Education Management Corporation Reports Fiscal 2003 Second Quarter Financial Results

Pittsburgh, Pennsylvania, UNITED STATES


PITTSBURGH, Feb. 4, 2003 (PRIMEZONE) -- Education Management Corporation (Nasdaq:EDMC) today reported its financial results for the second quarter ended December 31, 2002. For the quarter, net revenues increased 35.3% to $175.1 million and net income grew 33.8% to $25.8 million, or 70 cents per diluted share. Robert Knutson, EDMC's Chairman and Chief Executive Officer, commented, "We're pleased to report our second quarter results, which were in line with our plans. Enrollment growth as of the start of the third quarter leads us to project continued strong operating results for the balance of the fiscal year."

Financial highlights:


 -- Revenues for the three months ended December 31, 2002 increased
    35.3% to $175.1 million, compared to $129.5 million for the same
    period a year ago. Revenue growth in the second quarter resulted
    from a 36.1% increase in student enrollment and an approximate 7%
    increase in average tuition rates. In the prior-year period, the
    consolidated statement of income included only 11 days of
    financial results of Argosy Education Group. Total enrollment at
    the start of the second quarter of fiscal 2003 was 43,784 students
    as compared to 32,180 students last year. Argosy's enrollment was
    7,301 students as of the start of the second quarter of fiscal
    2003.

 -- Second quarter operating income (EBIT) rose 31.3% to $42.0 million
    from $32.0 million for the same period a year ago. The
    consolidated EBIT margin was 24.0%, compared to 24.7% in the prior
    period. The operating margin would have been flat for the quarter
    except for the inclusion of Argosy's results in our consolidated
    financial statements. Argosy tends to have stronger profitability
    in the second half of the fiscal year.

 -- Net income for the quarter grew 33.8% to $25.8 million, or $0.70
    per diluted share, compared to $19.3 million, or $0.58 per diluted
    share, in the second quarter last year.

 -- At December 31, 2002, the Company had cash and cash equivalents of
    $8.0 million. Cash flow from operations for the second quarter was
    negative $11.5 million compared to $37.6 million of positive cash
    flow in the second quarter last year. This year-over-year swing in
    quarterly cash flow was a timing issue, resulting from The Art
    Institutes' current winter academic quarter starting six days
    later in January this year. Student loan proceeds normally
    received by electronic transfer in the last week of December were
    received in early January, because federal regulations provide for
    the payment of these funds only within 10 days of the start of
    classes. Total loan proceeds received by The Art Institutes within
    10 days of the start of the winter quarter increased to $67
    million this year from $53 million last year, and all of these
    funds were received in January. In the previous fiscal year,
    approximately $51 million of these funds were received in
    December.

 -- Capital expenditures during the quarter were approximately $26 
    million. Argosy University started construction of its new Twin
    Cities, Minnesota facility and The Art Institutes' school in
    Miami, recently renamed Miami International University of Art &
    Design, completed the first phase of its move to a new facility.
    We continue to project approximately $79 million in capital
    expenditures for fiscal year 2003. 

Student Enrollment

At the start of the current winter quarter (third quarter of fiscal 2003), total enrollment at EDMC's schools was 43,461, a 15.4% increase from the same time last year. The Art Institutes' enrollment increased 14.2% to 35,906 from 31,442 as of the comparable period last year. Argosy's enrollment at the beginning of the current fiscal quarter was 7,555, a 21.5% increase as compared to 6,216 students in the prior year. Last year's Argosy enrollment included 94 students attending the ITI school in Halifax. The teach-out of all programs at that location announced in August 2002, has been completed.


                                      2003        2002      Change
                                     Winter      Winter        %

 Total Enrollment

  The Art Institutes                 35,906      31,442      14.2%
  Argosy Education Group              7,555       6,216      21.5%
                                     ------      ------     -----
 Total Enrollment                    43,461      37,658      15.4%

 Same-School Enrollment (schools owned for 2 years or more)

  The Art Institute                  33,179      29,848      11.2%
  Argosy Education Group              7,487       6,122      22.3%
                                     ------      ------     -----
 Total Same-School Enrollment        40,666      35,970      13.1%

 Total Students Taking 100%
  Courses Online                        601         215     179.5%
 Total Online Enrollment              2,586         904     186.1%

The Company's quarterly revenues and income fluctuate with student enrollment patterns. Student enrollment has typically peaked in the fall (fiscal year second quarter), when the largest number of new high school graduates traditionally begins post-secondary education. The Company's quarterly costs and expenses, however, do not fluctuate as significantly as revenues.

Business Outlook

Based on the January enrollment, the Company expects third quarter year-over-year revenue growth of 18%. For the fourth quarter of fiscal 2003, year-over-year total enrollment growth for the Company is expected to remain approximately 15%, with The Art Institutes achieving total enrollment growth above 13%. For fiscal year 2003, the Company estimates revenue growth of 27% with operating margins improving by approximately 100 basis points over the prior year. Diluted EPS of $0.50 and $1.53 are expected for the third quarter and fiscal year, respectively.

Conference Call with Management

Education Management will host a conference call to discuss its second fiscal quarter 2003 earnings today at 10:30 a.m. (Eastern Time). Those wishing to participate in this call should dial 303-262-2050 approximately 10 minutes prior to the start of the call. A listen-only audio of the conference call will also be broadcast live over the Internet at www.edumgt.com. (The audio will be available for 60 days on this Web site.)

Education Management Corporation (www.edumgt.com) is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue, with approximately 44,000 students as of fall 2002 at 43 primary campus locations in 26 major cities. EDMC's Art Institutes (www.artinstitutes.edu) offer master's, bachelor's, associate's and non-degree programs in the areas of design, media arts, fashion and culinary arts. EDMC's Argosy Education Group provides graduate and undergraduate degree programs in various fields including psychology, education, business, law and the health sciences. EDMC has provided career-oriented education for 40 years, and its education institutions have more than 150,000 alumni.

This press release may include information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the Company's Securities and Exchange Commission filings. Past results of EDMC are not necessarily indicative of its future results. EDMC does not undertake any obligation to update any forward-looking statements.


                   EDUCATION MANAGEMENT CORPORATION
        CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
           (Dollars in thousands, except per share amounts)

                       For the three months        For the six months 
                        ended December 31,          ended December 31,
                          2001       2002           2001      2002
                       ---------  ---------      ---------  ---------


 Net revenues          $ 129,490  $ 175,136      $ 221,364  $ 303,279

 Costs and expenses:
  Educational services    74,326    100,753        141,458    194,883
  General and
   administrative         22,679     31,322         43,403     59,482
  Amortization of
   intangible assets         530      1,095            839      2,060
                       ---------  ---------      ---------  ---------
                          97,535    133,170        185,700     256,425
                       ---------  ---------      ---------  ---------

 Income before
  interest and taxes      31,955     41,966         35,664     46,854
   Interest expense, net     548        332          1,027        642
                       ---------  ---------      ---------  ---------

 Income before income
  taxes                   31,407     41,634         34,637     46,212
   Provision for
    income taxes          12,123     15,823         13,370     17,563
                       ---------  ---------      ---------  ---------

 Net income            $  19,284  $  25,811      $  21,267  $  28,649
                       =========  =========      =========  =========

 Diluted earnings
  per share            $     .58  $     .70      $     .65  $     .78

 Weighted average
  number of diluted
  shares Outstanding
  (000s):                 33,363     36,685         32,626     36,650


 Other selected data (unaudited):

                        For the three months       For the six months 
                         ended December 31,         ended December 31,
                          2001      2002            2001      2002
                       ---------  ---------      ---------  ---------

 Cash flows from
  operations              37,641    (11,490)        66,525     21,418
 Capital expenditures      8,760     26,253         28,892     55,648
 Depreciation and
  amortization             7,196      9,301         14,049     18,551


 Selected Consolidated Balance Sheet Data (unaudited):

                                             As of December 31,
                                          2001               2002
                                       -----------        -----------
 Cash and cash equivalents             $    45,452        $     8,047
 Receivables, net                           33,318             35,509
 Current assets                             98,331             67,682
 Total assets                              439,285            474,431
 Current liabilities                       117,755             87,818
 Long-term debt (including current
  portion)                                   4,049              3,778
 Shareholders' investment                  312,247            379,625


        

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