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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

EDUCATION MANAGEMENT CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:  (412) 562-0900

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock, $.01 par value

(Title of class)

Preferred Share Purchase Rights

(Title of class)

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the definitive proxy statement incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No  ¨

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of December 31, 2002 was approximately $890,341,153. The number of shares of Common Stock outstanding on September 23, 2003 was 36,188,928 shares.

Documents incorporated by reference: Portions of the definitive Proxy Statement of the registrant for the annual meeting of shareholders to be held on November 20, 2003 (“Proxy Statement”), which will be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended June 30, 2003, are incorporated by reference into Part III of this Form 10-K. The incorporation by reference herein of portions of the Proxy Statement shall not be deemed to incorporate by reference the information referred to in Items 306 or 402(a)(8) of Regulation S-K.

PART I

Forward-Looking Statements: This Annual Report on Form 10-K contains statements that may be forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Those statements can be identified by their use of terms such as “believes,” “estimates,” “anticipates,” “continues,” “contemplates,” “expects,” “may,” “will,” “could,” “should” or “would” or the negatives thereof or other variations thereon or comparable terminology. Those statements are based on the intent, belief or expectation of Education Management Corporation (“EDMC” or the “Company”) as of the date of this Annual Report. Such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties that are outside the control of the Company. Actual results may vary materially from the forward-looking statements contained herein as a result of changes in United States or international economic conditions, governmental regulations and other factors, including those factors described at the end of the response to Item 7 under the heading “Risk Factors.” The Company expressly disclaims any obligation or understanding to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in the events, conditions or circumstances on which any such statement is based. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto filed in response to Item 8 of this Annual Report.

ITEM 1—BUSINESS

Business Overview

EDMC is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue. EDMC has provided career-oriented education for over 40 years and its education institutions have over 150,000 alumni. The Company was organized as a Pennsylvania corporation in 1962 and completed its initial public offering in 1996. EDMC’s Art Institutes education institutions (“The Art Institutes”) offer programs in the media arts, design, fashion and culinary arts. In December 2001, EDMC acquired Argosy Education Group, Inc. (“Argosy”), which owns and operates Argosy University, Western State University College of Law, and Argosy Professional Services. Argosy offers programs in the behavioral sciences, health sciences, education, business and law.

As of June 30, 2003, The Art Institutes consisted of 29 schools in cities throughout North America. Art Institute programs are designed to provide the knowledge and skills necessary for entry-level employment in various fields, including graphic design, media arts and animation, multimedia and web design, game art and design, animation, video and digital media production, interior design, industrial design, culinary arts, photography and fashion. These programs typically are completed in 18 to 48 months and culminate in a bachelor’s or associate’s degree. In the summer quarter beginning July 2003, 21 Art Institutes offered bachelor’s degree programs, and EDMC expects to continue to introduce bachelor’s degree programs at its schools in states that permit proprietary post-secondary institutions to offer such programs. As of fall 2002, The Art Institutes had approximately 36,000 students enrolled.

Argosy offers doctoral and master’s programs in clinical psychology, counseling and education. Argosy also offers doctoral, master’s and bachelor’s degree programs in business administration, law degrees, bachelor’s degrees in psychology and associate’s degree programs in various health sciences fields. Argosy operates 13 Argosy University campuses and six extension sites in 11 states, as well as Western State University College of Law in California. Argosy Professional Services provides courses and materials for post-graduate licensure examinations in human services fields and provides continuing education courses for K-12 educators. As of fall 2002, Argosy University and Western State University College of Law had approximately 7,300 students enrolled.

During fiscal 2003, the Company managed its business in relation to the services provided and had two reporting segments: The Art Institutes and Argosy. Certain financial information about these segments is presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in Item 7 in this Annual Report on Form 10-K and in Note 16, “Segment Reporting,” of the Company’s Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.

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Subsequent to June 30, 2003, EDMC made certain acquisitions that will add new programs and give the Company access to new markets. On July 14, 2003, EDMC acquired South University (“South”). South has four campuses in the southeastern United States and offers undergraduate and graduate degree programs in business, legal studies, information technology and health sciences fields. On September 2, 2003, EDMC acquired American Education Centers (“AEC”), headquartered in a suburb of Cincinnati, Ohio. AEC operates 18 education institutions in eight states primarily in the Midwest, offering diploma and associate’s degree programs in health sciences, business, information technology, legal studies and design technologies. On June 12, 2003, the Company announced that it had signed an agreement to purchase Dubrulle International Culinary & Hotel Institute of Canada, located in Vancouver, British Columbia, Canada. On August 26, 2003, the Company announced that it had signed an agreement to purchase Bradley Academy for the Visual Arts, located in York, Pennsylvania.

Including these recent acquisitions, EDMC will have 66 primary campus locations in 24 states and two Canadian provinces.

The Business of Education

EDMC’s primary mission is to promote student success by providing students with the education necessary to meet employers’ current and anticipated needs. To achieve this objective, the Company focuses on marketing to a broad range of potential students, admitting students who possess the relevant interests and capabilities, providing students with programs of study taught by experienced professionals and offering students various career services.

Student Recruitment and Marketing

The Art Institutes.    The general reputation of The Art Institutes and referrals from current students, alumni and employers are the largest sources of new students. The Company also employs marketing tools such as the Internet, high school visits and recruitment events, and television and print media advertising. EDMC uses its internal advertising agency to create publications, television and radio commercials, videos and other promotional materials for the Company’s schools. The Company estimates that in fiscal 2003 referrals accounted for 32% of new student enrollment at The Art Institutes, the Company’s web sites for 25%, high school recruitment programs for 18%, broadcast advertising for 15%, print media for 5%, direct mail efforts for 2% and international marketing for less than 1%. The remainder was classified as miscellaneous.

In fiscal 2003, The Art Institutes’ marketing efforts generated inquiries from approximately 511,000 qualified prospective students. The Art Institutes’ inquiry-to-application conversion ratio decreased from 8.8% in fiscal 2002 to 7.9% in fiscal 2003, and the applicant-to-new-student ratio was 61.7% for fiscal 2002 and 60.8% for fiscal 2003.

The Company employs approximately 130 representatives who make presentations at high schools to promote The Art Institutes. Art Institute representatives also participate in college fairs and other inquiry-generating activities. In fiscal 2003, representatives conducted over 16,000 high school visits and attended approximately 2,300 career events. Summer workshops for high school students and teachers are held to inform students and educators of the education programs offered by The Art Institutes. The Company’s marketing efforts to reach young adults and working adults who may be attracted to evening programs are conducted through local newspaper advertising, direct mail campaigns and broadcast advertising.

Argosy.    Argosy seeks to attract students with both the motivation and the ability to complete the programs offered by its schools. To generate interest, the Company engages in a broad range of activities to inform potential students and their parents about its schools and programs of study.

The general reputation of Argosy’s schools and referrals from current students, alumni and employers are the largest sources of new students. The Company also employs marketing tools such as its web sites and creates

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publications and other promotional materials for Argosy’s schools, participates in school fairs and uses other traditional marketing techniques common to undergraduate and post-graduate institutions. The Company estimates that in fiscal 2003 referrals accounted for 33% of new student enrollment at Argosy, the Company’s websites for 28%, print media for 16%, direct mail for 4%, and broadcast advertising for 3%. The remainder was classified as miscellaneous.

In fiscal 2003, Argosy’s marketing efforts generated inquiries from approximately 69,000 qualified prospective students. Argosy’s inquiry-to-applicant conversion ratio was 12% in fiscal 2003 and the applicant-to-new-student ratio was approximately 55% for fiscal 2003.

Student Admissions and Retention

The Art Institutes.    Each applicant for admission to an Art Institute is required to have a high school diploma or a recognized equivalent and to submit a written essay. Prospective students are interviewed to assess their qualifications, their interest in the programs offered by the applicable Art Institute and their commitment to their education. In addition, the curricula, student services, education costs, available financial resources and student housing are reviewed during interviews, and tours of the facilities are conducted for prospective students.

Art Institute students are of varying ages and backgrounds. For fiscal 2003, approximately 31% of the entering students matriculated directly from high school and the average age of entering students in Art Institute programs was 23.

Art Institute students may fail to finish their programs for a variety of personal, academic or financial reasons. To reduce the risk of student withdrawals, each Art Institute devotes staff resources to advising students regarding academic and financial matters, part-time employment and housing. Remedial courses are mandated for students with lower academic skill levels and tutoring is encouraged for students experiencing academic difficulties. The Art Institutes’ net annual persistence rate, which measures the number of students who are enrolled during a fiscal year and either graduate or advance to the next fiscal year, was 66.3% in fiscal 2002 and 67.4% in fiscal 2003.

Argosy.    Argosy’s admissions objective is to achieve controlled student enrollment growth while consistently maintaining the integrity and quality of its academic programs. At each of Argosy’s schools, student admissions are overseen by a committee, consisting principally of members of the faculty, that reviews each application and makes admissions decisions. Argosy’s education programs operate with varying degrees of selectivity. Admissions criteria for certain programs include a combination of prior academic record, performance on an admissions essay and work experience. Other programs are likely to be beneficial to anyone who possesses the necessary qualifications and chooses to enroll. Those programs tend to be less selective; however, Argosy does screen students both for their commitment to completing a particular program of study and their aptitude for the academic subject matter of their chosen program.

Argosy students are of varying ages and backgrounds. In 2003, the average age of entering students in Argosy programs was 35.

At Argosy schools, student retention is considered the responsibility of the entire school, from admissions to faculty and administration to career counseling services. Students are counseled early in the application process to gauge their commitment to completing their chosen course of study. To minimize student withdrawals, faculty and staff members at each campus strive to establish personal relationships with students. Each campus devotes staff resources to advising students regarding academic and financial matters, part-time employment and other matters that may affect their success. While doctoral psychology students have seven years to complete their studies, students generally complete the program in approximately five and one-half years. Argosy’s net annual persistence rate was 86.4% in both 2002 and 2003.

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Education Programs

The Art Institutes.    The Art Institutes offer the following degree programs. Not all programs are offered at each Art Institute. (For internal purposes, the Company classifies its degree programs according to four “schools” or areas of study.)

Approximately 48% of the average quarterly student enrollment at The Art Institutes in fiscal 2003 was in bachelor’s degree programs and approximately 45% was in associate’s degree programs.

Approximately 7% of the average quarterly student enrollment at The Art Institutes in fiscal 2003 was in specialized diploma and certificate programs. Academic credits from the specialized diploma programs at The Art Institutes are generally transferable into bachelor’s and associate’s degree programs at those schools. Diploma and certificate programs are designed for working adults who seek to supplement their education or are interested in enhancing their marketable skills. Additionally, at certain Art Institutes the Center for Professional Development offers certificate programs to a wide audience, including alumni seeking advances in their career fields and professionals who wish to add marketable new skill sets.

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Argosy.    The following degree programs are offered by Argosy, organized by discipline:

Approximately 59% of the average student enrollment at Argosy in fiscal 2003 was in doctoral programs, 27% in master’s-level programs, 4% in bachelor’s-level programs and 10% in associate’s degree programs.

Argosy University was among the first institutions in the United States to offer the practitioner-focused Doctor of Psychology (“Psy.D.”) degree, as compared to the research-oriented Ph.D. degree. The Psy.D. is a four-year program consisting of one year of classroom training, two years divided between classroom training and fieldwork practicum and a fourth year consisting of a paid internship. The program focuses on practical issues in clinical psychology rather than abstract research topics. For example, fourth-year students prepare a case study as their final project rather than a doctoral dissertation. Clinical M.A. students complete a two-year program that can be carried over into Argosy University’s Psy.D. program.

Argosy University also offers post-doctoral certificate programs in clinical psychology, psychopharmacology and sports psychology.

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Argosy University’s doctoral, master’s, and bachelor-level programs in business are offered both part-time and full-time and consist of classes in disciplines such as statistics, economics, accounting and finance. The D.B.A. programs are 60 semester hours; the M.B.A. is a 48-semester-hour program; and the bachelor-level programs are 120-semester-hour degree completion programs for students with 42 or more qualified semester hours.

The master’s and doctoral education programs are offered to professional educators from across the United States. The Ed.D. is a 60 semester-hour program, the M.Ed. is a 36-hour program and the Education Specialist curriculum is a 30-hour program.

The health sciences programs typically consist of 12 to 15 months of full-time classroom training and two to six additional months of internship.

Argosy Professional Services’ Ventura division publishes materials and holds workshops in cities across the United States to prepare individuals to take various national and state-administered health care licensure examinations in the fields of psychology, social work, counseling, marriage and family therapy, and marriage, family and child counseling. The programs typically last three to four days.

Argosy Professional Services’ Connecting Link division provides graduate-level continuing education courses to educators. It partners with local institutions that approve the instructors and curricula and provide the credit for each of these courses. Students then apply these credits toward career advancement and/or continuing education requirements of their state’s teacher’s license.

Graduate Employment

The Art Institutes.    Based on information received from graduating students and employers, the Company believes that students graduating from The Art Institutes during the five calendar years ended December 31, 2002 obtained employment in fields related to their programs of study as follows:

For calendar year 2002, the approximate average starting salaries of graduates of degree and diploma programs at The Art Institutes were as follows: The School of Culinary Arts—$25,975; The School of Design—$28,797; The School of Fashion—$26,070; and The School of Media Arts—$27,916.

Each Art Institute offers career-planning services to all graduating students through its Career Services department. Specific career advice is provided during the last two quarters of a student’s education. In addition to individualized training in interviewing and networking techniques and resume-writing, a Career Development

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course is required for all students. Students also receive portfolio counseling where appropriate. The Art Institutes maintain contact with approximately 50,000 employers nationwide. Employers of Art Institute graduates include numerous small and medium-sized companies, as well as larger companies with a national or international presence. Career services advisors educate employers about the programs at The Art Institutes and the caliber of their graduates. These advisors also participate in professional organizations, trade shows and community events to keep apprised of industry trends and maintain relationships with key employers. Career services staff also visit employer sites to learn more about their operations and better understand their recruiting needs.

Argosy.    Recently, Argosy began tracking employment and graduate employment data in detail for all graduating students. Argosy also provides career counseling and job search advising services to their students at all campuses to help them locate internships, practicums and full-time positions after graduation. Students can seek assistance from an experienced career counselor to develop their job search goals, learn to write an effective resume and cover letter, and sharpen their interviewing skills.

Accreditation

In the United States, accreditation is a process through which an institution submits itself to qualitative review by an organization of peer institutions. Accrediting agencies primarily examine the academic quality of the instructional programs of an institution, and a grant of accreditation is generally viewed as certification that an institution’s programs meet generally accepted academic standards. Accrediting agencies also review the administrative and financial operations of the institutions they accredit to ensure that each institution has the resources to perform its educational mission.

Pursuant to provisions of the Higher Education Act of 1965, as amended (“HEA”), the U.S. Department of Education relies on accrediting agencies to determine whether institutions’ educational programs qualify them to participate in federal financial aid programs under Title IV of the HEA (“Title IV Programs”). The HEA specifies certain standards that all recognized accrediting agencies must adopt in connection with their review of post-secondary institutions. All of EDMC’s U.S. schools are accredited by an accrediting agency recognized by the U.S. Department of Education.

In addition to the institutional accreditations described above, three Art Institutes offer interior design programs that have programmatic accreditation by the Foundation for Interior Design Education Research (FIDER) and six Art Institutes offer culinary programs accredited by the American Culinary Federation. Seven Argosy University locations have received accreditation by the American Psychological Association for their Doctor of Psychology programs.

The following table shows the location of each of EDMC’s schools at June 30, 2003, the name under which it operates, the year of its establishment, the date EDMC opened or acquired it, and the accrediting agency (for schools accredited by more than one recognized accrediting agency, the primary accrediting agency is listed first). No accreditation is shown for The Art Institute of Toronto as the Province of Ontario has no accreditation process for post-secondary schools.

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