used in) operations					39,690		93,177
Expenditures for long-lived assets					(31,331)		(39,458)
Proceeds from sale of fixed assets							65,065
Other investing activities					(573)		(3,891)
Net cash flows (used in) provided by investing activities					(31,904)		21,716
Net borrowings of debt and other					(81,088)		(117,066)
Share-based payment activity					3,389
Intercompany transactions					0		0
Net cash flows used in financing activities					(77,699)		(117,066)
Effect of exchange rate changes on cash and cash equivalents					8		207
Net change in cash and cash equivalents					$ (69,905)		$ (1,966)

[1] Excludes inter-company activity.

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Consolidated Statements Of Shareholders' Equity (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified				6 Months Ended	12 Months Ended		6 Months Ended	12 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2013 Treasury Stock [Member]	Jun. 30, 2013 Treasury Stock [Member]	Dec. 31, 2012 Treasury Stock [Member]	Dec. 31, 2013 Common Stock [Member]	Jun. 30, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]
Comprehensive income:
Cumulative loss on interest rate swaps, tax benefit	$ 10.1	$ 12.7	$ 16.4
Foreign currency translation gain	$ (0.7)	$ (0.9)	$ (0.3)
Common stock, shares authorized	600,000,000	600,000,000	600,000,000
Common stock, par value	$ 0.01	$ 0.01	$ 0.01
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury Stock, Number of Shares Held, Beginning of Period				18,902,140	18,902,140	18,902,140
Common Stock, Shares, Outstanding, Beginning of Period							124,601,524	124,477,807	124,601,524
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures				0	0		1,526,280	123,717
Shares Paid for Tax Withholding for Share Based Compensation				233,450			(233,450)
Treasury Stock, Number of Shares Held, End of Period				19,135,590	18,902,140	18,902,140
Common Stock, Shares, Outstanding, End of Period							125,894,354	124,601,524	124,601,524

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Derivative Instruments (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Interest Rate Swap [Member]	Dec. 31, 2013 Interest Rate Swap [Member] Estimate of Fair Value Measurement [Member] Other Liabilities [Member]	Jun. 30, 2013 Interest Rate Swap [Member] Estimate of Fair Value Measurement [Member] Other Liabilities [Member]	Dec. 31, 2012 Interest Rate Swap [Member] Estimate of Fair Value Measurement [Member] Other Liabilities [Member]	Dec. 31, 2013 Swap, Interest Rate Swaps, Maturity Fiscal 2015 [Member] Interest Rate Swap [Member] Derivatives
Derivative [Line Items]
Number of Interest Rate Derivatives Held									2
Derivative, Notional Amount									$ 312,500,000
Effective Percentage									6.26%
Net change in unrecognized loss on interest rate swaps, net of tax	(459,000)	(249,000)	(1,300,000)	(2,432,000)	10,100,000
Fair value of interest rate swap liabilities						16,054,000	20,232,000	27,252,000
Estimated Net Transfer, Current			$ 7,900,000

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Student Receivables (Tables)

3 Months Ended

6 Months Ended

Dec. 31, 2013

Dec. 31, 2013

Receivables [Abstract]

Schedule of Other Assets

The gross short-term and long-term student receivables by student status were as follows (in thousands):

	December 31, 2013		June 30, 2013		December 31, 2012
In-school	$	191,671	$	194,062	$	188,224
Out-of-school	209,647		239,330		186,465
Gross student receivables	$	401,318	$	433,392	$	374,689

Schedule of Accounts, Notes, Loans and Financing Receivable

the Company's total allowance for doubtful accounts, including reserves related to student and other related receivables and loan loss reserves is as follows (in thousands):

Balance June 30, 2012	$	250,282
Bad debt expense	171,850
Amounts written off	(213,884		)
Balance June 30, 2013	208,248
Bad debt expense	84,683
Amounts written off	(72,236		)
Balance December 31, 2013	$	220,695

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Goodwill And Intangible Assets (Tables)

6 Months Ended

Dec. 31, 2013

Goodwill And Intangible Assets [Abstract]

Schedule of Goodwill

	June 30, 2012		Impairment			June 30, 2013
The Art Institutes	$	861,619	$	(294,460	)	$	567,159
Argosy University	63,445		—			63,445
South University	38,486		—			38,486
Total goodwill	$	963,550	$	(294,460	)	$	669,090

Schedule of Intangible Assets

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

	December 31, 2013					June 30, 2013					December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
The Art Institutes trade name	$	190,000	$	—		$	190,000	$	—		$	218,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			95,862		—
Curriculum and programs	45,315		(33,800		)	43,575		(32,596		)	41,172		(30,392		)
Student contracts, applications and relationships	39,511		(37,937		)	39,511		(37,381		)	39,511		(36,826		)
Favorable leases and other	19,403		(18,375		)	19,424		(17,960		)	19,435		(17,401		)
Total intangible assets	$	390,091	$	(90,112	)	$	388,372	$	(87,937	)	$	413,980	$	(84,619	)

Schedule of Expected Amortization Expense

Total estimated amortization of the Company’s intangible assets for each of the fiscal years ending June 30, 2014 through 2018 was as follows at December 31, 2013 (in thousands):

Fiscal years	Amortization Expense
2014 (remainder)	$	2,882
2015	5,266
2016	3,910
2017	2,008
2018	51

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Fair Value Of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Senior Notes [Member] | Senior Notes Due 2014 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			8.75%
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt	$ 1,073,188	$ 1,078,818	$ 1,084,451
Fixed rate debt	211,110	206,422	375,324
Carrying Value [Member] | Other Liabilities [Member] | Interest Rate Swap [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liabilities	16,054	20,232	27,252
Fair Value Measurement, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt			0
Fixed rate debt			301,262
Fair Value Measurement, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liabilities			0
Fair Value Measurement, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt	1,043,977	962,134	883,833
Fixed rate debt	0	0	0
Fair Value Measurement, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liabilities	16,054	20,232	27,252
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Variable rate debt	0
Fixed rate debt	225,875	206,422
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swap liabilities	0	0
Variable rate debt		$ 0

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Accrued Liabilities (Tables)

6 Months Ended

Dec. 31, 2013

Accrued Liabilities, Current [Abstract]

Schedule of Accrued Liabilities

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

	December 31, 2013		June 30, 2013		December 31, 2012
Payroll and related taxes	$	28,602	$	35,668	$	36,476
Advertising	26,176		33,010		28,027
Benefits	15,383		16,235		15,444
Interest	11,117		10,416		3,037
Capital expenditures	5,791		4,113		6,789
Other	67,689		57,975		46,840
Total accrued liabilities	$	154,758	$	157,417	$	136,613

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Short-Term And Long-Term Debt (Tables)

6 Months Ended

Dec. 31, 2013

Short-Term And Long-Term Debt [Abstract]

Long-Term Debt

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

	December 31, 2013			June 30, 2013			December 31, 2012
Senior secured term loan facility, due in June 2016 ("Tranche C-2 Loan")	$	732,412		$	736,454		$	740,497
Senior secured term loan facility, due in March 2018, net of discount of $2,593, $2,898 and $3,203 ("Tranche C-3 Loan")	340,776			342,364			343,954
Senior cash pay/PIK notes due 2018, net of discount of $25,024 and $27,712 ("PIK Notes")	211,073			206,242			—
8.75% senior notes	—			—			375,000
Other	27			180			324
Total long-term debt	1,284,288			1,285,240			1,459,775
Less current portion	(11,901		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,272,387		$	1,273,164		$	1,447,699

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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 [Member]	(Accumulated Deficit) Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]
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]
Exercise of stock options including tax benefit	3	0	3	0	0	0
Share-based compensation	17,112	1	17,111	0	0	0
Net income (loss)	(267,976)	0	0	0	(267,976)	0
Other comprehensive income	4,396	0	0	0	0	4,396
Balance at Jun. 30, 2013	250,099	1,435	1,794,846	(328,605)	(1,203,936)	(13,641)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options including tax benefit	2,722	15	2,707	0	0	0
Share-based compensation	9,828	0	9,828	0	0	0
Adjustments Related to Tax Withholding for Share-based Compensation	(3,177)	0	0	3,177	0	0
Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation	2,388	0	2,388	0	0	0
Net income (loss)	(8,426)	0	0	0	(8,426)	0
Other comprehensive income	2,811	0	0	0	0	2,811
Balance at Dec. 31, 2013	$ 256,245	$ 1,450	$ 1,809,769	$ (331,782)	$ (1,212,362)	$ (10,830)

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Fair Value Of Financial Instruments (Tables)

6 Months Ended

Dec. 31, 2013

Financial Instruments, Owned, at Fair Value [Abstract]

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments

The following table presents the carrying amounts and fair values of the interest rate swap liabilities, which are measured at fair value on a recurring basis based on the framework described in Note 9, "Derivative Instruments," and the fair values of the Company's debt, which is recorded at carrying value (in thousands):

	December 31, 2013						June 30, 2013					December 31, 2012
	Carrying Value		Level Two		Level Three		Carrying Value		Level Two		Level Three	Carrying Value		Level One		Level Two
Recurring:
Interest rate swap liabilities	$	16,054	$	16,054	$	—	$	20,232	$	20,232	—	$	27,252	$	—	$	27,252
Disclosure only:
Variable rate debt	1,073,188		1,043,977		—		1,078,818		962,134		—	1,084,451		—		883,833
Fixed rate debt	211,110		—		225,875		206,422		—		206,422	375,324		301,262		—

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Student Receivables (Details) (USD $)	6 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable, Net, Noncurrent	$ 27,600,000	$ 18,900,000	$ 24,300,000
Net allowances	29,600,000	24,100,000	27,900,000
Student Receivables, Gross	401,318,000	374,689,000	433,392,000
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	208,248,000	250,282,000	250,282,000
Bad debt expense	(84,683,000)	(89,768,000)	(171,850,000)
Amounts written off	(72,236,000)		(213,884,000)
Ending Balance	220,695,000		208,248,000
Private loans, aid awarded	10,000,000
Old policy [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Student receivables collection period	36 months
New policy [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Student receivables collection period	42 months
In-School Students [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Student Receivables, Gross	191,671,000	188,224,000	194,062,000
Out-of-School Students [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past due receivables, collection agency	4 months
Student Receivables, Gross	$ 209,647,000	$ 186,465,000	$ 239,330,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Jun. 30, 2013		Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 60,790		$ 130,695		$ 189,042
Restricted cash	270,272		271,340		273,425
Total cash, cash equivalents and restricted cash	331,062		402,035		462,467
Student receivables, net of allowances of $180,355, $174,760 and $175,407 (Note 6)	163,741		206,406		156,294
Notes, advances and other receivables	37,639		32,547		16,532
Deferred income taxes	76,927		76,927		102,668
Prepaid income taxes	35,379		20,854		0
Other current assets	34,709		32,850		48,107
Total current assets	679,457		771,619		786,068
Property and equipment, net (Note 4)	477,222		525,625		562,184
Goodwill (Note 5)	669,090		669,090		963,550
Intangible assets, net (Note 5)	299,979		300,435		329,361
Other long-term assets (Note 6)	54,340		48,524		52,655
Total assets	2,180,088	[1]	2,315,293	[1]	2,693,818	[1]
Current liabilities:
Current portion of long-term debt (Note 8)	11,901		12,076		12,076
Revolving credit facility (Note 8)	0		75,000		0
Accounts payable	58,413		32,559		38,161
Accrued liabilities (Note 7)	154,758		157,417		136,613
Accrued income taxes	0		0		10,525
Unearned tuition	50,956		113,371		55,038
Advance payments	83,361		95,675		116,569
Total current liabilities	359,389		486,098		368,982
Long-term debt, less current portion (Note 8)	1,272,387		1,273,164		1,447,699
Deferred rent	189,173		201,202		212,085
Deferred income taxes	72,122		70,316		99,845
Other long-term liabilities	30,772		34,414		41,599
Shareholders’ equity:
Common stock, at par	1,450		1,435		1,435
Additional paid-in capital	1,809,769		1,794,846		1,785,413
Treasury stock, at cost	(331,782)		(328,605)		(328,605)
Accumulated deficit	(1,212,362)		(1,203,936)		(917,909)
Accumulated other comprehensive loss	(10,830)		(13,641)		(16,726)
Total shareholders’ equity	256,245		250,099		523,608
Total liabilities and shareholders’ equity	$ 2,180,088		$ 2,315,293		$ 2,693,818

[1] Excludes inter-company activity.

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Internal Revenue Service (IRS) [Member]
Income Tax [Line Items]
Effective income tax rate	41.30%	62.30%	42.20%
Pennsylvania House Bill No. 465 [Member]
Income Tax [Line Items]
Unrecognized tax benefits, resulting from change in law		$ 3.2

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Consolidated Statements of Comprehensive Income [Abstract]
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	$ (271)	$ (147)	$ (766)	$ (1,434)
Other Comprehensive Income (Loss), Reclassification Adjustment for Derivative Interest Included in Net Income, Tax	$ 1,166	$ 1,130	$ 2,316	$ 2,173

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Basis of Presentation (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	1 Months Ended
	Oct. 31, 2009	Dec. 31, 2013 Education_Systems	Oct. 31, 2013 Students	Jun. 30, 2013	Dec. 31, 2012
DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP [Abstract]
Number of students			125,560
Online platforms		3
Number of education systems		4
Common Stock, Shares, Issued	23.0
Common stock, par value	$ 0.01	$ 0.01		$ 0.01	$ 0.01
Price Per Share	$ 18.00

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Guarantor Subsidiaries Financial Information

6 Months Ended

Dec. 31, 2013

Guarantor Subsidiaries Financial Information [Abstract]

Guarantor Subsidiaries Financial Information

GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION

The PIK Notes described in Note 8, "Short-Term and Long-Term Debt," are fully and unconditionally guaranteed by EDMC and 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 “Guarantor Subsidiaries”). All other subsidiaries of EM LLC, either direct or indirect, (the “Non-Guarantor Subsidiaries”) do not guarantee the PIK Notes.

The following tables present the condensed consolidated financial position of EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and EDMC as of December 31, 2013, June 30, 2013 and December 31, 2012. The results of operations and comprehensive income (loss) for the three and six months ended December 31, 2013 and 2012 and the condensed statements of cash flows for the six months ended December 31, 2013 and 2012 are presented for EM LLC, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries and EDMC.

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2013 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	57,425	$	126		$	3,239		$	—		$	60,790		$	—		$	—		$	60,790
Restricted cash	46,176		—			224,096			—			270,272			—			—			270,272
Student and other receivables, net	9,814		(15		)	191,581			—			201,380			—			—			201,380
Other current assets	27,848		586			118,581			—			147,015			—			—			147,015
Total current assets	141,263		697			537,497			—			679,457			—			—			679,457
Property and equipment, net	61,134		5,836			410,252			—			477,222			—			—			477,222
Goodwill	7,328		—			661,762			—			669,090			—			—			669,090
Intangible assets, net	976		22			298,981			—			299,979			—			—			299,979
Other long-term assets	1,519		—			52,821			—			54,340			—			—			54,340
Inter-company balances	473,854		(30,765		)	(623,801		)	—			(180,712		)	180,712			—			—
Investment in subsidiaries	769,767		—			—			(769,767		)	—			75,917			(75,917		)	—
Total assets	$	1,455,841	$	(24,210	)	$	1,337,512		$	(769,767	)	$	1,999,376		$	256,629		$	(75,917	)	$	2,180,088
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,875	$	—		$	26		$	—		$	11,901		$	—		$	—		$	11,901
Other current liabilities	55,898		3,096			288,491			—			347,485			3			—			347,488
Total current liabilities	67,773		3,096			288,517			—			359,386			3			—			359,389
Long-term debt, less current portion	1,272,387		—			—			—			1,272,387			—			—			1,272,387
Other long-term liabilities	37,531		184			182,232			—			219,947			(2		)	—			219,945
Deferred income taxes	2,233		399			69,107			—			71,739			383			—			72,122
Total liabilities	1,379,924		3,679			539,856			—			1,923,459			384			—			1,923,843
Total shareholders’ equity (deficit)	75,917		(27,889		)	797,656			(769,767		)	75,917			256,245			(75,917		)	256,245
Total liabilities and shareholders’ equity (deficit)	$	1,455,841	$	(24,210	)	$	1,337,512		$	(769,767	)	$	1,999,376		$	256,629		$	(75,917	)	$	2,180,088

CONDENSED CONSOLIDATED BALANCE SHEET

June 30, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	(10,777	)	$	139		$	141,110		$	—		$	130,472		$	223		$	—		$	130,695
Restricted cash	46,982			—			224,358			—			271,340			—			—			271,340
Student and other receivables, net	134			253			238,565			—			238,952			1			—			238,953
Other current assets	27,488			570			102,573			—			130,631			—			—			130,631
Total current assets	63,827			962			706,606			—			771,395			224			—			771,619
Property and equipment, net	65,018			5,984			454,623			—			525,625			—			—			525,625
Goodwill	7,328			—			661,762			—			669,090			—			—			669,090
Intangible assets, net	1,101			28			299,306			—			300,435			—			—			300,435
Other long-term assets	5,059			—			43,465			—			48,524			—			—			48,524
Inter-company balances	653,504			(31,016		)	(791,213		)	—			(168,725		)	168,725			—			—
Investment in subsidiaries	741,069			—			—			(741,069		)	—			81,532			(81,532		)	—
Total assets	$	1,536,906		$	(24,042	)	$	1,374,549		$	(741,069	)	$	2,146,344		$	250,481		$	(81,532	)	$	2,315,293
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt and revolving credit facility	$	86,850		$	—		$	226		$	—		$	87,076		$	—		$	—		$	87,076
Other current liabilities	51,558			3,018			344,397			—			398,973			49			—			399,022
Total current liabilities	138,408			3,018			344,623			—			486,049			49			—			486,098
Long-term debt, less current portion	1,273,214			—			—			—			1,273,214			(50		)	—			1,273,164
Other long-term liabilities	41,519			248			193,849			—			235,616			—			—			235,616
Deferred income taxes	2,233			399			67,301			—			69,933			383			—			70,316
Total liabilities	1,455,374			3,665			605,773			—			2,064,812			382			—			2,065,194
Total shareholders’ equity (deficit)	81,532			(27,707		)	768,776			(741,069		)	81,532			250,099			(81,532		)	250,099
Total liabilities and shareholders’ equity (deficit)	$	1,536,906		$	(24,042	)	$	1,374,549		$	(741,069	)	$	2,146,344		$	250,481		$	(81,532	)	$	2,315,293

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2012 (In thousands)

	EM LLC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Assets
Current:
Cash and cash equivalents	$	183,968	$	180		$	3,679		$	—		$	187,827		$	1,215		$	—		$	189,042
Restricted cash	41,370		—			232,055			—			273,425			—			—			273,425
Student and other receivables, net	—		142			172,684			—			172,826			—			—			172,826
Other current assets	37,350		715			112,710			—			150,775			—			—			150,775
Total current assets	262,688		1,037			521,128			—			784,853			1,215			—			786,068
Property and equipment, net	65,231		7,454			489,499			—			562,184			—			—			562,184
Goodwill	7,328		—			956,222			—			963,550			—			—			963,550
Intangible assets, net	1,801		34			327,526			—			329,361			—			—			329,361
Other long-term assets	15,043		—			37,612			—			52,655			—			—			52,655
Inter-company balances	687,013		(29,674		)	(815,535		)	—			(158,196		)	158,196			—			—
Investment in subsidiaries	911,317		—			—			(911,317		)	—			364,090			(364,090		)	—
Total assets	$	1,950,421	$	(21,149	)	$	1,516,452		$	(911,317	)	$	2,534,407		$	523,501		$	(364,090	)	$	2,693,818
Liabilities and shareholders’ equity (deficit)
Current:
Current portion of long-term debt	$	11,850	$	—		$	226		$	—		$	12,076		$	—		$	—		$	12,076
Other current liabilities	75,752		3,580			277,577			—			356,909			(3		)	—			356,906
Total current liabilities	87,602		3,580			277,803			—			368,985			(3		)	—			368,982
Long-term debt, less current portion	1,447,601		—			98			—			1,447,699			—			—			1,447,699
Other long-term liabilities	49,598		316			203,770			—			253,684			—			—			253,684
Deferred income taxes	1,530		515			97,904			—			99,949			(104		)	—			99,845
Total liabilities	1,586,331		4,411			579,575			—			2,170,317			(107		)	—			2,170,210
Total shareholders’ equity (deficit)	364,090		(25,560		)	936,877			(911,317		)	364,090			523,608			(364,090		)	523,608
Total liabilities and shareholders’ equity (deficit)	$	1,950,421	$	(21,149	)	$	1,516,452		$	(911,317	)	$	2,534,407		$	523,501		$	(364,090	)	$	2,693,818

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	1,677		$	591,996		$	—		$	593,673		$	—		$	—		$	593,673
Costs and expenses:
Educational services	26,231			2,280			317,076			—			345,587			—			—			345,587
General and administrative	(8,636		)	(525		)	185,575			—			176,414			—			—			176,414
Depreciation and amortization	7,124			156			31,313			—			38,593			—			—			38,593
Long-lived asset impairments	—			—			3,847			—			3,847			—			—			3,847
Total costs and expenses	24,719			1,911			537,811			—			564,441			—			—			564,441
Income (loss) before interest and income taxes	(24,719		)	(234		)	54,185			—			29,232			—			—			29,232
Interest expense (income), net	31,797			—			(182		)	—			31,615			—			—			31,615
Equity in subsidiaries	18,290			—			—			(18,290		)	—			1,090			(1,090		)	—
(Loss) Income before income taxes	(38,226		)	(234		)	54,367			(18,290		)	(2,383		)	1,090			(1,090		)	(2,383		)
Income tax (benefit) expense	(39,316		)	(170		)	36,013			—			(3,473		)	1			—			(3,472		)
Net income (loss)	$	1,090		$	(64	)	$	18,354		$	(18,290	)	$	1,090		$	1,089		$	(1,090	)	$	1,089
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,518		$	—		$	—		$	—		$	1,518		$	1,518		$	(1,518	)	$	1,518
Foreign currency translation loss	(163		)	—			(163		)	163			(163		)	(163		)	163			(163		)
Other comprehensive income (loss)	1,355			—			(163		)	163			1,355			1,355			(1,355		)	1,355
Comprehensive income (loss)	$	2,445		$	(64	)	$	18,191		$	(18,127	)	$	2,445		$	2,444		$	(2,445	)	$	2,444

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	1,738		$	653,157		$	—		$	654,895		$	—		$	—		$	654,895
Costs and expenses:																						—
Educational services	29,515			2,645			328,218			—			360,378			(1		)	—			360,377
General and administrative	(19,799		)	(85		)	191,074			—			171,190			—			—			171,190
Depreciation and amortization	7,281			152			31,822			—			39,255			—			—			39,255
Total costs and expenses	16,997			2,712			551,114			—			570,823			(1		)	—			570,822
Income (loss) before interest and income taxes	(16,997		)	(974		)	102,043			—			84,072			1			—			84,073
Interest expense (income), net	30,416			—			600			—			31,016			(7		)	—			31,009
Equity in subsidiaries	57,038			—			—			(57,038		)	—			31,136			(31,136		)	—
Income (loss) before income taxes	9,625			(974		)	101,443			(57,038		)	53,056			31,144			(31,136		)	53,064
Income tax expense (benefit)	(21,511		)	(344		)	43,775			—			21,920			—						21,920
Net income (loss)	$	31,136		$	(630	)	$	57,668		$	(57,038	)	$	31,136		$	31,144		$	(31,136	)	$	31,144
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,666		$	—		$	—		$	—		$	1,666		$	1,666		$	(1,666	)	$	1,666
Foreign currency translation loss	(98		)	—			(98		)	98			(98		)	(98		)	98			(98		)
Other comprehensive income (loss)	1,568			—			(98		)	98			1,568			1,568			(1,568		)	1,568
Comprehensive income (loss)	$	32,704		$	(630	)	$	57,570		$	(56,940	)	$	32,704		$	32,712		$	(32,704	)	$	32,712

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For the Six Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			EM LLC Consolidated			EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	3,894		$	1,170,159		$	—		$	1,174,053		$	—		$	—		$	1,174,053
Costs and expenses:
Educational services	47,608			5,092			650,574			—			703,274			2			—			703,276
General and administrative	(27,483		)	(1,022		)	377,088			—			348,583			—			—			348,583
Depreciation and amortization	14,063			306			62,829			—			77,198			—			—			77,198
Long-lived asset impairments	—			—			3,847						3,847									3,847
Total costs and expenses	34,188			4,376			1,094,338			—			1,132,902			2			—			1,132,904
Income (loss) before interest and income taxes	(34,188		)	(482		)	75,821			—			41,151			(2		)	—			41,149
Interest expense (income), net	63,719			—			(234		)	—			63,485			(4		)	—			63,481
Equity in subsidiaries	28,515			—			—			(28,515		)	—			(8,427		)	8,427			—
(Loss) income before income taxes	(69,392		)	(482		)	76,055			(28,515		)	(22,334		)	(8,425		)	8,427			(22,332		)
Income tax (benefit) expense	(60,965		)	(300		)	47,358			—			(13,907		)	1			—			(13,906		)
Net (loss) income	$	(8,427	)	$	(182	)	$	28,697		$	(28,515	)	$	(8,427	)	$	(8,426	)	$	8,427		$	(8,426	)
Net change in unrecognized loss on interest rate swaps, net of tax	$	2,628		$	—		$	—		$	—		$	2,628		$	2,628		$	(2,628	)	$	2,628
Foreign currency translation gain	183			—			183			(183		)	183			183			(183		)	183
Other comprehensive income	2,811			—			183			(183		)	2,811			2,811			(2,811		)	2,811
Comprehensive (loss) income	$	(5,616	)	$	(182	)	$	28,880		$	(28,698	)	$	(5,616	)	$	(5,615	)	$	5,616		$	(5,615	)

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

For the Six Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			EM LLC Consolidated		EDMC			Eliminations			EDMC Consolidated
Net revenues	$	—		$	4,159		$	1,260,300	$	—		$	1,264,459	$	—		$	—		$	1,264,459
Costs and expenses:
Educational services	64,315			5,290			672,069		—			741,674		(1		)	—			741,673
General and administrative	(31,377		)	(3,424		)	380,483		—			345,682		—			—			345,682
Depreciation and amortization	18,879			303			64,218		—			83,400		—			—			83,400
Total costs and expenses	51,817			2,169			1,116,770		—			1,170,756		(1		)	—			1,170,755
Income (loss) before interest and income taxes	(51,817		)	1,990			143,530		—			93,703		1			—			93,704
Interest expense (income), net	61,275			—			1,199		—			62,474		(13		)	—			62,461
Equity in subsidiaries	83,355			—			—		(83,355		)	—		18,037			(18,037		)	—
(Loss) Income before income taxes	(29,737		)	1,990			142,331		(83,355		)	31,229		18,051			(18,037		)	31,243
Income tax expense (benefit)	(47,774		)	841			60,125		—			13,192		—						13,192
Net income	$	18,037		$	1,149		$	82,206	$	(83,355	)	$	18,037	$	18,051		$	(18,037	)	$	18,051
Net change in unrecognized loss on interest rate swaps, net of tax	$	1,252		$	—		$	—	$	—		$	1,252	$	1,252		$	(1,252	)	$	1,252
Foreign currency translation gain	59			—			59		(59		)	59		59			(59		)	59
Other comprehensive income	1,311			—			59		(59		)	1,311		1,311			(1,311		)	1,311
Comprehensive income	$	19,348		$	1,149		$	82,265	$	(83,414	)	$	19,348	$	19,362		$	(19,348	)	$	19,362

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended December 31, 2013 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(32,233	)	$	418		$	71,503		$	39,688		$	2		$	39,690
Cash flows from investing activities:
Expenditures for long-lived assets	(4,014		)	(383		)	(26,934		)	(31,331		)	—			(31,331		)
Other investing activities	—			—			(573		)	(573		)	—			(573		)
Net cash flows used in investing activities	(4,014		)	(383		)	(27,507		)	(31,904		)	—			(31,904		)
Cash flows from financing activities:
Net repayments of debt	(80,888		)	—			(200		)	(81,088		)				(81,088		)
Share-based payment activity	—			—			—			—			3,389			3,389
Inter-company transactions	185,337			(48		)	(181,675		)	3,614			(3,614		)	—
Net cash flows provided by (used in) financing activities	104,449			(48		)	(181,875		)	(77,474		)	(225		)	(77,699		)
Effect of exchange rate changes on cash and cash equivalents	—			—			8			8			—			8
Increase (decrease) in cash and cash equivalents	68,202			(13		)	(137,871		)	(69,682		)	(223		)	(69,905		)
Beginning cash and cash equivalents	(10,777		)	139			141,110			130,472			223			130,695
Ending cash and cash equivalents	$	57,425		$	126		$	3,239		$	60,790		$	—		$	60,790

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended December 31, 2012 (In thousands)

	EM LLC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			EM LLC Consolidated			EDMC			EDMC Consolidated
Net cash flows provided by (used in) operations	$	(46,583	)	$	(3,191	)	$	142,935		$	93,161		$	16		$	93,177
Cash flows from investing activities
Expenditures for long-lived assets	(4,578		)	(524		)	(34,356		)	(39,458		)	—			(39,458		)
Proceeds from sale of fixed assets	—			—			65,065			65,065			—			65,065
Other investing activities	(375		)	—			(3,516		)	(3,891		)	—			(3,891		)
Net cash flows provided by (used in) investing activities	(4,953		)	(524		)	27,193			21,716			—			21,716
Cash flows from financing activities
Net repayments of debt and other	(116,930		)	—			(136		)	(117,066		)	—			(117,066		)
Inter-company transactions	378,683			3,797			(380,480		)	2,000			(2,000		)	—
Net cash flows provided by (used in) financing activities	261,753			3,797			(380,616		)	(115,066		)	(2,000		)	(117,066		)
Effect of exchange rate changes on cash and cash equivalents	—			—			207			207			—			207
Increase (decrease) in cash and cash equivalents	210,217			82			(210,281		)	18			(1,984		)	(1,966		)
Beginning cash and cash equivalents	(26,249		)	98			213,960			187,809			3,199			191,008
Ending cash and cash equivalents	$	183,968		$	180		$	3,679		$	187,827		$	1,215		$	189,042

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income (loss)	$ 1,089	$ 31,144	$ (8,426)	$ 18,051	$ (267,976)
Basic (shares)	125,450,000	124,560,000	125,053,000	124,519,000
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	5,560,000	202,000	0	101,000
Diluted (shares)	131,010,000	124,762,000	125,053,000	124,620,000
Basic (dollars per share)	$ 0.01	$ 0.25	$ (0.07)	$ 0.14
Diluted (dollars per share)	$ 0.01	$ 0.25	$ (0.07)	$ 0.14
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	600,000
Time-Based Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,500,000			9,700,000

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Basis of Presentation (Policies)

6 Months Ended

Dec. 31, 2013

DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP [Abstract]

Comparability of Prior Year Financial Data, Policy

Reclassifications

Certain reclassifications of prior year data have been made to conform to the December 31, 2013 presentation with no effect on previously reported net income (loss) or shareholders' equity.

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
Cash flows from operating activities:
Net income (loss)	$ (8,426)		$ 18,051
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation and amortization of property and equipment	74,181		80,241
Amortization of intangible assets	3,017		3,159
Bad debt expense	84,683		89,768
Long-lived asset impairments	3,847	[1]	0	[1]
Amortization of debt issuance costs	7,200		2,561
Share-based compensation	9,828		7,679
Non cash adjustments related to deferred rent	(9,956)		(7,824)
Amortization of deferred gains on sale-leaseback transactions	(1,126)		0
Changes in assets and liabilities:
Restricted cash	1,068		(5,545)
Receivables	(44,338)		(40,727)
Reimbursements for tenant improvements	573		3,891
Inventory	(1,292)		(583)
Other assets	(204)		2,939
Accounts Payable	24,863		(15,853)
Accrued liabilities, including income taxes	(29,539)		2,343
Unearned tuition	(62,416)		(61,239)
Advance payments	(12,273)		14,316
Total adjustments	48,116		75,126
Net cash flows provided by operating activities	39,690		93,177
Cash flows from investing activities:
Expenditures for long-lived assets	(31,331)		(39,458)
Proceeds from sale of fixed assets	0		65,065
Reimbursements for tenant improvements	(573)		(3,891)
Net cash flows (used in) provided by investing activities	(31,904)		21,716
Cash flows from financing activities:
Payments under revolving credit facility	(75,000)		(111,300)
Issuance of common stock as a result of stock option exercises	2,722		3
Gross excess tax benefit from share-based compensation	3,391		0
Minimum tax withholding requirements upon restricted stock unit vesting	(2,724)		0
Principal payments on long-term debt	(6,088)		(5,769)
Net cash flows used in financing activities	(77,699)		(117,066)
Effect of exchange rate changes on cash and cash equivalents	8		207
Net change in cash and cash equivalents	(69,905)		(1,966)
Cash and cash equivalents, beginning of period	130,695		191,008
Cash and cash equivalents, end of period	60,790		189,042
Cash paid (received) during the period for:
Interest (including swap settlement)	55,870		60,980
Income taxes, net of refunds	(2,058)		7,860
Noncash investing activities:
Capital expenditures in current liabilities	$ 11,826		$ 13,538

[1] Refer to Note 4, "Property and Equipment," for more information on these charges.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Allowances for student receivables	$ 180,355	$ 174,760	$ 175,407

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Short-Term And Long-Term Debt

6 Months Ended

Dec. 31, 2013

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 $354.0 million at December 31, 2013, the largest of which is issued to the U.S. Department of Education, which requires the Company to 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 $348.6 million at December 31, 2013, which equals 15 percent of the total Title IV aid received by students who attended the Company’s institutions during the fiscal year ended June 30, 2012.

As of December 31, 2013, in order to fund its current letter of credit obligation to the U.S. Department of Education, the Company utilized all $200.0 million of capacity under two cash secured letter of credit facilities, in connection with which the Company classifies $210.0 million as restricted cash to satisfy the 105 percent collateralization requirement, and $148.6 million of letter of credit capacity under its $328.3 million revolving credit facility, which expires on June 1, 2015. The cash secured letter of credit facilities currently mature on July 8, 2014 or earlier if the existing revolving credit facility is terminated. Any future reduction in the usage of the cash secured letter of credit facilities will reduce the amount of cash that is classified as restricted cash on the consolidated balance sheet. In January 2014, the U.S. Department of Education decreased its letter of credit requirement from $348.6 million to $302.2 million, which equals 15 percent of total Title IV aid received by students who attended the Company's institutions during the fiscal year ended June 30, 2013.

Short-Term Debt

There were $75.0 million of borrowings outstanding at June 30, 2013 under the revolving credit facility, all of which was repaid in full on July 1, 2013. No borrowings were outstanding under the revolving credit facility at December 31, 2013 and 2012. After adjusting for outstanding letters of credit, which decrease availability thereunder, the Company had $174.3 million of additional capacity under the revolving credit facility at December 31, 2013 available for borrowings or issuance of letters of credit.

The interest rate on amounts outstanding at June 30, 2013 under the revolving credit facility was 6.25 percent, which is equal to the prime rate as defined under the credit facility plus a margin of 3.00 percent. The applicable margin for borrowings under the revolving credit facility can change depending on the Company's leverage ratios and credit ratings. Education Management LLC ("EM LLC"), an indirect wholly-owned subsidiary of the Company, is obligated to pay a per annum commitment fee on undrawn amounts under the revolving credit facility, which is currently 0.375 percent and varies based on certain leverage ratios. EM LLC must also pay customary letter of credit fees for outstanding letters of credit under the revolving credit facility, which is secured by certain of the Company’s assets and is subject to the Company’s satisfaction of certain covenants and financial ratios described further below.

Long-Term Debt

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

	December 31, 2013			June 30, 2013			December 31, 2012
Senior secured term loan facility, due in June 2016 ("Tranche C-2 Loan")	$	732,412		$	736,454		$	740,497
Senior secured term loan facility, due in March 2018, net of discount of $2,593, $2,898 and $3,203 ("Tranche C-3 Loan")	340,776			342,364			343,954
Senior cash pay/PIK notes due 2018, net of discount of $25,024 and $27,712 ("PIK Notes")	211,073			206,242			—
8.75% senior notes	—			—			375,000
Other	27			180			324
Total long-term debt	1,284,288			1,285,240			1,459,775
Less current portion	(11,901		)	(12,076		)	(12,076		)
Total long-term debt, less current portion	$	1,272,387		$	1,273,164		$	1,447,699

Cash interest on the PIK Notes accrues at the rate of 15.0 percent per annum and is payable semi-annually on March 30 and September 30. For any interest period after March 30, 2014 up to and including July 1, 2018, interest in addition to the cash interest payable will be paid by increasing the principal amount of the outstanding PIK Notes (“PIK Interest”). Additionally, the PIK Notes are required to be paid at a premium of 13.0 percent at their contractual maturity, which is being treated as an original issuance discount for accounting purposes. Including PIK Interest and the original issuance discount, the annual effective interest rate on the PIK Notes is 19.8 percent. The Tranche C-3 Loan bears interest at a rate equal to the greater of three-month LIBOR or 1.25 percent, plus a margin of 7.0 percent, which yielded an interest rate of 8.25 percent at December 31, 2013, June 30, 2013 and December 31, 2012.  The Tranche C-2 Loan bears interest at a rate equal to three-month LIBOR plus a margin of 4.00 percent, which yielded an interest rate of 4.25 percent, 4.31 percent and 4.38 percent at December 31, 2013, June 30, 2013 and December 31, 2012, respectively. 

The indenture and credit agreement governing the senior secured credit facilities and PIK Notes, respectively, contain a number of covenants that, among other things, restrict, subject to certain exceptions, EM LLC’s ability to incur additional indebtedness, pay dividends and distributions on or repurchase capital stock, create liens on assets, repay subordinated indebtedness, make investments, loans or advances, make capital expenditures, engage in certain transactions with affiliates, amend certain material agreements, change its lines of business, sell assets and engage in mergers or consolidations. In addition, EM LLC is required to satisfy and maintain a maximum total leverage ratio and a minimum interest coverage ratio under the senior secured credit facilities on a quarterly basis. EM LLC met the requirements of these two financial covenants for the twelve month period ended December 31, 2013. While the Company has continued to satisfy applicable financial covenant compliance ratios, the margin between the actual results and the covenant requirements has decreased significantly over the past 12 months due to declining operating performance.

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Document And Entity Information (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Dec. 31, 2013	Feb. 07, 2014	Dec. 31, 2012
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	Dec. 31, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		125,920,645
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 77.6

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Derivative Instruments

6 Months Ended

Dec. 31, 2013

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. The Company currently holds two interest rate swap agreements, one of which was entered into with an affiliate of one of the Sponsors, that are for notional amounts of $312.5 million each and effectively fix future interest payments at a rate of 6.26 percent through June 1, 2015. Because both interest rate swaps are deemed to be highly effective for accounting purposes, they qualify for cash flow hedge accounting treatment and changes in their fair values are recorded in other comprehensive income or loss. The Company uses Level Two inputs to value its interest rate swaps as defined in Note 10, "Fair Value of Financial Instruments," which includes obtaining quotes from counter-parties that are based on LIBOR forward curves and assessing non-performance risk based upon published market data.

At December 31, 2013, there was a cumulative unrealized loss of $10.1 million, net of tax, related to the Company's interest rate swaps included in accumulated other comprehensive loss on the accompanying consolidated balance sheet. This unrealized loss would be recognized in the consolidated statement of operations immediately if the forecasted cash flows being hedged did not occur.  The fair values of the interest rate swap liabilities were $16.1 million, $20.2 million and $27.3 million at December 31, 2013, June 30, 2013 and December 31, 2012, respectively, and were recorded in other long-term liabilities on the accompanying consolidated balance sheets. Over the next twelve months, the Company estimates that approximately $7.9 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 December 31, 2013.

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Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended				12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012		Jun. 30, 2013
Income Statement [Abstract]
Net revenues	$ 593,673		$ 654,895		$ 1,174,053		$ 1,264,459
Costs and expenses:
Educational services	345,587		360,377		703,276		741,673
General and administrative	176,414		171,190		348,583		345,682
Depreciation and amortization	38,593		39,255		77,198		83,400
Long-lived asset impairments	3,847	[1]	0	[1]	3,847	[1]	0	[1]
Total costs and expenses	564,441		570,822		1,132,904		1,170,755
Income before interest and income taxes	29,232		84,073		41,149		93,704
Interest expense, net	31,615		31,009		63,481		62,461
(Loss) income before income taxes	(2,383)		53,064		(22,332)		31,243
Income tax (benefit) expense	(3,472)		21,920		(13,906)		13,192
Net income (loss)	$ 1,089		$ 31,144		$ (8,426)		$ 18,051		$ (267,976)
Earnings (loss) per share: (Note 2)
Basic (dollars per share)	$ 0.01		$ 0.25		$ (0.07)		$ 0.14
Diluted (dollars per share)	$ 0.01		$ 0.25		$ (0.07)		$ 0.14
Weighted average number of shares outstanding: (Note 2)
Basic (shares)	125,450		124,560		125,053		124,519
Diluted (shares)	131,010		124,762		125,053		124,620

[1] Refer to Note 4, "Property and Equipment," for more information on these charges.

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Share-Based Compensation

6 Months Ended

Dec. 31, 2013

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 replaced the Education Management Corporation Omnibus Long-Term Incentive Plan (the "2009 Omnibus Plan") that was adopted in April 2009 and became effective upon the completion of the Initial Public Offering. The 2009 Omnibus Plan and the 2006 Stock Option Plan, which it replaced, are now frozen. The 2012 Omnibus Plan may be used to issue stock options, stock appreciation rights, restricted stock, restricted stock units and other forms of long-term incentive compensation.

The Company amended the 2012 Omnibus Plan in November 2013 to formally authorize the grant of cash and stock-based awards that generally have a performance period of one year and to increase the number of shares of Common Stock authorized for issuance by 4.0 million. As of December 31, 2013, approximately 5.6 million shares of Common Stock remain reserved for issuance under the 2012 Omnibus Plan.

Share-Based Compensation Activity

On November 8, 2013, the Company granted the share-based compensation awards presented in the table below. The fair value of the time-based stock options was determined using a Black-Scholes-Merton model in which the key assumptions are presented below.

	Time-Based Stock Options			Restricted Stock Units
Number granted (in millions)	1.5			0.6
Fair value per unit	$	7.66		$	12.74
Exercise price	$	12.74		N/A
Expected dividend yield	0		%	N/A
Expected volatility	64		%	N/A
Risk free interest rate	1.86		%	N/A
Expected term (yrs)	6.25 years			N/A

The above awards will vest 25 percent per year and will result in compensation expense of approximately $16.5 million over the four-year service period, net of expected forfeitures. The Company also granted 0.1 million shares of restricted stock to members of its Board of Directors on November 8, 2013, all of which will vest after one year.

The Company recognized $5.7 million and $4.1 million of share-based compensation expense during the three months ended December 31, 2013 and 2012, respectively, and $9.8 million and $7.7 million of share-based compensation expense during the six months ended December 31, 2013 and 2012, respectively. Compensation expense for the three and six months ended December 31, 2013 includes additional expense recognized upon the termination of former employees that are no longer required to provide services to obtain certain awards in accordance with the terms of their employment agreements.

The table below presents outstanding share units, unrecognized compensation expense (net of expected forfeitures) and stock options that are exercisable at December 31, 2013:

	Outstanding (in millions)	Unrecognized Compensation Expense (in millions)		Exercisable (in 000s)	Weighted Average Exercise Price / Share Price
Time-based stock options	11.3	$	27.0	3.6	$	3.58
Restricted stock units	2.5	$	12.6	N/A	$	5.90
Performance-based stock options	1.0	$	2.1	—	$	3.59
Total	14.8	$	41.7	3.6

During the six month period ended December 31, 2013, the Company issued 1.5 million shares of Common Stock and recorded a gross excess tax benefit of $3.4 million in connection with share-based compensation activity. The gross excess tax benefit is classified as a cash inflow from financing activities in the accompanying consolidated statement of cash flows.

Performance-based stock options vest upon the greater of (i) the percentage of the Company's common stock sold by certain investment funds affiliated with Providence Equity Partners and Goldman Sachs Capital Partners (together, the "Principal Stockholders") or (ii) certain return on investment hurdles achieved by the Principal Stockholders. As of December 31, 2013, the Company continues to defer recognizing expense on outstanding performance-based stock options until the relevant performance conditions become probable of being met.

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Earnings Per Share

6 Months Ended

Dec. 31, 2013

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 a given period. The Company uses the treasury stock method to compute diluted EPS, which assumes that restricted stock units are 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 December 31,				For the Six Months Ended December 31,
	2013		2012		2013			2012
Net income (loss)	$	1,089	$	31,144	$	(8,426	)	$	18,051
Weighted average number of shares outstanding:
Basic	125,450		124,560		125,053			124,519
Effect of stock-based awards	5,560		202		—			101
Diluted	131,010		124,762		125,053			124,620
Earnings (loss) per share
Basic	$	0.01	$	0.25	$	(0.07	)	$	0.14
Diluted	$	0.01	$	0.25	$	(0.07	)	$	0.14

Because the effect of applying the treasury stock method would have been antidilutive, the Company excluded time-based options to purchase approximately 1.5 million shares of common stock and 0.6 million restricted stock units outstanding at December 31, 2013 from the computation of diluted EPS in the current quarter and approximately 9.7 million shares of common stock outstanding at December 31, 2012 from the computation of diluted EPS for the three and six months ended December 31, 2012. All outstanding stock options and restricted stock units were excluded from the computation of diluted EPS for the six months ended December 31, 2013 because the Company recorded a net loss.

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Segment Reporting

6 Months Ended

Dec. 31, 2013

Segments [Abstract]

Segment Reporting Disclosure

SEGMENT REPORTING

The Company's principal business is providing post-secondary education. The Company manages its operations through four operating segments, which are The Art Institutes, Argosy University, Brown Mackie Colleges and South University.

During fiscal 2013, the Company created "The Center", which provides support services to its four education systems through the centralization and automation of certain non-student facing activities, including financial aid packaging, the qualification and transfer of prospective students to school admissions teams, student billing services, certain registrar services, support call center services for students and employees, and remote student advising services. Effective July 1, 2013, The Center allocates costs to each reportable segment based primarily on the level of transaction volume. In the prior fiscal year, similar costs were allocated to each reportable segment based primarily on net revenues. To ensure comparability among periods, EBITDA excluding certain expenses for each segment has been recast to report results for the three and six months ended December 31, 2012 as if The Center existed in prior periods and allocating its costs in a manner consistent with the current methodology. The creation of The Center and changes in the allocation methodology had no impact on previously reported consolidated EBITDA excluding certain expenses.

Earnings before interest, income taxes, depreciation and amortization ("EBITDA") excluding certain expenses is the measure used by the chief operating decision maker to evaluate segment performance and allocate resources. It is defined as net income before interest, income taxes, depreciation and amortization and certain expenses presented in the table below. EBITDA excluding certain expenses is not a recognized term under generally accepted accounting principles ("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 (loss) before income taxes along with other summary financial information by reportable segment is presented below (in thousands):

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2013			2012			2013			2012
Net revenues:
The Art Institutes	$	371,474		$	411,533		$	727,989		$	791,672
Argosy University	76,640			92,312			159,788			174,232
Brown Mackie Colleges	69,463			78,274			139,649			152,246
South University	76,096			72,776			146,627			146,309
Total EDMC	$	593,673		$	654,895		$	1,174,053		$	1,264,459
EBITDA excluding certain expenses:
The Art Institutes	$	87,992		$	113,429		$	147,089		$	182,848
Argosy University	2,547			15,231			5,931			15,401
Brown Mackie Colleges	7,123			8,980			13,407			18,186
South University	12,158			9,132			17,550			16,364
Corporate and other	(22,737		)	(23,444		)	(44,727		)	(46,550		)
Total EDMC	87,083			123,328			139,250			186,249
Reconciliation to consolidated (loss) income before income taxes:
Restructuring (A)	9,452			—			11,097			9,145
Settlement-related costs	5,959			—			5,959			—
Long-lived asset impairments (B)	3,847			—			3,847			—
Depreciation and amortization	38,593			39,255			77,198			83,400
Net interest expense	31,615			31,009			63,481			62,461
(Loss) income before income taxes	$	(2,383	)	$	53,064		$	(22,332	)	$	31,243

(A) Refer to Note 7, "Accrued Liabilities," for more information on these charges.

(B) Refer to Note 4, "Property and Equipment," for more information on these charges.

Total assets of each reportable segment were as follows (in thousands):

Assets: (+)	December 31, 2013		June 30, 2013		December 31, 2012
The Art Institutes	$	1,371,173	$	1,438,028	$	1,748,715
Argosy University	204,924		257,608		242,546
Brown Mackie Colleges	190,294		231,225		190,915
South University	203,945		226,041		202,341
Corporate and other	209,752		162,391		309,301
Total EDMC	$	2,180,088	$	2,315,293	$	2,693,818

(+) Excludes inter-company activity.

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Fair Value Of Financial Instruments

6 Months Ended

Dec. 31, 2013

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 value hierarchy is 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 of what 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 amounts and fair values of the interest rate swap liabilities, which are measured at fair value on a recurring basis based on the framework described in Note 9, "Derivative Instruments," and the fair values of the Company's debt, which is recorded at carrying value (in thousands):

	December 31, 2013						June 30, 2013					December 31, 2012
	Carrying Value		Level Two		Level Three		Carrying Value		Level Two		Level Three	Carrying Value		Level One		Level Two
Recurring:
Interest rate swap liabilities	$	16,054	$	16,054	$	—	$	20,232	$	20,232	—	$	27,252	$	—	$	27,252
Disclosure only:
Variable rate debt	1,073,188		1,043,977		—		1,078,818		962,134		—	1,084,451		—		883,833
Fixed rate debt	211,110		—		225,875		206,422		—		206,422	375,324		301,262		—

The fair value of the Company’s variable rate debt was based on each instrument’s trading value in markets that are not active. The fixed rate debt at December 31, 2012 consists of the Company's 8.75 percent senior notes that were retired in connection with a refinancing transaction described in Part II, Item 8 "Financial Statements and Supplementary Data," Note 8, "Short-Term and Long-Term Debt" of the June 30, 2013 Annual Report on Form 10-K. The fixed rate debt at December 31, 2013 and June 30, 2013 reflects the Company's PIK Notes that were issued in connection with this refinancing transaction. There is currently no observable trading for the Company's PIK Notes; therefore, the fair value of the fixed rate PIK Notes was estimated using the performance of the Company's other debt while also considering current market conditions. Student accounts receivable, notes receivable and the revolving credit facility have fair values that approximate their carrying values.

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Student Receivables

6 Months Ended

Dec. 31, 2013

Student Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure

STUDENT RECEIVABLES    

The Company records student receivables at cost less an estimated allowance for doubtful accounts, which is determined on a monthly basis based on the likelihood of collection considering students' enrollment status and historical payment experience. For example, receivables from students who are out-of-school are reserved for at a higher rate than the receivables from students who are in-school. 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 a collection agency. Student accounts that have been placed with a collection agency are reserved for at a very high rate and are written off after collection attempts have been unsuccessful.

Student receivables include $27.6 million (net of $29.6 million allowance), $24.3 million (net of $27.9 million allowance), and $18.9 million (net of $24.1 million allowance) recorded in other long-term assets on the accompanying consolidated balance sheets at December 31, 2013, June 30, 2013 and December 31, 2012, respectively. These amounts relate to the extension of credit to students for amounts due beyond one year, which helps students 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 and private loans. During fiscal 2013, the Company extended the repayment period for financing made available to students from a maximum of 36 months beyond graduation to a maximum of 42 months beyond graduation. The majority of applicable accounts incur interest charges that accrue each month on unpaid balances except for those accounts that have been placed into collections. The gross short-term and long-term student receivables by student status were as follows (in thousands):

	December 31, 2013		June 30, 2013		December 31, 2012
In-school	$	191,671	$	194,062	$	188,224
Out-of-school	209,647		239,330		186,465
Gross student receivables	$	401,318	$	433,392	$	374,689

The Company commenced a new program in fiscal 2013 under which it purchases loans awarded and disbursed to its students from a private lender. The Company has awarded approximately $10 million of aid under this program as of December 31, 2013, all of which has been purchased and recorded in other long-term assets, net of an allowance.

Details surrounding the Company's total allowance for doubtful accounts, including reserves related to student and other related receivables and loan loss reserves is as follows (in thousands):

Balance June 30, 2012	$	250,282
Bad debt expense	171,850
Amounts written off	(213,884		)
Balance June 30, 2013	208,248
Bad debt expense	84,683
Amounts written off	(72,236		)
Balance December 31, 2013	$	220,695

The amounts set forth above are recorded within student receivables, net and other long-term assets on the consolidated balance sheets. Recoveries of amounts previously written off were not significant in any period presented.

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Property And Equipment

6 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property And Equipment

PROPERTY AND EQUIPMENT

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

Asset Class	December 31, 2013			June 30, 2013			December 31, 2012
Leasehold improvements	$	574,231		570,286			$	564,578
Technology and other equipment	322,349			324,403			314,663
Furniture and equipment	164,148			163,595			161,013
Software	105,720			98,537			86,284
Library books	45,001			44,248			43,319
Buildings and improvements	25,708			25,566			25,358
Construction in progress	24,182			19,600			20,258
Land	5,496			5,496			5,496
Total	1,266,835			1,251,731			1,220,969
Less accumulated depreciation and amortization	(789,613		)	(726,106		)	(658,785		)
Property and equipment, net	$	477,222		$	525,625		$	562,184

Depreciation and amortization expense related to property and equipment was $37.1 million and $37.6 million, respectively, for the three months ended December 31, 2013 and 2012 and $74.2 million and $80.2 million, respectively, for the six months ended December 31, 2013 and 2012. Depreciation and amortization expense for the six months ended December 31, 2012 included $4.6 million in accelerated amortization resulting from the write off of a software asset that no longer had a useful life.

During the three months ended December 31, 2013, the Company recorded an impairment of long-lived assets of $3.8 million in the consolidated statement of operations as estimated future cash flows at two of the Company's Brown Mackie Colleges locations were insufficient to support the carrying values of its property and equipment. In connection with the impairment, the leasehold improvement assets at the affected locations were measured at fair value using the discounted cash flow method (income approach) on a non-recurring basis using Level Three inputs as defined in Note 10, "Fair Value of Financial Instruments."

During the three months ended December 31, 2012, the Company completed five sale-leaseback transactions with unrelated third parties for net proceeds of $65.1 million. Concurrent with these sales, the Company entered into agreements to lease the properties back from the purchasers over initial lease terms ranging from three to 15 years. The Company classified these leases as operating and considers them normal leasebacks with no other continuing involvement.

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Goodwill And Intangible Assets

6 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill And Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

Goodwill

In connection with the Transaction on June 1, 2006, the Company recorded approximately $2.6 billion of goodwill, which was allocated to its four reporting units: The Art Institutes, Argosy University, Brown Mackie Colleges and South University. The Company formally evaluates the carrying amount of goodwill for each of its reporting units on April 1 of each fiscal year. In addition, the Company performs an evaluation on an interim basis if it determines that recent events or prevailing conditions indicate a potential impairment of goodwill. 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, overall financial performance such as adverse changes in recent forecasts of operating results, industry and market considerations, the Company's market capitalization, updated business plans and regulatory and legal developments.

As disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Use of Estimates and Critical Accounting Policies" of the Company's 2013 Annual Report on Form 10-K, the fair value of The Art Institutes reporting unit exceeded its carrying value by more than 15 percent at March 31, 2013. During the quarter ended December 31, 2013, management observed declining application trends for future academic terms, particularly at The Art Institutes reporting unit, and performed a sensitivity analysis of its fair value using the most recently completed long range forecast and available earnings multiples of the Company's peer group.

As a result of the sensitivity analysis performed in the current quarter, management continues to believe that the fair value of The Art Institutes exceeds its carrying value by more than 10 percent at December 31, 2013; accordingly, the Company does not believe that it is more-likely-than-not that the fair value of The Art Institutes has decreased below its carrying value at December 31, 2013. Management also considered the results of the most recently completed long range forecast and available earnings multiples for the potential impact on the fair values of the Argosy University and South University reporting units and, based on its analysis, management does not believe that it is more-likely-than-not that the fair values of these reporting units have decreased below their carrying values at December 31, 2013. Consequently, management concluded that none of the Company's reporting units experienced any triggering event that would have required a step one interim goodwill impairment analysis at December 31, 2013.

A roll forward of the Company's consolidated goodwill balance from June 30, 2012 to June 30, 2013 is as follows (in thousands):

	June 30, 2012		Impairment			June 30, 2013
The Art Institutes	$	861,619	$	(294,460	)	$	567,159
Argosy University	63,445		—			63,445
South University	38,486		—			38,486
Total goodwill	$	963,550	$	(294,460	)	$	669,090

The entire goodwill balance attributed to the Brown Mackie Colleges reporting unit was written off in connection with impairment charges incurred in fiscal 2012; therefore, it was not considered in the sensitivity analysis described above. The Company's goodwill balance did not change between June 30, 2013 and December 31, 2013.

Intangible Assets

The Company also evaluates indefinite-lived intangible assets annually on April 1 for impairment and on an interim basis if it determines that recent events or prevailing conditions indicate these assets could be potentially impaired. The Company does not believe that it is more-likely-than-not that the fair values of its indefinite-lived intangible assets have decreased below their respective carrying values at December 31, 2013; consequently, management concluded that no triggering event occurred in the current quarter that would have required an interim evaluation of these assets. Intangible assets other than goodwill consisted of the following amounts (in thousands):

	December 31, 2013					June 30, 2013					December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
The Art Institutes trade name	$	190,000	$	—		$	190,000	$	—		$	218,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			95,862		—
Curriculum and programs	45,315		(33,800		)	43,575		(32,596		)	41,172		(30,392		)
Student contracts, applications and relationships	39,511		(37,937		)	39,511		(37,381		)	39,511		(36,826		)
Favorable leases and other	19,403		(18,375		)	19,424		(17,960		)	19,435		(17,401		)
Total intangible assets	$	390,091	$	(90,112	)	$	388,372	$	(87,937	)	$	413,980	$	(84,619	)

The Company considers The Art Institutes reporting unit trade name to have a useful life similar to that of the overall business and assigned it 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 one 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 originally assigned indefinite lives and annual costs to renew are expensed as incurred.

Amortization of intangible assets was approximately $1.5 million and $1.6 million for the three months ended December 31, 2013 and 2012, respectively, and $3.0 million and $3.2 million for the six months ended December 31, 2013 and 2012. Total estimated amortization of the Company’s intangible assets for each of the fiscal years ending June 30, 2014 through 2018 was as follows at December 31, 2013 (in thousands):

Fiscal years	Amortization Expense
2014 (remainder)	$	2,882
2015	5,266
2016	3,910
2017	2,008
2018	51

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Accrued Liabilities

6 Months Ended

Dec. 31, 2013

Accrued Liabilities, Current [Abstract]

Accrued Liabilities

ACCRUED LIABILITIES

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

	December 31, 2013		June 30, 2013		December 31, 2012
Payroll and related taxes	$	28,602	$	35,668	$	36,476
Advertising	26,176		33,010		28,027
Benefits	15,383		16,235		15,444
Interest	11,117		10,416		3,037
Capital expenditures	5,791		4,113		6,789
Other	67,689		57,975		46,840
Total accrued liabilities	$	154,758	$	157,417	$	136,613

Over the past several fiscal years, the Company has completed restructuring plans across the organization intended to improve operational efficiencies and align costs with student enrollment levels. During the six months ended December 31, 2013, the Company recorded restructuring expenses of $11.1 million split between educational services expense and general and administrative expense, which consisted of employee severance charges of $9.4 million and $1.7 million related to a sublease transaction the Company entered into after consolidating office space. At December 31, 2013, the remaining liability for all restructuring plans was $8.8 million, consisting primarily of employee severance amounts that will be paid through June 30, 2014 and net rent charges that will be paid through the remaining lease terms.

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Segment Reporting (Tables)

6 Months Ended

Dec. 31, 2013

Segments [Abstract]

Schedule of Segment Reporting Information, by Segment

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2013			2012			2013			2012
Net revenues:
The Art Institutes	$	371,474		$	411,533		$	727,989		$	791,672
Argosy University	76,640			92,312			159,788			174,232
Brown Mackie Colleges	69,463			78,274			139,649			152,246
South University	76,096			72,776			146,627			146,309
Total EDMC	$	593,673		$	654,895		$	1,174,053		$	1,264,459
EBITDA excluding certain expenses:
The Art Institutes	$	87,992		$	113,429		$	147,089		$	182,848
Argosy University	2,547			15,231			5,931			15,401
Brown Mackie Colleges	7,123			8,980			13,407			18,186
South University	12,158			9,132			17,550			16,364
Corporate and other	(22,737		)	(23,444		)	(44,727		)	(46,550		)
Total EDMC	87,083			123,328			139,250			186,249
Reconciliation to consolidated (loss) income before income taxes:
Restructuring (A)	9,452			—			11,097			9,145
Settlement-related costs	5,959			—			5,959			—
Long-lived asset impairments (B)	3,847			—			3,847			—
Depreciation and amortization	38,593			39,255			77,198			83,400
Net interest expense	31,615			31,009			63,481			62,461
(Loss) income before income taxes	$	(2,383	)	$	53,064		$	(22,332	)	$	31,243

(A) Refer to Note 7, "Accrued Liabilities," for more information on these charges.

(B) Refer to Note 4, "Property and Equipment," for more information on these charges.

Total assets of each reportable segment were as follows (in thousands):

Assets: (+)	December 31, 2013		June 30, 2013		December 31, 2012
The Art Institutes	$	1,371,173	$	1,438,028	$	1,748,715
Argosy University	204,924		257,608		242,546
Brown Mackie Colleges	190,294		231,225		190,915
South University	203,945		226,041		202,341
Corporate and other	209,752		162,391		309,301
Total EDMC	$	2,180,088	$	2,315,293	$	2,693,818

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Contingencies

6 Months Ended

Dec. 31, 2013

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 on the case 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 federal district court in the Western District of Pennsylvania, relates to whether the Company's compensation plans for admission representatives violated the Higher Education Act of 1965, 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 common law claims and the allegations that the plan as implemented violated the rule to continue to discovery.  The Company believes the case to be without merit and intends to vigorously defend itself. From time to time, the Company engages in settlement discussions with respect to this case.  There can be no assurance that these conversations will lead to a settlement acceptable to all parties and approved by all parties.   There can also be no assurance that any settlement will be within amounts currently accrued or be covered by insurance or not be material to the Company. 

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. The case, which is pending in the federal district court in 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.

In August 2013, the parties to the action, along with the U.S. Department of Justice, participated in a private mediation in which the relator and defendants reached an agreement in principle regarding the financial terms of a potential settlement. The agreement between the parties remains subject to approval by the U.S. Department of Justice. Significant terms remain to be negotiated, and there is no certainty that a final agreement will be reached. The settlement amount agreed to by the parties under the terms of the agreement in principle would be paid by the Company's insurer and the Company would pay an immaterial amount of attorneys' fees incurred by the relator. The ultimate dismissal of the action, should a final settlement be reached, is subject to the Court's approval.

In the course of settlement discussions regarding the Sobek matter, the U.S. Department of Justice informed the Company that it is the subject of an investigation related to a claim under the federal false claims act by the U. S. Attorney’s Office in the Middle District of Tennessee. The Company plans on cooperating with the U.S. Department of Justice with regard to this matter. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

Shareholder Derivative Lawsuits

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, PA. 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, improper classification 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 and the director defendants 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. On July 16, 2013, the Court dismissed the claims that the Company engaged in improper recruiting tactics and mismanaged the Company's financial well-being with prejudice and found that the Special Litigation Committee could conduct a supplemental investigation of the plaintiff's claims related to incentive compensation paid to admissions representatives and graduate placement statistics. The Special Litigation Committee filed supplemental reports on October 15, 2013 and January 9, 2014, finding no support for the incentive compensation and graduate placement statistic claims. The Court held a hearing on the defendants' supplemental motion to dismiss the case on January 29, 2014.

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 federal district court in 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 believes that the claims set forth in the complaint are without merit and intends to vigorously defend itself. The Company and the named director defendants filed a motion to stay the litigation pending the resolution of the Oklahoma Law Enforcement Retirement System shareholder derivative case or, alternatively, dismiss the case on October 19, 2012. On August 5, 2013, the Court granted the Company's motion to stay the case in light of the ruling on the defendants' motion to dismiss the Oklahoma Law Enforcement Retirement System case.

OIG Subpoena

On May 24, 2013, the Company received a subpoena from the Office of Inspector General of the U.S. Department of Education requesting policies and procedures related to Argosy University's attendance, withdrawal and return to Title IV policies during the period of July 1, 2010 through December 31, 2011 and detailed information on a number of students who enrolled in Argosy University's Bachelor's of Psychology degree program. The Company plans to cooperate with the Office of Inspector General in connection with its investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

State Attorney General Investigations

In January 2014, the Company received inquiries from 13 states regarding the Company’s business practices. The Attorney General of the Commonwealth of Pennsylvania informed the Company that it will serve as the point of contact for the inquiries related to the Company. The inquiries focus on the Company's practices relating to the recruitment of students, graduate placement statistics, graduate certification and licensing results, and student lending activities, among other matters. Several other companies in the proprietary education industry have disclosed that they received similar inquiries. The Company intends to cooperate with the states involved and cannot predict the eventual scope, duration or outcome of the investigation at this time.

In January 2013, The New England Institute of Art received a civil investigative demand from the Commonwealth of Massachusetts Attorney General requesting information for the period from January 1, 2010 to the present pursuant to an investigation of practices by the school in connection with marketing and advertising job placement and student outcomes, the recruitment of students and the financing of education. The Company previously responded to a similar request that The New England Institute of Art received in June 2007 and intends to cooperate with the Attorney General in connection with its investigation. However, the Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

As previously disclosed, on December 5, 2013, the Company entered into a Final Consent Judgment (the “Consent Judgment”) with the Colorado Attorney General’s Office for the purpose of resolving disputed claims, avoiding the expense of further litigation, and permitting the Company to focus on its education mission with regard to its students. Under the Consent Judgment, without admitting liability, the Company has agreed to pay the aggregate amount of approximately $3.4 million, consisting of $2.9 million to be distributed as restitution to eligible students and $0.5 million to the Colorado Department of Law to be used by the State of Colorado for consumer restitution and as reimbursement to the state for reasonable costs and attorney’s fees and for future consumer education, consumer fraud and antitrust enforcement efforts. The Company further agreed to a suspended civil penalty of $1.0 million, which becomes due and payable if the Company commits a knowing and willful material violation of the Consent Judgment within three years of the date of the Consent Judgment. The Company accrued a liability for the $3.4 million settlement within general and administrative expense in the accompanying consolidated statement of operations in the three months ended December 31, 2013.

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 proprietary post-secondary schools and that subpoenas were issued to six proprietary 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.

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 has engaged in settlement discussions with the City Attorney's office in order to explore a potential resolution of the investigation and recorded a liability at December 31, 2013 based on these discussions which the Company believes is immaterial to the financial statements. Settlement discussions continue with the City Attorney's office and the Company cannot predict at this time the eventual scope or timing of any settlement agreement or if such an agreement will be reached with the City Attorney or if any resolution of the matter will have a material impact on the Company’s financial statements or results of operations.

Securities and Exchange Commission Subpoenas

On March 20, 2013, the Company received a subpoena from the Division of Enforcement of the Securities and Exchange Commission requesting documents and information relating to the Company's valuation of goodwill and its bad debt allowance for student receivables. The Company received a second subpoena from the Division of Enforcement on May 13, 2013 which requests documents and information related to the letters of credit posted with the U.S. Department of Education. The Company intends to cooperate with the SEC in its investigation. The Company cannot predict the eventual scope, duration or outcome of the investigation at this time.

Argosy University, Seattle APA Program Accreditation Lawsuits

In August 2013, a petition was filed in the Superior Court of the State of Washington (King County) in the case of Winters, et al. v. Argosy Education Group, et al. by 20 former students in the Clinical Psychology program offered by the Seattle campus of Argosy University. In December 2013, a similar petition was filed in the same court in the case of McMath, et al. v. Argosy Education Group, et al. by nine former students in the Clinical Psychology program offered by the Seattle campus of Argosy University. Both cases allege negligent misrepresentation due to the failure of the Clinical Psychology program to obtain accreditation from the American Psychology Association ("APA"), breach of contract, violation of the Washington State Consumer Protection Act, negligent infliction of emotional distress, negligence and lack of institutional control, negligent misrepresentation, breach of fiduciary duty, negligent failure to disclose and fraud.  The Seattle campus of Argosy University announced that it was teaching-out (i.e., not accepting new students into the program) the Clinical Psychology program in November 2011 due to the inability to obtain APA accreditation. The Company believes the claims in the lawsuits to be without merit and intends to vigorously defend itself.

Other Matters

The Company is a defendant in certain other legal proceedings arising out of the conduct of its business.  Additionally, the Company is subject to compliance reviews by various state and federal agencies which provide student financial aid programs, of which noncompliance may result in liability for educational benefits paid as well as fines and other corrective action.  The U.S. Department of Veterans Affairs is currently conducting a compliance review of one of the Company's schools and has advised the Company that it intends to conduct reviews of four additional schools during fiscal 2014. As disclosed in 2013 Annual Report on Form 10-K, with regard to the review that has begun, the U. S. Department of Veterans Affairs has not yet issued a report of its findings, but has informed the Company that it has identified instances in which the school failed to notify the U. S. Department of Veterans Affairs of circumstances where students receiving educational benefits failed to pursue a course, which the Company has been informed may in turn give rise to a refund obligation by students. The Company may be required, or may elect, to reimburse the U. S. Department of Veterans Affairs for adjustments to the amount of educational benefits paid by the U. S. Department of Veterans Affairs to the affected students. In the opinion of management, based upon an investigation of these matters and discussion with legal counsel, the ultimate outcome of such other legal proceedings and compliance reviews, individually and in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

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Share-Based Compensation (Tables)

6 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of the time-based stock options was determined using a Black-Scholes-Merton model in which the key assumptions are presented below.

	Time-Based Stock Options			Restricted Stock Units
Number granted (in millions)	1.5			0.6
Fair value per unit	$	7.66		$	12.74
Exercise price	$	12.74		N/A
Expected dividend yield	0		%	N/A
Expected volatility	64		%	N/A
Risk free interest rate	1.86		%	N/A
Expected term (yrs)	6.25 years			N/A

Schedule of Share-based Payment Award, Stock Options, Activity

The table below presents outstanding share units, unrecognized compensation expense (net of expected forfeitures) and stock options that are exercisable at December 31, 2013:

	Outstanding (in millions)	Unrecognized Compensation Expense (in millions)		Exercisable (in 000s)	Weighted Average Exercise Price / Share Price
Time-based stock options	11.3	$	27.0	3.6	$	3.58
Restricted stock units	2.5	$	12.6	N/A	$	5.90
Performance-based stock options	1.0	$	2.1	—	$	3.59
Total	14.8	$	41.7	3.6

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Accrued Liabilities (Details) (USD $)	3 Months Ended				6 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012		Jun. 30, 2013
Accrued liabilities, current [Line Items]
Payroll and related taxes	$ 28,602,000		$ 36,476,000		$ 28,602,000		$ 36,476,000		$ 35,668,000
Advertising	26,176,000		28,027,000		26,176,000		28,027,000		33,010,000
Benefits	15,383,000		15,444,000		15,383,000		15,444,000		16,235,000
Interest	11,117,000		3,037,000		11,117,000		3,037,000		10,416,000
Capital expenditures	5,791,000		6,789,000		5,791,000		6,789,000		4,113,000
Other	67,689,000		46,840,000		67,689,000		46,840,000		57,975,000
Total accrued liabilities	154,758,000		136,613,000		154,758,000		136,613,000		157,417,000
Restructuring charges	9,452,000	[1]	0	[1]	11,097,000	[1]	9,145,000	[1]
Employee Severance [Member]
Accrued liabilities, current [Line Items]
Restructuring charges					9,400,000
Lease Abandonment [Member]
Accrued liabilities, current [Line Items]
Restructuring charges					1,700,000
Restructuring Charges [Member]
Accrued liabilities, current [Line Items]
Accrued Liabilities	$ 8,800,000				$ 8,800,000

[1] Refer to Note 7, "Accrued Liabilities," for more information on these charges.

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Net income (loss)	$ 1,089	$ 31,144	$ (8,426)	$ 18,051
Net change in interest rate swaps:
Periodic revaluation of interest rate swaps, net of tax benefit of $271, $147, $766 and $1,434	(459)	(249)	(1,300)	(2,432)
Reclassification adjustment for interest recognized in consolidated statement of operations, net of tax expense of $1,166, $1,130, $2,316 and $2,173	1,977	1,915	3,928	3,684
Net change in unrecognized loss on interest rate swaps, net of tax	1,518	1,666	2,628	1,252
Foreign currency translation (loss) gain	(163)	(98)	183	59
Other comprehensive income	1,355	1,568	2,811	1,311
Comprehensive income (loss)	$ 2,444	$ 32,712	$ (5,615)	$ 19,362

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Basis of Presentation

6 Months Ended

Dec. 31, 2013

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 accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the accompanying interim financial statements have been reflected. The consolidated statements of operations for the three and six months ended December 31, 2013 and 2012 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, 2013 (the “Annual Report on Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”). The accompanying consolidated balance sheet at June 30, 2013 and consolidated statement of shareholders' equity for the fiscal year ended June 30, 2013 have been derived from the consolidated audited balance sheet and statement of shareholders' equity included in the 2013 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 125,560 enrolled students as of October 2013. The Company offers campus-based education through four different education systems and through online platforms at three of its four education systems, or through a combination of both. These four education systems comprise the Company's reportable segments, which are 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 to help them achieve their educational goals across the spectrum of in-demand careers. 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") and was financed by equity invested by the Sponsors and other investors, cash on hand and secured and unsecured borrowings. Refer to Note 8, "Short-Term and Long-Term Debt" for more 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.

Reclassifications

Certain reclassifications of prior year data have been made to conform to the December 31, 2013 presentation with no effect on previously reported net income (loss) or shareholders' equity.

Recent Accounting Pronouncements

In July 2013, the FASB clarified the presentation of an unrecognized tax benefit when a net operating loss or tax credit carryforward exists.  The clarification requires that an unrecognized tax benefit be presented as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward when settlement of the unrecognized tax benefit using those carryforwards is available pursuant to existing tax law.  The Company's adoption of the FASB clarification had no impact on its consolidated financial statements.

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Property And Equipment (Tables)

6 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

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

Asset Class	December 31, 2013			June 30, 2013			December 31, 2012
Leasehold improvements	$	574,231		570,286			$	564,578
Technology and other equipment	322,349			324,403			314,663
Furniture and equipment	164,148			163,595			161,013
Software	105,720			98,537			86,284
Library books	45,001			44,248			43,319
Buildings and improvements	25,708			25,566			25,358
Construction in progress	24,182			19,600			20,258
Land	5,496			5,496			5,496
Total	1,266,835			1,251,731			1,220,969
Less accumulated depreciation and amortization	(789,613		)	(726,106		)	(658,785		)
Property and equipment, net	$	477,222		$	525,625		$	562,184

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Property And Equipment (Details) (USD $)	3 Months Ended				6 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2013		Dec. 31, 2012		Jun. 30, 2013
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	$ 1,266,835,000		$ 1,220,969,000		$ 1,266,835,000		$ 1,220,969,000		$ 1,251,731,000
Less accumulated depreciation	(789,613,000)		(658,785,000)		(789,613,000)		(658,785,000)		(726,106,000)
Property and equipment, net	477,222,000		562,184,000		477,222,000		562,184,000		525,625,000
Depreciation and amortization of property and equipment					74,181,000		80,241,000
Accelerated Depreciation					4,600,000
Long-lived asset impairments	3,847,000	[1]	0	[1]	3,847,000	[1]	0	[1]
Proceeds from sale of fixed assets			65,100,000		0		65,065,000
Minimum [Member]
Property, Plant and Equipment, Net [Abstract]
Sale Leaseback Transaction, Lease Terms			P3Y
Maximum [Member]
Property, Plant and Equipment, Net [Abstract]
Sale Leaseback Transaction, Lease Terms			P15Y
Leasehold improvements and capitalized lease costs [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	574,231,000		564,578,000		574,231,000		564,578,000		570,286,000
Technology and other equipment [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	322,349,000		314,663,000		322,349,000		314,663,000		324,403,000
Furniture and equipment [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	164,148,000		161,013,000		164,148,000		161,013,000		163,595,000
Software [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	105,720,000		86,284,000		105,720,000		86,284,000		98,537,000
Library books [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	45,001,000		43,319,000		45,001,000		43,319,000		44,248,000
Building and improvements [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	25,708,000		25,358,000		25,708,000		25,358,000		25,566,000
Construction in progress [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	24,182,000		20,258,000		24,182,000		20,258,000		19,600,000
Land [Member]
Property, Plant and Equipment, Net [Abstract]
Property and equipment, gross	5,496,000		5,496,000		5,496,000		5,496,000		5,496,000
Property and Equipment [Member]
Property, Plant and Equipment, Net [Abstract]
Depreciation and amortization of property and equipment	$ 37,100,000		$ 37,600,000

[1] Refer to Note 4, "Property and Equipment," for more information on these charges.

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Income Taxes

6 Months Ended

Dec. 31, 2013

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 if 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 December 31, 2013.

The Company incurred cumulative losses before taxes in the three most recent fiscal years ended June 30, 2013 primarily due to long-lived asset impairment charges recorded in fiscal 2013 and 2012, most of which was not deductible. Absent these impairment charges, the Company would have recorded pre-tax earnings in fiscal 2013 and 2012. Management considered the cumulative loss for book purposes and concluded that it was more-likely-than-not that the Company's deferred tax assets would be realized except as disclosed in Part II, Item 8 "Financial Statements and Supplementary Data," Note 11, "Income Taxes" of the June 30, 2013 Annual Report on Form 10-K with respect to certain state deferred tax assets.

The effective tax rates differ from the combined federal and state statutory rates due to valuation allowances, expenses that are non-deductible for tax purposes, discrete items and the accounting related to uncertain tax positions. The Company's effective tax rate in the three months ended December 31, 2013 was impacted by the disproportionate impact on low earnings of discrete items as well as permanent tax differences, which have remained relatively consistent period over period. The effective tax rate for the three months ended December 31, 2012 was 41.3 percent. The Company's effective tax rate was a benefit of 62.3 percent and expense of 42.2 percent, respectively, for the six months ended December 31, 2013 and 2012. The current six-month period includes a deferred tax benefit of approximately $3.2 million that was recorded as a discrete item resulting from the July 2013 enactment of Pennsylvania House Bill No. 465, which, in addition to other amendments, changes how revenues from the sale of services are sourced for Pennsylvania income tax purposes. 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, 2013.