Source - Education Management Corporation

edmc.edu

Source - Education Management Corporation

MENTOR LEADER FRIEND TEACHER

EDMC

Finding Your Way –

Making Your Mark

Education Management Corporation

2005 Annual Report


Molly Deas, Instructor, Interior Design

The Art Institute of Portland

Portland, Oregon

3 Letter to Shareholders

6 Operating Highlights

7 Finding Your Way – Making Your Mark

16 Financial Summary

19 Board of Directors

20 EDMC School Listings

ibc Shareholder Information


ANNUAL REPORT

“Teaching requires being intuitive and sensing what students need in order

to succeed. Experience guides me, and I’m not afraid to alter the lesson

plan when I think it’s necessary. I find that when my students are excited

about a project or subject matter, their work naturally reflects that and

they shine.” MOLLY DEAS ■ “Molly does more than teach design, she lives

it. We all feed off her passion. Best of all, she’s secure and open enough to

feed off our passion and interests. She’ll tune in to what we’re excited about

and weave it into the discussion. It’s all seamless, and a couple of hours will

go by and we’ve forgotten that it’s school. JAMES BURBACK”

FINDING YOUR WAY–

MAKING YOUR MARK

EDMC

Molly Deas, an Instructor of Interior Design at The Art Institute of Portland, sends

a powerful message to her students through her interest in sustainable design.

Molly focuses on the many ways that green materials and approaches can change

the relationship between people and spaces. New ideas in every field of study,

remind us all, people and organizations alike, of the need to continually learn and

adapt. Molly's insights also remind us that the spaces we occupy must go beyond

their material properties to sustain our complex human needs. The same is true

for a wide-reaching educational enterprise such as EDMC. We continue to build

impressive campuses, laboratories, computer centers, medical simulation rooms,

animation studios and other current technology facilities. And yet we are far more

than the sum of these spaces. We measure our success by the success of our

students. Molly is an example of how important faculty support of our students

is to their success.

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P1


EDUCATION MANAGEMENT CORPORATION

John R. McKernan, Jr.

Chief Executive Officer

Photographed in The Art Institute

of Pittsburgh Gallery of Art


ANNUAL REPORT

“EDMC and its faculty know

how important it is to adapt to

change. We are customizing

learning options to fit a person’s

schedule, interests, learning style

and other needs.”John R. McKernan, Jr.

2005

TO OUR SHAREHOLDERS

“Finding Your Way – Making Your Mark.”

These few words describe the relationship of

our faculty to our students. In this year’s annual

report, you will read how EDMC is making its

mark in the education industry, and how our

faculty is making their mark through the way

they are engaged with our students. The featured

faculty remind us what a difference that

engagement ultimately means to students as they

find their way, and how, one teachable moment

and one student at a time, we make the world a

better place as these students prepare to make

their mark in their careers. The profiled faculty

represent each of our education systems, so their

approaches are unique to their fields; however,

the common denominator is their commitment to

the EDMC philosophy of “learning-centered,

career-focused education.”

That philosophy has proven again this year

that it benefits all of our shareholders. During

fiscal 2005, EDMC continued its track record of

long-term, sustainable growth. Reflecting

enrollment growth and strong fundamentals,

our consolidated net revenues grew 19.5% to

$1,019 million, operating margins expanded by

95 basis points, and earnings per share rose

31% to $1.35. Average student enrollment grew

16%, with same-school enrollment up 12%.

Since going public in 1996, EDMC’s total

student enrollment has increased at an average

annual rate of 20%, with over two-thirds of this

growth organic. In addition, the average annual

growth in net revenues and earnings per share

has been greater than 21% and 29%, respectively.

We continue to see significant opportunity

for our online delivery models. We offer a variety

of higher education programs from 100% online

at The Art Institute Online, a division of The Art

Institute of Pittsburgh, and South University to

individual online courses at The Art Institutes,

South University and Argosy University that can

be blended with traditional classroom courses and

degrees. The total number of online course-takers

this past summer has increased 35% to 7,709,

while the number of students taking 100% of their

coursework online has grown from 1,940 to 3,461.

During fiscal year 2005, we opened five new

campuses as shared-services locations: The Art

Institute of Ohio - Cincinnati and Brown Mackie

Colleges in Miami, Los Angeles, Orange County

(CA), and San Diego. Our expansion strategy

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P3


EDUCATION MANAGEMENT CORPORATION

of utilizing shared-services locations, where we

co-locate schools from our different education

systems, enables us to benefit shareholder value

by sharing classroom space and staff. During

fiscal year 2006, we plan to open five additional

campuses, all as shared-services locations, the

first being the July opening of a Brown Mackie

College in Denver.

Not surprisingly, the fastest growing source

of inquiries is the Internet. Since November 2004,

we have increased our advertising on the Web,

resulting in a significant increase in total inquiries

versus the last fiscal year. We have retained topquality

firms to assist in gathering these inquiries,

and increased training for our admissions staff

on handling Internet inquiries. In addition, high

school visits are still an extremely important part

of our strategy. Over the past year, we visited

almost 20,000 high schools, up 7% from last year,

generating a 14% increase in high school inquiries

from the previous year. We have also worked to

control the mix and type of inquiry so there is

a better balance among our schools in order to

facilitate inquiry conversions. We believe that the

marketing plan established during fiscal 2005 has

better positioned us for continued enrollment

growth in the years to come.

Over the past year, we have introduced approximately

120 new and transplanted academic

programs across EDMC’s education systems.

We added eleven new education programs,

including associate’s degrees in Baking & Pastry,

Gerontology, Healthcare Administration, Medical

Office Management, Pharmacy Technology, Sales

& Marketing and Surgical Technology; bachelor’s

degrees in Design Management, Healthcare

Management and Information Technology;

and an Anesthesiology Assistant master’s degree

FALL QUARTER ENROLLMENT

NET REVENUES dollars in millions

NET INCOME dollars in millions

EARNINGS PER SHARE diluted

70m

60m

50m

40m

30m

20m

10m

0m

01

02

03

04

05

$1200

1100

1000

900

800

700

600

500

400

300

200

100

0

01

02

03

04

05

$120

100

80

60

40

20

0

01

02

03

04

05

$1.50

1.20

.90

.60

.30

.0

01

02

03

04

05


ANNUAL REPORT

We are pleased to report that during the calendar

year ended December 31, 2004, 86% of total

available graduates from our undergraduate programs

were employed within six months of graduation

with an average starting salary of $27,470.

program. Once again, we expect to roll out

approximately 120 education programs during the

current fiscal year. We will continue to develop

new programs as well as transplant existing

programs from one education system to another.

For example, we anticipate transplanting the

Graphic Design associate’s and bachelor’s degree

programs from The Art Institutes to several of

our South University campuses during fiscal 2006.

The success of our delivery models and

diverse academic programs, our company-wide

commitment to our students, and the preparation

of our students for their careers is best exemplified

by the employment of our graduates in their field,

or a related field, of study. We are pleased to report

that during the calendar year ended December 31,

2004, 86% of total available graduates from our

undergraduate programs were employed within

six months of graduation with an average

starting salary of $27,470.

Our Company’s mission is to help students

begin or advance in their chosen career fields.

Our education systems strive for excellence by

developing and delivering academic programs

that meet the needs of employers; having faculty

with experience in their field as well as the

required academic credentials; providing flexible

campus-based and online course delivery options

with appropriate facilities and technology;

and maintaining a commitment to student and

graduate success. After helping our students

tailor class schedules that fit their lifestyles, they

receive personalized, hands-on instruction from

caring, energetic faculty dedicated to the success

of their students.

The faculty members spotlighted on the

following pages are shining examples of individuals

who, having combined their love of teaching

with their life passions, have found their way

and are making their mark on both their students

and communities. They have become more than

just teachers; they have become leaders, mentors

and friends.

John R. McKernan, Jr.

Chief Executive Officer

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P5


EDUCATION MANAGEMENT CORPORATION

OPERATING HIGHLIGHTS

dollars in thousands, except per share data

% change (2)

2001 2002 2003 2004 2005 2004 to 2005

Operating Results:

Net revenues $ 370,681 $ 500,576 $ 640,027 $ 853,019 $1,019,338 19.5%

Income before interest

and taxes (EBIT) $ 49,675 $ 68,967 $ 92,733 $ 132,986 $ 168,588 26.8%

EBIT Margin 13.4% 13.8% 14.5% 15.6% 16.5%

Net Income $ 28,978 $ 42,314 $ 56,277 $ 77,014 $ 101,574 31.9%

Diluted earnings per share (1) $ 0.46 $ 0.61 $ 0.77 $ 1.03 $ 1.35 31.1%

Balance Sheet Data:

Total assets $ 287,540 $ 492,655 $ 577,595 $ 827,999 $ 956,027 15.5%

Shareholders’ equity $ 159,949 $ 346,577 $ 427,779 $ 528,687 $ 666,010 26.0%

Other Selected Data:

Capital expenditures $ 47,477 $ 45,400 $ 80,809 $ 80,703 $ 71,205 (11.8%)

Schools at end of period 24 40 43 67 71

Student enrollment:

Beginning of fall quarter 27,718 32,180 43,784 58,828 66,179 12.5%

Fiscal year average 25,284 32,545 40,457 53,724 62,384 16.1%

(1) Periods prior to fiscal 2004 adjusted to reflect a 2-for-1 stock split on December 22, 2003.

(2) During fiscal 2004, the Company made several acquisitions that impacted the indicated growth.


ANNUAL REPORT

MENTOR LEADER FRIEND TEACHER

Finding Your Way – Making Your Mark

in the field of education means anticipating

employer demand, and responding quickly

with new and revised program designs and

timely faculty recruitment. Change is a

constant, and we commit EDMC’s resources

to respond quickly to opportunity, ensuring

that our students maintain a competitive

edge. EDMC will once again roll out

approximately 120 new and transplanted

programs during fiscal 2006.

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P7


EDUCATION MANAGEMENT CORPORATION

Jerry Lee Brice

Instructor, Multimedia

The Art Institute of California - San Diego

San Diego, California


THE ART INSTITUTES

“I take the approach that the student-teacher relationship is just for three

years. My hope is to remain colleagues and friends for much longer. I see

the classroom as a two-way exchange. Everything that I give as a teacher

comes back to me tenfold. Listening to and learning from my students

prevents me from becoming comfortable or obsolete. In the process, we

all become more interesting people.” JERRY BRICE ■ “Jerry isn't afraid to

bring attention to some aspect of your work that needs to be improved.

At the same time, he treats you like he would any colleague or professional.

He inspires with his example and his feedback. DIANA ARECHIGA”

Keeping it real: Jerry Brice stands with one foot in

the fast-moving, anything-is-possible entertainment

industry, and the other firmly planted in reality. He

offers students a bridge and road map for crossing

between these sometimes divergent worlds. “You

can’t declare yourself an artist without someone

dismissing such goals as foolish dreams. My job is

to help students see that dreams can be broken into

smaller, more attainable goals. Otherwise, they

remain something invisible and out of reach.”

With two decades’ worth of TV & film animation

and music video credits to his name, Jerry points

to the quiet example and mentoring he found from

the father of a childhood friend. “All it takes is one

person’s example, and a young person will figure

out where and how to direct their passion. I try

to be that person.” He’s even gone so far as to

invite students to Hollywood events as part of the

acclimation process. “I think students learn from

observing what you do more than from what

you say.”

Bridging art and technology: Jerry believes the current

generation of young artists will surely accomplish

more than he ever imagined possible. But to realize

the potential, they must first acquire a balance

between specialization and broad exposure to

traditional disciplines; a perfect marriage of technical

and creative training.

Students must gain an aesthetic foundation (light,

form, color and function), along with a refined sense

of story structure and development. They must also

show an ability to execute and implement ideas with

flair and technical efficiency.

Demand for these hybrid talents continues to

grow in TV & film animation, industrial design,

and gaming. Exciting opportunities await animation

artists, special effects artists, broadcast graphics

designers, and video post-production artists.

Responding to creative demands: The Art Institute

of California – San Diego has grown rapidly in

recent years on the strength of its faculty and a

forward-minded approach to arts education.

Students from these closely aligned fields join

with industry mentors and like-minded peers to

create a vibrant learning environment. Streaming

light, open and inviting spaces, and current technology

tools and facilities all combine to encourage

teacher and student exploration and mastery.

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P9


EDUCATION MANAGEMENT CORPORATION

Carol Lee Jarrell

Department Chair, Medical Assisting

Brown Mackie College - Merrillville

Merrillville, Indiana


BROWN MACKIE COLLEGE

Life changing: Carol Jerrell has been on both the

giving and receiving end of lifesaving medical care.

Three years ago, Carol was diagnosed with breast

cancer, which she confronted with the same steadfast

optimism she’s modeled to her students through their

life trials and detours. “We all have situations in

our lives that require us to rise above,” she says. “I

couldn’t have made it through without my students.

They kept me focused on the everyday and normal,

rather than on myself.”

Last year, Carol was named Volunteer of the Year

by the American Cancer Society for her efforts in

organizing Brown Mackie College - Merrillville

volunteers in support of the Relay for Life, a 24-hour

fund-raising event. She recalls a favorite moment

from the annual event, when luminaria bags,

decorated to honor loved ones, are set along the track

and the stadium lights go dark. “Standing there, you

really feel the outpouring of compassion,” Carol says.

“I’m reminded of the strong desire to help others that

draws me and my students to the medical field.”

Keeping pace: In a field as rapidly changing as healthcare,

the teacher must remain a lifelong student.

Carol’s vitae of continuing education training runs

the gamut, from allergies and bacterial resistance

issues to medical malpractice and HIPPA. “I do it all

for the students,” she says. “I can’t just talk the talk.

I have to demonstrate a commitment to providing

the best possible patient care. They will do as I do

as a medical professional, not what I say.”

Carol recognizes medical offices will continue

to evolve, spurred by new technology, treatment

protocols and the growing role of information in

patient diagnosis and care. “Every aspect of medical

care is growing more complex,” she says. As such

things as genetics and family history become more

integrated into care, and as research reaches the

bedside more quickly, all members of the care team

will need to respond.

Brown Mackie College schools pride themselves

on a change-oriented approach to curriculum,

giving students the most timely information and

exposure to new technology and treatment methods.

Brown Mackie College offers training in a full range

of health science specialties including Gerontology,

Occupational and Physical Therapy, Nursing and

Surgical Technology.

“Carol traces her instinct for teaching to her toddler years. She recalls

gathering her plush animals for a daily lesson in hygiene, using soap on

a mirror to substitute for chalk and blackboard. “The urge to teach has been

a part of me for as long as I can remember.” CAROL JERRELL ■ ”Carol

is determined to be a positive role model for her students. She will not allow

you to give in to negative thinking. Her attitude makes the difference. You

come away thinking, ‘yes, I can do this.’ MICHELLE WINKLER”

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P11


EDUCATION MANAGEMENT CORPORATION

Larry Gay Reagan

Faculty, General Education

Argosy University

Sarasota, Florida


ARGOSY UNIVERSITY

“I believe I have a gift for motivating students. They really appreciate the

time and care I give to their development. I try to add an extra element

of warmth and touch. It comes in different forms. I coach, prod, support,

guide, and mentor. They all yield the same reward, which is seeing a

student reach their greatest potential and become something more than

they could, at one time, imagine.” LARRY GAY REAGAN ■ “Dr. Reagan

has been a mentor, guide and true friend during my transition from public

k-12 education to higher education. She’s a joy to be around, and the

consummate academic professional. DR. KARL STERNER”

The woman who runs with wolves. In one legend from

Native American and Latina desert cultures, gifts of

nature that could be lost to the world are resurrected

through the persistence and care of La Loba, the

wolf woman.

Author Clarrisa Pinkola Estés describes the

essence of this female archetype as someone “filled

with good instincts, passionate creativity, and ageless

knowing." Many students and colleagues apply that

description to Larry Gay, who introduces folktales

and other legends in her work with students enrolled

in Argosy University’s Doctor of Education in

Educational Leadership (EdD) program.

“I sometimes end a class with a bit of legend

and song as a way of building community and

opening minds to other approaches,” Larry Gay says.

“Becoming a leader in the field of education involves

more than mastering theory. Educators are charged

with inspiring people to transform themselves,

and transformation is a recurring theme in many

folk stories.”

Larry Gay holds master’s degrees in health

education and Spanish, and a doctorate in education.

She’s developed international programs in Latin

America, launched major diversity training and

curriculum revision initiatives and organized a

Celebration of the Arts. She was recently named

Outstanding Faculty Member of the Year for

2004–2005.

She draws upon her vast knowledge of art,

music, improvisational theatre, world cultures and

languages to inspire and communicate. “Nobody

wants to hear me or anyone else lecture for three

hours,” she says. “I look for active learning

strategies that turn the classroom into a dynamic

workshop and stage.”

Future school leaders: An important aspect of

Larry Gay’s work is preparing women and others

representing minority populations for positions

of educational leadership. “Schools reflect the full

diversity of this nation,” she says. “Our future

school leaders need to be equally diverse.”

Argosy University/Sarasota’s College of

Education and Human Development offers both

Master of Arts and Doctor of Education degrees

in Curriculum & Instruction and Educational

Leadership. The School of Professional Psychology

and Behavioral Sciences offers additional programs

for school professionals, including an Education

Specialist in School Counseling (EdS), Master of Arts

in Guidance Counseling, and Master of Arts in

School Psychology.

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P13


EDUCATION MANAGEMENT CORPORATION

Martin Zdanowicz

Associate Professor, Pharmaceutical Sciences

South University

Savannah, Georgia


SOUTH UNIVERSITY

Prior to teaching, Martin Zdanowicz spent more

than a decade as a graduate and doctoral student

and researcher, working in such areas as pediatric

endocrinology and muscular dystrophy. In that

time, he learned a thing or two about self-discipline

and delayed reward – two constants in any

scientific endeavor.

“I tell my students, it all comes down to what

you want most,” Marty says. “If it’s a career like

pharmacy that pays well and gives you so many

opportunities, then you’ll decide to make the shortterm

sacrifices. There aren’t that many fields where,

after three years of study, you have a chance to

earn more than your instructor.”

Marty has no regrets about the path he chose.

“Once I began a teaching career, I couldn’t imagine

doing anything else,” he says. He has earned

numerous teaching honors along the way – not that

such recognition ever prompted complacency. “I’m

as nervous now before a class as I was 10 years ago.

Students will ask why I pace, and I say, ‘This is

how I relax.’ As soon as the first word comes out

of my mouth, I’m fine. I feel like I’m in the

right place doing exactly what I should be doing.”

Medicine’s fast track: Marty sees a bright future for

his students. In a world of increasingly customized

medicine, diagnostics and drug delivery, pharmacists

will play a vital role in drug therapy decision making

and patient counseling.

South University recently launched an innovative,

full-time, 12-quarter Doctor of Pharmacy program.

As a capstone experience, students complete

five-week rotations in Drug Information, Internal

Medicine, Ambulatory Care, Hospital Pharmacy

Practice, Community Pharmacy Practice, and one

elective rotation.

This type of accelerated program is currently

available at only five of the nation’s 90 pharmacy

schools, and South University offers the only

accelerated program currently located in the south

and southeast.

Meeting student needs: South University follows

a tradition of growth and innovation leading to

wide-ranging opportunities in the health sciences,

business and legal professions at campuses in

Savannah, Georgia; Montgomery, Alabama; West

Palm Beach, Florida; and Columbia, South Carolina.

“I prepared a set of detailed notes before I taught my first class.

As the students filed in, I realized this approach wasn’t going to work.

I had five minutes to do an instant revision, not just of my notes,

but of my whole approach to teaching. I learned to trust my instincts

and to use information as a way of connecting with students.” MARTIN

ZDANOWICZ ■ “Dr. Zdanowicz has a way of interacting with students that

keeps our interest high. He’s always challenging us to think and to apply our

problem-solving skills. He’ll put a slide up and give us an impromptu quiz as a

way of re-energizing the class in the middle of a presentation. RENEE LYON”

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P15


EDUCATION MANAGEMENT CORPORATION

Condensed Consolidated BALANCE SHEETS*

dollars in thousands

As of June 30, 2002 2003 2004 2005

Assets

Current assets:

Cash, cash equivalents and restricted cash $ 92,123 $ 89,552 $ 123,142 $ 176,866

Receivables, net 30,378 40,641 52,196 57,968

Inventories 3,932 4,371 5,002 5,598

Other current assets 13,609 26,458 24,714 39,246

Total current assets 140,042 161,022 205,054 279,678

Property and equipment, net 191,698 230,749 276,148 325,796

Intangibles and other long-term assets 160,915 185,824 346,797 350,553

Total assets $ 492,655 $ 577,595 $ 827,999 $ 956,027

Liabilities and shareholders’ equity

Current liabilities, excluding current portion of LTD $ 114,596 $ 105,127 $ 156,314 $ 166,487

Long-term debt, including current portion 28,576 38,500 128,560 70,420

Other long-term liabilities 2,906 6,189 14,438 53,110

Total shareholders’ equity 346,577 427,779 528,687 666,010

Total liabilities and shareholders’ equity $ 492,655 $ 577,595 $ 827,999 $ 956,027

* The condensed financial statements presented above were derived from the audited financial statements included in the Company’s report on Form 10-K.


ANNUAL REPORT

During fiscal 2005, EDMC continued its track record

of long-term, sustainable growth. Reflecting enrollment

growth and strong fundamentals, our consolidated

net revenues grew 19.5% to $1,019 million, and EPS

rose 31% to $1.35.

Condensed Consolidated STATEMENT OF OPERATIONS*

in thousands, except share data

For the Year Ended June 30, 2002 2003 2004 2005

Net Revenues $ 500,576 $ 640,027 $ 853,019 $1,019,338

Costs and expenses:

Educational services 325,027 417,557 546,132 640, 445

General and administrative 102,486 125,294 166,990 203,813

Amortization of intangible assets 4,096 4,443 6,911 6,492

431,609 547,294 720,033 850,750

Income before interest and taxes 68,967 92,733 132,986 168,588

Interest (income) expense, net 1,552 1,282 2,475 (220)

Income before income taxes 67,415 91,451 130,511 168,808

Provision for income taxes 25,101 35,174 53,497 67,234

Net income $ 42,314 $ 56,277 $ 77,014 $ 101,574

Earnings per share:

Diluted $ 0.61 $ 0.77 $ 1.03 $ 1.35

Weighted average number of shares outstanding:

Diluted 68,958 73,018 74,870 75,153

* The condensed financial statements presented above were derived from the audited financial statements included in the Company’s report on Form 10-K.

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P17


EDUCATION MANAGEMENT CORPORATION

Condensed Consolidated STATEMENTS OF CASH FLOW*

dollars in thousands

For the Year Ended June 30, 2002 2003 2004 2005

Cash flows from operating activities:

Net income $ 42,314 $ 56,277 $ 77,014 $ 101,574

Depreciation and amortization 29,968 40,477 48,376 53,985

Landlord allowances for tenant improvements – – – 14,629

Amortization of intangibles 4,096 4,443 6,911 6,492

Non-cash charges related to property, plant and equipment – – – 8,002

Stock-based compensation expense – – 871 1,044

Deferred income taxes (2,791) (97) (2,232) 424

Changes in current assets and liabilities 26,837 (21,714) 32,356 7,039

Net cash flows from operating activities 100,424 79,386 163,296 193,189

Cash flows used for investing activities:

Acquisition of subsidiaries, net of cash acquired (104,396) (23,661) (157,777) (12,298)

Expenditures for property and equipment (45,400) (80,809) (80,703) (71,205)

Landlord allowances for tenant improvements – – – (14,629)

Investment in marketable securities – – – (59,815)

Redemption of marketable securities – – – 59,815

Other items, net (4,441) (3,966) 1,546 (659)

Net cash flows used for investing activities (154,237) (108,436) (236,934) (98,791)

Cash flows from (used for) financing activities:

Net activity under revolving credit facility (28,525) 10,000 90,100 (63,100)

Changes in debt balances (8,756) (329) (78) 2,935

Net proceeds from issuance of Common Stock 135,808 14,581 12,018 21,169

Net cash flows from (used for) financing activities 98,527 24,252 102,040 (38,996)

Effective exchange rate changes on cash

and cash equivalents 337 1,632 (631) (156)

Net change in cash and cash equivalents 45,051 (3,166) 27,771 55,246

Cash and cash equivalents, beginning of fiscal year 47,072 92,123 88,957 116,728

Cash and cash equivalents, end of fiscal year $ 92,123 $ 88,957 $ 116,728 $ 171,974

* The condensed financial statements presented above were derived from the audited financial statements included in the Company’s report on Form 10-K.


ANNUAL REPORT

Board of DIRECTORS

MANAGEMENT

Committee

Robert B. Knutson

Chairman

Education Management Corporation

Robert H. Atwell

President Emeritus

American Council on Education

William M. Campbell, III

President

Discovery Networks, U.S.

Thomas J. Colligan

Former Vice Chairman

PricewaterhouseCoopers LLP

Michael J. Emmi

Chairman and Chief Executive Officer

IPR International, LLC

Martin L. Garcia

Managing Director

Pinehill Capital Partners

Jerry L. Johnson

President

eMoney Advisor

Miryam L. Knutson

Former Vice Chairman

Education Management Corporation

John R. McKernan, Jr.

Vice Chairman and

Chief Executive Officer

Education Management Corporation

James S. Pasman, Jr.

Former President and

Chief Operating Officer

National Intergroup, Inc.

Former Chairman

Permian Oil Corporation

Friedrich Teroerde

Chairman

ELG Haniel GmbH

Albert Greenstone

Emeritus Director

The National Center for

Professional Development

John R. McKernan, Jr.

Vice Chairman and

Chief Executive Officer

J. William Brooks, Jr.

President and Chief Operating Officer

Robert B. Knutson

Chairman

Robert T. McDowell

Executive Vice President and

Chief Financial Officer

Stacey Sauchuk

Senior Vice President

Academic Programs and Student Affairs

Joseph A. Charlson

Senior Vice President and

Chief Marketing Officer

Ronald W. Ogrodnik

Senior Vice President

Human Resources

FINDING YOUR WAY – MAKING YOUR MARK • 2005 • P19


EDUCATION MANAGEMENT CORPORATION

EDUCATION MANAGEMENT CORPORATION

THE ART INSTITUTES

The Art Institute of Atlanta ® , GA

The Art Institute of California SM – Los Angeles

The Art Institute of California SM

– Orange County

The Art Institute of California SM – San Diego

The Art Institute of California SM

– San Francisco

The Art Institute of Charlotte ® , NC

The Art Institute of Colorado ® (Denver)

The Art Institute of Dallas ® , TX

The Art Institute of Fort Lauderdale ® , FL

The Art Institute of Houston ® , TX

The Art Institute of Las Vegas ® , NV

The Art Institute of New York City ® , NY

The Art Institute of Ohio – Cincinnati SM

The Art Institute of Philadelphia ® , PA

The Art Institute of Phoenix ® , AZ

The Art Institute of Pittsburgh ® , PA

The Art Institute of Portland ® , OR

The Art Institute of Seattle ® , WA

The Art Institute of Tampa SM , FL

A branch of Miami International University

of Art & Design

The Art Institute of Toronto SM , ON

The Art Institute of Vancouver SM , BC

The Art Institute of Vancouver – Burnaby SM , BC

The Art Institute of Washington ®

(Arlington, VA)

A branch of The Art Institute of Atlanta

The Art Institute Online SM

A division of The Art Institute of Pittsburgh

The Art Institutes International Minnesota SM

(Minneapolis, MN)

Bradley Academy for the Visual Arts SM

(York, PA)

California Design College SM

(Los Angeles – Wilshire Blvd.)

The Illinois Institute of Art ® – Chicago

The Illinois Institute of Art ® – Schaumburg 1

Miami International University of Art

& Design SM , FL

The New England Institute of Art SM

(Boston, MA)

1

Accredited by ACCSCT as a branch of

The Illinois Institute of Art – Chicago

ARGOSY UNIVERSITY

Primary Campuses:

Atlanta, GA

Chicago, IL

Dallas, TX

Honolulu, HI

Orange County, CA

Phoenix, AZ

San Francisco Bay Area, CA

Sarasota, FL

Schaumburg, IL

Seattle, WA

Tampa, FL

Twin Cities, MN

Washington, DC

Extension Sites:

Clearwater, FL

Hilo, HI

Kauai, HI

Maui, HI

Nashville, TN

Savannah, GA

Western State University College of Law

(Fullerton, CA)

Argosy Professional Services:

Association for Advanced Training

in Behavioral Sciences (AATBS)

The Connecting Link (Ventura, CA)

BROWN MACKIE COLLEGE

Brown Mackie College – Akron, OH

Brown Mackie College – Atlanta, GA

Brown Mackie College – Cincinnati, OH

Brown Mackie College – Dallas, TX

Brown Mackie College – Denver, CO

Brown Mackie College – Findlay, OH

Brown Mackie College – Fort Worth, TX

Brown Mackie College – Fort Wayne, IN

Brown Mackie College – Hopkinsville, KY

Brown Mackie College – Kansas City, KS

Brown Mackie College – Los Angeles, CA

Brown Mackie College – Louisville, KY

Brown Mackie College – Merrillville, IN

Brown Mackie College – Miami, FL

Brown Mackie College – Michigan City, IN

Brown Mackie College – Moline, IL

Brown Mackie College – North Canton, OH

Brown Mackie College – Northern Kentucky, KY

Brown Mackie College – Orange County, CA

Brown Mackie College – Salina, KS

Brown Mackie College – San Diego, CA

Brown Mackie College – South Bend, IN

SOUTH UNIVERSITY

Columbia, SC

Montgomery, AL

Savannah, GA

West Palm Beach, FL


PROFILE

Education Management Corporation (www.edmc.com) is among the largest

providers of private post-secondary education in North America, based on student

enrollment and revenue. Student enrollment exceeded 66,000 as of fall 2004.

EDMC has 71 primary campus locations in 24 states and two Canadian provinces

that offer a broad range of academic programs concentrated in the media arts,

design, fashion, culinary arts, behavioral sciences, health sciences, education,

information technology, legal studies and business fields, culminating in the

award of associate’s through doctoral degrees. EDMC has provided career-focused

education for more than 40 years.

SHAREHOLDER INFORMATION

Corporate Offices

210 Sixth Avenue

33rd Floor

Pittsburgh, PA 15222-2603

Stock Registrar and Transfer Agent

For address changes, account

consolidation, registration changes,

lost certificates, and other shareholder

services, contact:

Mellon Investor Services

85 Challenger Road

Overpeck Centre

Ridgefield Park, NJ 07660-2104

1-800-756-3353

1-800-231-5469 (for speech and

hearing impaired)

Investor Relations

Education Management Corporation

James R. Sober

Vice President, Finance

210 Sixth Avenue

33rd Floor

Pittsburgh, PA 15222-2603

Phone: (412) 995-7684

Fax: (412) 562-0598

www.edmc.com

Registered Public Accountants

Ernst & Young LLP

2100 One PPG Place

Pittsburgh, PA 15222-5417

Legal Counsel

Kirkpatrick & Lockhart LLP

1500 Oliver Building

Pittsburgh, PA 15222-2312

Stock Prices and Dividends

The Company’s Common Stock is traded

on the Nasdaq National Market under the

symbol “EDMC.” The prices set forth here

reflect the high and low intra-day trading

sales prices for the Common Stock for

the periods indicated, as reported in the

consolidated transaction reporting system

of the Nasdaq National Market.

Stock Price Ranges Three Months Ended

Fiscal Year 2005 High Low

June 30, 2005 $34.50 $24.21

March 31, 2005 33.96 27.49

December 31, 2004 34.19 24.64

September 30, 2004 33.19 22.81

Fiscal Year 2004 High Low

June 30, 2004 $36.62 $30.02

March 31, 2004 35.00 28.43

December 31, 2003 34.99 27.28

September 30, 2003 32.12 26.38

Inquiries

Stockholders may contact Investor Relations

to obtain, without charge, a copy of Form

10-K, Form 10-Q, current reports on Form

8-K, and any amendments to these reports

filed or furnished pursuant to Section 13(a) or

15(d) of the Securities Exchange Act of 1934.

Design: BD& E, Pittsburgh, PA

Photography: Tom Gigliotti, ‘79 graduate of The Art Institute of Pittsburgh

Molly Deas photographed in West Elm, Portland, Oregon

Martin Zdanowicz photographed at Wormsloe State Historic Site, Savannah, Georgia

Copywriting: R. Todd Erkel

© 2005 by Education Management Corporation


Education That Builds Careers

210 Sixth Avenue

Pittsburgh, PA 15222-2603

www.edmc.com

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