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