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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-03-01 · 154 added, 204 removed, 210 unchanged (63% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with “Selected Financial Data,” our consolidated financial statements and the notes thereto, the “Cautionary Notice Regarding Forward-Looking Statements,” Item 1A entitled “Risk Factors,” and the other information appearing elsewhere, or incorporated by reference, in this Annual Report on Form 10-K.

Background and Overview

You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto, the “Cautionary Notice Regarding Forward-Looking Statements,” Item 1A entitled “Risk Factors,” and the other information appearing elsewhere, or incorporated by reference, in this Annual Report on Form 10-K.

Strategic Education, Inc.

(“SEI,” “we”, “us” or “our”) is an education services company that seeks to provide the most direct path between learning and employment through campus-based and online post-secondary education offerings and through programs to develop job-ready skills for high-demand markets.

(“SEI,” “we”, “us” or “our”) is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.

We operate primarily through our wholly-owned subsidiaries Strayer University and Capella University, both accredited post-secondary institutions of higher education located in the United States, as well as Torrens University, an accredited post-secondary institution of higher education located in Australia.

Our operations also include certain non-degree programs, mainly focused on software and application development, and other vocational and training programs in a variety of fields.

Our operations emphasize relationships through our Education Technology Services segment (formerly called the Alternative Learning segment) with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.

Company Response to COVID-19

The ongoing COVID-19 pandemic has caused significant volatility and disruption to the global economy.

The ongoing COVID-19 pandemic has caused significant volatility and disruption to the United States and international economies.

SEI took early action to protect the health and well-being of our students and employees in accordance with government mandates and informed by guidance from the Centers for Disease Control and Prevention.

Specifically, we instituted a work-from-home policy for the vast majority of our workforce, closed physical campus locations, moved our on-ground courses at Strayer University online, postponed large events such as graduation ceremonies, and prohibited non-essential employee travel.

We are taking measures to provide financial relief to our students and employer partners negatively affected by the COVID-19 crisis.

Measures include payment flexibility, scholarship opportunities, and other pricing relief.

We expect that these measures will enable more students to continue pursuing their education during and after the COVID-19 crisis.

In addition, we paused planned 2020 new campus expansion for campus projects that had not yet started, although we completed or executed leases on roughly half of the originally planned eight to twelve new campuses for 2020.

In the third quarter of 2020, we began implementing a restructuring plan that includes both voluntary and involuntary employee terminations in an effort to reduce ongoing operating costs to align with changes in enrollment.

The headcount reductions are expected to result in a 5% decrease to SEI's total workforce.

This restructuring also includes the closure of underutilized campus and corporate office space.

Of the planned campus closures, the majority have an alternative location within relative proximity to support students as campus interactions are needed.

As the pandemic has continued, we have seen deterioration in overall demand, which has impacted our total enrollment results for the third and fourth quarters.

The weakness has been most pronounced at Strayer University, where total enrollments for the third and fourth quarters declined 1% and 9%, respectively.

While it is not possible to predict the magnitude or persistence of this deterioration, enrollment weakness that started in 2010, following the recession in 2008, impacted Strayer University's student enrollment for several quarters.

Enrollment at Capella University and Torrens University also has been impacted by the pandemic, though not as severely as at Strayer University.

As a result of the near-term enrollment trends we have enhanced our cost management efforts to offset lower than expected revenue, and these efforts may continue in 2021.

As guidance has evolved, we have begun to reopen campus and office locations and permit business travel, after instituting a mandatory vaccination policy for all employees who may be required to be on-site at a Company facility or at a Company-sponsored event, subject to medical and religious accommodations (any employee receiving an accommodation is required to test at least weekly before being on-site).

We have taken measures to provide financial relief to our students and employer partners negatively affected by the COVID-19 crisis, including payment flexibility, scholarship opportunities, and other pricing relief.

We expect that these measures will enable more students to continue pursuing their education during and after the COVID-19 pandemic.

In the third quarter of 2020, we began implementing a restructuring plan that included both voluntary and involuntary employee terminations in an effort to reduce ongoing operating costs to align with changes in enrollment.

These headcount reductions resulted in an approximately 5% decrease to SEI's total workforce.

During 2021, our restructuring efforts included the consolidation of underutilized facilities in response to changes in enrollment trends and as a result of our work-from-home policies.

As the pandemic has continued, we have seen sustained weakness in demand, especially in the United States, where total average enrollment in our U.S.

Higher Education (“USHE”) segment decreased 11.0% in 2021 compared to 2020.

Enrollment in ANZ also has been impacted by the pandemic and the related closure of international borders in Australia and New Zealand.

We believe our current financial position and expected operating results, and ability to further control costs are sufficient to support the ongoing operation of SEI in a manner that protects the health and well-being of our employees, students, and partners.

Acquisition of Torrens University and related assets in Australia and New Zealand

On November 3, 2020, we completed the acquisition of Torrens University and related assets in Australia and New Zealand ("ANZ"), pursuant to the sale and purchase agreement dated July 29, 2020 (the "Purchase Agreement").

ANZ includes Torrens University Australia, Think Education, and Media Design School, which together provide diversified student curricula to over 19,000 students across five industry verticals, including business, hospitality, health, education, creative technology and design.

Acquisition of Torrens University and associated assets in Australia and New Zealand

On November 3, 2020, we completed the acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”), pursuant to the sale and purchase agreement dated July 29, 2020.

ANZ includes Torrens University Australia, Think Education, and Media Design School, which together provide diversified student curricula to approximately 19,000 students across five industry verticals, including business, hospitality, health, education, creative technology and design.

We believe ANZ represents an attractive portfolio of institutions with a similar focus on innovation, academic outcomes, improved affordability and career advancement as us.

We also believe that ANZ provides an attractive platform for future growth, driven by Australia’s status as an attractive destination for international students, as well as the potential to use ANZ as a platform for expansion across the ASEAN region.

Pursuant to the Purchase Agreement, the aggregate consideration paid was approximately $658.4 million in cash, which reflected the original agreed upon purchase price of $642.7 million, plus a $15.7 million adjustment reflecting an estimated $11.0 million of net cash at close, and an estimated $4.7 million related to higher net working capital.

These estimated adjustments are subject to a final true-up of net cash and net working capital, based on the actual closing accounts to be finalized by both parties.

We also believe that ANZ provides an attractive platform for future growth, driven by Australia’s status as an attractive destination for international students.

Pursuant to the purchase agreement, the aggregate consideration paid was approximately $658.4 million in cash, which reflected the original agreed upon purchase price of $642.7 million, plus a $15.7 million adjustment reflecting $11.0 million of net cash at close, and $4.7 million related to higher net working capital.

The aggregate consideration paid in the transaction was funded using cash on hand and borrowings under our revolving credit facility.

Our financial results for any periods ended prior to November 3, 2020 do not include the financial results of ANZ and are therefore not directly comparable.

In 2019, ANZ's revenues were $191.1 million, and its income from continuing operations was $3.8 million.

During the year ended December 31, 2020, we incurred $7.7 million in expenses related to this acquisition, primarily related to legal, financial, and accounting support services.

Acquisition of Capella Education Company

On August 1, 2018, we completed our merger with Capella Education Company (“CEC”) pursuant to a merger agreement dated October 29, 2017.

The merger solidifies our position as a national leader in education innovation, and provides scale that will enable greater investment in improving student academic and career outcomes while maintaining our focus on affordability.

The merger is also expected to create significant cost synergies for us.

Pursuant to the merger, we issued 0.875 shares of our common stock for each issued and outstanding share of CEC common stock.

Outstanding equity awards held by CEC employees and certain nonemployee directors of CEC were assumed by us and converted into comparable SEI awards at the exchange ratio.

Outstanding equity awards held by CEC nonemployee directors who did not serve as directors of SEI after completion of the merger, and awards held by former employees of CEC who left before completion of the merger were settled upon completion of the merger as specified in the merger agreement.

Our financial results for any periods ended prior to August 1, 2018 do not include the financial results of CEC, and are therefore not directly comparable.

During the years ended December 31, 2020 and 2019, we incurred $6.1 million and $21.9 million, respectively, in expenses related to the CEC merger, primarily attributable to financial advisory fees, consulting costs, legal fees, personnel, and other integration costs.

During the fourth quarter of 2020, following the acquisition of ANZ, the Company revised its reportable segments to add ANZ to conform to the current period presentation.

As of December 31, 2020, SEI had the following reportable segments:

Strayer University Segment

• Strayer University is an institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice at 64 physical campuses, predominantly located in the eastern United States, and online.

Strayer University is accredited by the Middle States Commission on Higher Education (hereinafter referred to as “Middle States” or “Middle States Commission”), an institutional collegiate accrediting agency recognized by the Department of Education.

By offering its programs both online and in physical classrooms, Strayer University provides its working adult students flexibility and convenience.

• The Jack Welch Management Institute (“JWMI”) offers an executive MBA online and is a Top 25 Princeton Review ranked online MBA program.

• DevMountain is a software development program offering affordable, high-quality, leading-edge software coding education at multiple campus locations and online.

• Hackbright Academy is a software engineering school for women.

Its primary offering is an intensive 12-week accelerated software development program, together with placement services and coaching.

• In 2020, Strayer University's average total enrollment increased 2% to 52,167 students compared to 51,395 students in 2019.

Student enrollment at Strayer University is more volatile in the current economic environment due to Strayer’s mostly undergraduate student mix, which includes many first-time college students.

In the first quarter of 2020, Strayer University adopted a new enrollment reporting census date, which occurs approximately two weeks following the start of the academic term.

Previously the Strayer University enrollment census date coincided with the end of the University’s “drop-add” period, approximately one week following the

start of the academic term.

The new census date is consistent with the approach employed by Capella University.

All historical enrollment data included in this Form 10-K has been revised using the new census date.

Year-over-year percentage change in enrollment for the new census date does not differ significantly from the prior approach.

Capella University Segment

• Capella University is an online post-secondary education company that offers a variety of doctoral, master’s and bachelor’s degree programs, primarily for working adults, in the following primary disciplines:

public service leadership, nursing and health sciences, social and behavioral sciences, business and technology, education, and undergraduate studies.

Capella University focuses on master's and doctoral degrees, with approximately 70% of its students enrolled in a master’s or doctoral degree program.

Capella University's academic offerings are built with competency-based curricula and are delivered in an online format that is convenient and flexible.

Capella University designs its offerings to help working adult students develop specific competencies they can apply in their workplace.

Capella University is accredited by the Higher Learning Commission, an institutional collegiate accrediting agency recognized by the Department of Education.

• Sophia Learning is an innovative company which leverages technology and high quality academic content to provide self-paced online courses recommended by the American Council on Education for college credit.

• In 2020, Capella University's average total enrollment increased 3% to 40,471 students compared to 39,203 students in 2019.

In the first quarter of 2020, Capella University consolidated two different enrollment reporting census dates into a single date, which occurs approximately two weeks following the start of the academic term.

All historical enrollment data included in this Form 10-K has been revised using the new census date.

Year-over-year percentage change in enrollment for the new census date does not differ significantly from the prior approach.

Company Overview

In the first quarter of 2021, we changed the way management reports financial information relied on by the Chief Operating Decision Maker to evaluate performance and allocate the resources of the Company.

Our revised organizational structure includes the following three operating and reportable segments:

(1) USHE, which is primarily comprised of SEI's previous Strayer University and Capella University segments and is focused on providing flexible and affordable certificate and degree programs to working adults;

(2) Education Technology Services, a new segment that is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs;

and (3) Australia/New Zealand, which provides certificate and degree programs in Australia and New Zealand.

During the first three quarters of 2021, the Education Technology Services segment was called the Alternative Learning segment.

The Australia/New Zealand segment was not changed as a result of the reorganization.

We began reporting under the new segment structure in 2021, and we have restated the results for the prior periods to conform to the current period presentation.

Higher Education Segment

• The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Strayer University and Capella University, including the Jack Welch Management Institute MBA, which is a unit of Strayer University.

USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are units of Strayer University.

• Strayer University is accredited by the Middle States Commission on Higher Education and Capella University is accredited by the Higher Learning Commission, both higher education institutional accrediting agencies recognized by the Department of Education.

The USHE segment provides academic offerings both online and in physical classrooms, helping working adult students develop specific competencies they can apply in their workplace.

• In 2021, USHE average total enrollment decreased 11.0% to 82,425 students compared to 92,637 students in 2020.

• Trailing 4-quarter student persistence within USHE was 86.9% in the third quarter of 2021 compared to 86.8% for the same period in 2020.

Student persistence is calculated as the rate of students continuing from one quarter to the next, adjusted for graduates, on a trailing 4-quarter basis.

Student persistence is reported one quarter in arrears.

The table below summarizes USHE trailing 4-quarter student persistence for the past 8 quarters.

Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021

87.0 % 87.2% 86.6% 86.8% 86.7% 86.5% 87.0% 86.9%

Education Technology Services Segment

• Our Education Technology Services segment is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.

The employer relationships developed by the Education Technology Services division are an important source of student enrollment for Strayer University and Capella University, and the majority of the revenue attributed to the Education Technology Services division is driven by the volume of enrollment derived from these employer relationships.

Enrollments attributed to the Education Technology Services segment are determined based on a student’s employment status and the existence of a corporate partnership arrangement with SEI.

All enrollments attributed to the Education Technology Services division continue to be attributed to the division until the student graduates or withdraws, even if his or her employment status changes or if the partnership contract expires.

• In 2021, employer affiliated enrollment as a percentage of USHE enrollment was 21.0% compared to 17.8% in 2020.

• Education Technology Services also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which enables lower cost education benefits programs through the use of low-cost online general education courses recommended by the American Council on Education for credit at other colleges and universities.

Australia/New Zealand Segment

• Torrens University is the only investor-funded university in Australia.

Torrens University offers undergraduate and graduate courses primarily in five fields of study:

Torrens University offers undergraduate, graduate, higher degree by research, and specialized degree courses primarily in five fields of study:

business, design and creative technology, health, hospitality, and education.

Courses are offered both online and on physical campuses.

Courses are offered both online and at physical campuses.

Torrens University is registered with the Tertiary Education Quality and Standards Agency (“TEQSA”), the regulator for higher education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.

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Media Design School offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media artificial intelligence, and creative advertising.

Media Design School is accredited in New Zealand by the New Zealand Qualifications Authority, responsible for the quality assurance of non-university tertiary training providers.

Media Design School is accredited in New Zealand by the New Zealand Qualifications Authority, the organization responsible for the quality assurance of non-university tertiary training providers.

• In 2021, Australia/New Zealand enrollment increased 1.5% to 19,350 compared to 19,069 for the same period in 2020.

We believe we have the right operating strategies in place to provide the most direct path between learning and employment for our students.

We focus on innovation continually to differentiate ourselves in our markets and drive growth by supporting student success, producing affordable degrees, optimizing our comprehensive marketing strategy, serving a broader set of our students’ professional needs, and establishing new growth platforms.

Technology and the talent of our faculty and employees enable these strategies.

We believe these strategies and enablers will allow us to continue to deliver high quality, affordable education, resulting in continued growth over the long-term.

We will continue to invest in these enablers to strengthen the foundation and future of our business.

We also believe our enhanced scale and capabilities allow us to continue to focus on innovative cost and revenue synergies, while improving the value provided to our students.

We are constantly innovating to differentiate ourselves in our markets and drive growth by supporting student success, producing affordable degrees, optimizing our comprehensive marketing strategy, serving a broader set of our students’ professional needs, and establishing new growth platforms.

The talent of our faculty and employees, supported by market leading technology, enable these strategies.

We believe our strategy will allow us to continue to deliver high quality, affordable education, resulting in continued growth over the long-term.

We will continue to invest in this strategy to strengthen the foundation and future of our business.

Critical Accounting Policies and Estimates

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent

assets and liabilities.

On an ongoing basis, management evaluates its estimates and judgments related to its allowance for credit losses;

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Management believes that the following critical accounting policies are its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue recognition — Like many traditional institutions in the United States, Strayer University and Capella University offer educational programs primarily on a quarter system having four academic terms, which generally coincide with our quarterly financial reporting periods.

Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within one calendar year.

Revenue recognition — Like many traditional institutions, Strayer University and Capella University offer educational programs primarily on a quarter system having four academic terms, which generally coincide with our quarterly financial reporting periods.

Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year.

Approximately 96% of our revenues during the year ended December 31, 2021 consisted of tuition revenue.

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Capella University also offers its FlexPath program, which allows students to determine their 12-week billing session schedule after they complete their first course.

Tuition revenue for all students is recognized ratably over the course of instruction as the Universities and the schools offering non-degree programs provide academic services, whether delivered in person at a physical campus or online.

Tuition revenue is shown net of any refunds, withdrawals, corporate discounts, scholarships, and employee tuition discounts.

Tuition revenue for all students is recognized ratably over the course of instruction as the universities provide academic services, whether delivered in person at a physical campus or online.

Tuition revenue is shown net of any refunds, withdrawals, corporate discounts, scholarships, and employee tuition

The universities also derive revenue from other sources such as textbook-related income, certificate revenue, certain academic fees, licensing revenue, accommodation revenue, food and beverage fees, and other income, which are all recognized when earned.

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Any cash received prior to the start of an academic term or program is recorded as a contract liability.

Students at Strayer University and Capella University finance their education in a variety of ways, and historically about three quarters of our students have participated in one or more financial aid program provided through Title IV of the Higher Education Act.

Students at Strayer University and Capella University finance their education in a variety of ways, and historically about 75% of our students have participated in one or more financial aid program provided through Title IV of the Higher Education Act.

In addition, many of our working adult students finance their own education or receive full or partial tuition reimbursement from their employers.

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Refunds reduce the tuition revenue that otherwise would have been recognized for that student.

Since the academic terms coincide with our financial reporting periods

for most programs, nearly all refunds are processed and recorded in the same quarter as the corresponding revenue.

For certain programs where courses may overlap a quarter-end date, the Company estimates a refund or withdrawal rate and does not recognize the related revenue until the uncertainty related to the refund is resolved.

Since the academic terms coincide with our financial reporting periods for most programs, nearly all refunds are processed and recorded in the same quarter as the corresponding revenue.

For certain programs where courses may overlap a quarter-end date, we estimate a refund or withdrawal rate and do not recognize the related revenue until the uncertainty related to the refund is resolved.

The portion of tuition revenue refundable to students may vary based on the student’s state of residence.

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Loss of financial aid eligibility during an academic term is rare and would normally coincide with the student’s withdrawal from the institution.

When a student withdraws from all of their courses, we consider it to be a contract modification and reassess collectibility at that time.

As a result of this reassessment, we cease revenue recognition as our historical experience has shown that amounts outstanding for this group of students are not collectible.

When a student withdraws from all of his or her courses, we consider it to be a contract modification and reassess collectibility at that time.

As a result of this reassessment, we cease revenue recognition until tuition charges are collected in cash, as our historical experience has shown that amounts outstanding for this group of students are not collectible.

In Australia and New Zealand, government funding for eligible students is provided directly to the institution on an estimated basis annually.

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Using the enrollment forecast provided as well as the requesting institution's historical enrollment trends, the government approves a fixed amount, which is then funded to the institution evenly on a monthly basis.

Periodic reconciliation and true-ups are undertaken between the relevant government authority and the institution based on actual eligible enrollments, which may result in a net amount being due to or from the government.

reconciliation and true-ups are undertaken between the relevant government authority and the institution based on actual eligible enrollments, which may result in a net amount being due to or from the government.

Students at Strayer University registering in credit-bearing courses in any undergraduate program beginning in the summer 2013 term or graduate program beginning in the summer 2020 term (fiscal third quarter), and subsequent terms qualify for the Graduation Fund, whereby qualifying students earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program.

Students must meet all of the University’s admission requirements and not be eligible for any previously offered scholarship program.

Students must meet all of Strayer University’s admission requirements and not be eligible for any previously offered scholarship program.

Our employees and their dependents are not eligible for the program.

To maintain eligibility, students must be enrolled in a bachelor’s or master's degree program.

Students who have more than one consecutive term of non-attendance lose any Graduation Fund credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by the University in the future.

In response to the COVID-19 pandemic, Strayer University is temporarily allowing students to miss two consecutive terms without losing their Graduation Fund credits.

In response to the COVID-19 pandemic, Strayer University temporarily allowed students to miss three consecutive terms without losing their Graduation Fund credits.

In their final academic year, qualifying students will receive one free course for every three courses that the student successfully completed in prior years.

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As of December 31, 2021, we had deferred $52.0 million for estimated redemptions earned under the Graduation Fund, as compared to $53.3 million at December 31, 2020.

Each quarter, we assess our methodologies and assumptions underlying our estimates for persistence and estimated redemptions based on actual experience.

Each quarter, we assess our assumptions underlying our estimates for persistence and estimated redemptions based on actual experience.

To date, any adjustments to our estimates have not been material.

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These estimates are based on assumptions believed to be reasonable, and when appropriate, include assistance from independent third-party valuation firms.

During the measurement period, which is up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with corresponding offsets to goodwill.

The Company applied the acquisition method of accounting to its merger with CEC in 2018 and its acquisition of ANZ in 2020.

During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with corresponding offsets to goodwill.

We applied the acquisition method of accounting to our acquisition of ANZ in 2020.

Refer to Note 3, Business Combinations, within the footnotes to the consolidated financial statements for additional information.

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Management identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management regularly reviews the operating results of those components.

We had significant additions to goodwill and tradename intangible assets related to our acquisitions of ANZ in 2020 and CEC in 2018.

Goodwill and indefinite-lived intangible assets are assessed at least annually for impairment, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.

We had significant additions to goodwill and tradename intangible assets related to our acquisition of ANZ in 2020.

reporting unit below its carrying amount.

In 2021, we performed a qualitative impairment assessment, consistent with ASC 350, of goodwill and indefinite-lived intangible assets assigned to our reporting units to evaluate the recoverability of the related amounts.

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Results of Operations

As discussed above, we completed our merger with CEC on August 1, 2018 and our acquisition of ANZ on November 3, 2020.

Our results of operations include the results of CEC and the results of ANZ from their respective acquisition dates.

Periods prior to August 1, 2018 do not include the financial results of CEC, and periods prior to November 3, 2020 do not include the financial results of ANZ.

As discussed above, we completed our acquisition of ANZ on November 3, 2020.

Our results of operations include the results of ANZ from the acquisition date.

Periods prior to November 3, 2020 do not include the financial results of ANZ.

Accordingly, the financial results of each period presented are not directly comparable.

In 2021, we generated $1,131.7 million in revenue compared to $1,027.7 million in 2020.

Our income from operations decreased to $109.4 million in 2020 compared to $110.5 million in 2019, principally due to the inclusion of ANZ, which generated a $13.3 million loss from operations following the acquisition as well as restructuring costs incurred in 2020, partially offset by a decrease in merger and integration related costs and an increase in Strayer University and Capella University revenue due to enrollment growth.

Our income from operations decreased to $73.9 million in 2021 compared to $109.4 million in 2020, primarily due to lower earnings in the USHE segment and higher restructuring costs, partially offset by the inclusion of ANZ's income from operations and lower amortization expense related to intangible assets.

Our net income in 2021 was $55.1 million compared to $86.3 million in 2020.

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These measures, which are considered “non-GAAP financial measures” under SEC rules, are defined by us to exclude the following:

• purchase accounting adjustments to record acquired contract liabilities at fair value as a result of the Company's merger with Capella Education Company in 2018 and the Company's acquisition of Torrens University and related assets in Australia and New Zealand in 2020,

• amortization and depreciation expense related to intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company's acquisition of Torrens University and related assets in Australia and New Zealand,

• transaction and integration expenses associated with the Company’s merger with Capella Education Company, and the Company's acquisition of Torrens University and related assets in Australia and New Zealand,

• severance costs and right-of-use lease asset impairment charges associated with the Company's restructuring

• impairment charges for intangible assets related to the Company's acquisition of The New York Code and Design Academy,

• income from partnership and other investments that are not part of our core operations, and

• purchase accounting adjustments to record acquired contract liabilities at fair value as a result of our acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense related to intangible assets and software assets acquired through our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand;

• transaction and integration expenses associated with our merger with Capella Education Company and our acquisition of Torrens University and associated assets in Australia and New Zealand;

• severance costs and right-of-use lease asset impairment charges associated with our restructuring;

• income from partnership and other investments that are not part of our core operations;

• discrete tax adjustments related to stock-based compensation and other adjustments;

When considered together with GAAP financial results, we believe these measures provide management and investors with an additional understanding of our business and operating results, including underlying trends associated with the Company’s ongoing operations.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies.

• foreign currency exchange impact related to translating foreign currency results at a constant exchange rate.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies.

Non-GAAP financial measures may be considered in addition to, but not as a substitute for or superior to, GAAP results.

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Non-GAAP Adjustments

As Reported (GAAP) Contract

adjustment (1)

Amortization of

intangible assets (2)

As Reported (GAAP) Purchase accounting adjustments (1)

Merger and integration costs (2)

Restructuring costs (3)

Impairment of

intangible assets (5)

Income from other investments (4)

Tax adjustments (5)

As Adjusted (Non-

Foreign exchange adjustments (6)

Revenues $ 1,131,686 $ 3,646 $ — $ — $ — $ — $ (3,209) $ 1,132,123

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Non-GAAP Adjustments

As Reported (GAAP) Contract

adjustment (1)

Amortization of

intangible assets (2)

As Reported (GAAP) Purchase accounting adjustments (1)

Merger and integration costs (2)

Restructuring costs (3)

Impairment of

intangible assets (5)

Income from other investments (4)

Tax adjustments (5)

As Adjusted (Non-

Foreign exchange adjustments (6)

Revenues $ 1,027,653 $ 11,296 $ — $ — $ — $ — $ — $ 1,038,949

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Non-GAAP Adjustments

As Reported (GAAP) Contract

adjustment (1)

Amortization of

intangible assets (2)

As Reported (GAAP) Purchase accounting adjustments (1)

Merger and integration costs (2)

Restructuring costs (3)

Impairment of

intangible assets (5)

Income from other investments (4)

Tax adjustments (5)

As Adjusted (Non-

Foreign exchange adjustments (6)

Revenues $ 997,137 $ — $ — $ — $ — $ — $ — $ 997,137

Total costs and expenses $ 886,605 $ (61,667) $ (21,923) $ — $ — $ — $ — $ 803,015

Income (loss) from operations (22,740) 28,748 25,694 45,745 — 19,909 — — 97,356

Income from operations $ 110,532 $ 61,667 $ 21,923 $ — $ — $ — $ — $ 194,122

Operating margin 11.1% 19.5%

Income (loss) before income taxes (19,139) 28,748 25,694 45,745 — 19,909 — — 100,957

Net income (loss) $ (15,671) $ 28,748 $ 25,694 $ 45,745 $ — $ 19,909 $ — $ (29,348) $ 75,077

Diluted earnings (loss) per share $ (1.03) $ 4.75

Income before income taxes $ 123,724 $ 61,667 $ 21,923 $ — $ (3,446) $ — $ — $ 203,868

Net income $ 81,138 $ 61,667 $ 21,923 $ — $ (3,446) $ (14,001) $ — $ 147,281

Diluted earnings per share $ 3.67 $ 6.67

Weighted average diluted shares outstanding 22,097 22,097

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(1) Reflects purchase accounting adjustments to record acquired contract liabilities at fair value as a result of the Company’s merger with CEC in 2018 and the Company's acquisition of ANZ in 2020.

(2) Reflects amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with CEC and the Company's acquisition of ANZ.

(3) Reflects transaction and integration expenses associated with the Company's merger with CEC and acquisition of ANZ.

(1) Reflects a purchase accounting adjustment to record acquired contract liabilities at fair value as a result of the Company's acquisition of Torrens University and associated assets in Australia and New Zealand, and amortization and depreciation expense of intangible assets and software assets acquired through the Company’s merger with Capella Education Company and the Company's acquisition of Torrens University and associated assets in Australia and New Zealand.

(2) Reflects transaction and integration expenses associated with the Company's merger with Capella Education Company, including premerger litigation settlement in principle, net of insurance recovery, and the Company's acquisition of Torrens University and associated assets in Australia and New Zealand.

(3) Reflects severance costs and right-of-use lease asset impairment charges associated with the Company's restructuring.

(5) Reflects impairment of goodwill and intangible assets in 2018 related to the Company's acquisition of the New York Code and Design Academy.

(4) Reflects income recognized from the Company's investments in partnership interests and other investments.

(7) Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted annual effective tax rate of 28.5%, 27.8% and 25.6% for 2020, 2019 and 2018, respectively.

(5) Reflects tax impacts of the adjustments described above and discrete tax adjustments related to stock-based compensation and other adjustments, utilizing an adjusted annual effective tax rate of 28.5% for 2021 and 2020 and an adjusted effective tax rate of 27.8% for 2019.

(6) Reflects foreign currency exchange impact related to translating foreign currency results at a constant exchange rate of 0.743 Australian Dollars to U.S.

Dollars, which is the 2021 budget rate.

Year Ended December 31, 2021 Compared To Year Ended December 31, 2020

Consolidated revenues increased to $1,131.7 million in 2021 compared to $1,027.7 million in the same period in the prior year, primarily due to the inclusion of ANZ for the full year.

In the USHE segment for the year ended December 31, 2021, total average enrollment decreased 11.0% to 82,425 from 92,637 in the prior year.

USHE segment revenues decreased 14.2% to $829.3 million compared to $966.6 million in 2020 as a result of declines in enrollment and revenue-per-student due to higher scholarships and discounts.

Near term revenue in the USHE segment is expected to continue to be impacted negatively by the ongoing COVID-19 pandemic with weaker demand for enrollments and higher scholarships and discounts.

In the Education Technology Services segment, revenues for the year ended December 31, 2021 increased 38.7% to $52.3 million, compared to $37.7 million in 2020 as a result of rapid growth in Sophia Learning and higher employer affiliated enrollment.

In the Australia/New Zealand segment, revenues for the year ended December 31, 2021 were $250.1 million, compared to $23.4 million in 2020, which only reflects activity after the completion of the ANZ acquisition in November 2020.

ANZ revenue includes a $3.6 million and $11.3 million purchase accounting reduction in 2021 and 2020, respectively, related to contract liabilities acquired in the acquisition.

Instructional and support costs.

Consolidated instructional and support costs increased to $608.3 million in 2021 compared to $532.7 million in 2020, principally due to the inclusion of $129.6 million of instructional and support costs related to ANZ in 2021, compared to $19.7 million in 2020, partially offset by cost savings implemented as a result of the COVID-19 pandemic, which included lower expenses associated with travel and facilities costs, as well as savings from the employee restructuring plan implemented in the third quarter of 2020.

Consolidated instructional and support costs as a percentage of revenues increased to 53.7% in 2021, from 51.8% in 2020.

General and administration expenses.

Consolidated general and administration expenses increased to $361.3 million in 2021 compared to $295.2 million in 2020, principally due to the inclusion of $84.6 million of general and administration expenses related to ANZ in 2021, compared to $17.0 million in 2020.

Consolidated general and administration expenses as a percentage of revenues increased to 31.9% in 2021 from 28.7% in 2020.

Amortization of intangible assets.

Amortization of intangible assets decreased to $51.5 million in 2021 compared to $64.2 million in 2020, due to lower amortization expense associated with intangible assets acquired through the merger with Capella Education Company, offset by additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020.

Merger and integration costs.

Merger and integration costs decreased to $11.2 million in 2021 compared to $13.8 million in 2020, principally due to lower transaction and integration expenses associated with the acquisition of ANZ and lower integration support costs related to the merger with Capella Education Company, partially offset by a charge taken in 2021 related to a premerger litigation settlement in principle, net of insurance recovery.

Restructuring costs.

Restructuring costs increased to $25.5 million in 2021 from $12.4 million in 2020, principally due to $21.6 million of right-of-use lease asset and fixed asset impairment charges associated with vacating leased space in 2021 based on an assessment of our real estate portfolio, partially offset by lower severance costs and a $2.7 million gain in 2021 from the sale of property and equipment of owned campuses that were closed in connection with the 2020 restructuring plan.

Income from operations .

Consolidated income from operations decreased to $73.9 million in 2021 compared to $109.4 million in 2020, primarily due to lower earnings in the USHE segment and higher restructuring costs, partially offset by the inclusion of ANZ's income from operations and lower amortization expense related to intangible assets.

USHE segment income from operations decreased 45.8% to $104.9 million in 2021, compared to $193.4 million in 2020, primarily due to declines in enrollment and revenue-per-student due to higher scholarships and discounts.

Education Technology Services segment income from operations increased 8.5% to $21.3 million in 2021, compared to $19.6 million in 2020 as a result of rapid growth in Sophia Learning, partially offset by increased investment in outreach to corporate partners.

Income from operations for the Australia/New Zealand segment was $35.9 million in 2021, compared to a loss from operations of $13.3 million in 2020, following our acquisition of ANZ in November 2020.

Other income.

Other income decreased to $2.7 million in 2021 compared to $4.6 million in 2020, as a result of an increase in interest expense related to our revolving credit facility which was used to partially fund the ANZ acquisition in November 2020, partially offset by higher investment income from our limited partnerships and other investments in 2021.

We incurred $3.6 million of interest expense in 2021 compared to $1.4 million in 2020.

Provision for income taxes.

Income tax expense was $21.5 million in 2021 compared to $27.7 million in 2020.

Our effective tax rate for 2021 was 28.1%, compared to 24.3% in 2020.

The effective tax rate in 2020 included higher windfall tax benefits recognized through share-based payment arrangements.

Our effective tax rate, excluding these and other discrete tax adjustments, was 28.5% for 2021.

Net income decreased to $55.1 million in 2021 compared to $86.3 million in 2020 due to the factors discussed above.

Year Ended December 31, 2020 Compared To Year Ended December 31, 2019

The increase in consolidated revenues compared to the same period in the prior year was primarily related to the acquisition of ANZ in November 2020.

Near term revenue growth at our U.S.

based Universities is expected to be impacted negatively by the ongoing COVID-19 pandemic with weaker demand and higher scholarships and discounts.

In the Strayer University segment for the year ended December 31, 2020, total enrollment grew 2% to 52,167 from 51,395 in the prior year.

Revenue increased 0.1% to $537.6 million compared to $537.0 million in 2019 as a result of enrollment growth, partially offset by a decline in revenue per student due to higher scholarships and discounts we are offering in response to the COVID-19 pandemic.

In the Capella University segment for the year ended December 31, 2020, total enrollment grew 3% to 40,471 from 39,203 in 2019.

Capella University segment revenue increased 1.4% to $466.6 million in 2020, compared to $460.2 million in 2019 as a result of the increase in enrollment, partially offset by lower revenue per student due to a mix shift to enrollment from corporate sponsored students who receive discounted tuition.

In the USHE segment for the year ended December 31, 2020, total average enrollment grew 2.3% to 92,637 from 90,598 in the prior year.

USHE segment revenues increased 0.4% to $966.6 million compared to $963.1 million in 2019 as a result of enrollment growth, partially offset by a decline in revenue per student due to higher scholarships and discounts offered in response to the COVID-19 pandemic.

Education Technology Services segment revenues were $37.7 million in 2020 compared to $34.1 million in the prior year as a result of higher employer affiliated enrollment.

Revenues for the Australia/New Zealand segment were $23.4 million, following our acquisition of ANZ in November 2020, and included an $11.3 million purchase accounting reduction related to contract liabilities acquired in the acquisition.

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General and administration expenses.

Consolidated general and administration expenses increased to $295.2 million in 2020 compared to $272.4 million in 2019, principally due to the inclusion of $17.0 million of general and administration expenses related to ANZ, as well as increased investments in brand initiatives and partnerships with brand ambassadors.

Consolidated general and administration expenses increased to $295.2 million in 2020 compared to $272.4 million in 2019, principally due to the inclusion of $17.0 million of general and administration expenses related to ANZ, as well as increased investments in branding initiatives and partnerships with brand ambassadors.

Consolidated general and administration expenses as a percentage of revenues increased to 28.7% in 2020, from 27.3% in 2019.

Amortization of intangible assets .

Amortization expense of intangible assets increased to $64.2 million in 2020 compared to $61.7 million in 2019, due to the additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020.

Amortization of intangible assets increased to $64.2 million in 2020 compared to $61.7 million in 2019, due to the additional amortization expense of intangible assets acquired in the acquisition of ANZ in November 2020.

Merger and integration costs.

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Income from operations.

Consolidated income from operations decreased to $109.4 million in 2020 compared to $110.5 million in 2019, principally due to the inclusion of ANZ, which generated a loss from operations following acquisition as well as restructuring costs incurred in 2020, partially offset by a decrease in merger and integration related costs and an increase in Strayer University and Capella University revenue due to enrollment growth.

Strayer University segment income from operations increased 16.4% to $120.4 million in 2020, compared to $103.4 million in 2019, primarily due to expense savings related to campus closures during the COVID-19 pandemic, as well as lower marketing expense.

Capella University segment income from operations increased 2.1% to $92.6 million in 2020, compared to $90.7 million in 2019, primarily due higher revenues as a result of enrollment growth.

USHE segment income from operations increased 11.9% to $193.4 million in 2020, compared to $172.9 million in 2019, primarily due to expense savings related to campus closures during the COVID-19 pandemic, as well as lower marketing expense.

Education Technology Services segment income from operations decreased 7.5% to $19.6 million in 2020, compared to $21.2 million in 2019 as a result of increased investment in outreach to corporate partners.

Loss from operations for the Australia/New Zealand segment was $13.3 million in 2020 following our acquisition of ANZ in November 2020.

Other income.

Other income decreased to $4.6 million in 2020 compared to $13.2 million in 2019, as a result of lower yields on money markets and marketable securities due to reductions in interest rates as a result of the COVID-19 crisis and a decrease in investment income from our limited partnerships and other investments.

Other income decreased to $4.6 million in 2020 compared to $13.2 million in 2019, as a result of lower yields on money markets and marketable securities due to reductions in interest rates as a result of the COVID-19 pandemic and a decrease in investment income from our limited partnerships and other investments.

Other income is net of interest expense, which was $1.4 million and $0.8 million in 2020 and 2019, respectively.

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The tax rate for both periods reflects favorable discrete adjustments, primarily related to tax windfalls recognized through share-based payment arrangements.

Our effective tax rate, excluding these and other discrete tax adjustments, was 28.5% for 2020.

Net income was $86.3 million in 2020 compared to $81.1 million in 2019 due to the factors discussed above.

Year Ended December 31, 2019 Compared To Year Ended December 31, 2018

The increase in consolidated revenues compared to the same period in the prior year was primarily related to the inclusion of CEC revenue for the full year.

In the Strayer University segment for the year ended December 31, 2019, enrollment grew 11% to 51,395 from 46,143 in the prior year.

Revenue grew 12.4% to $537.0 million compared to $477.8 million in 2018 as a result of the increase in enrollment.

Capella University segment revenue was $460.2 million in 2019 compared to $156.3 million in the prior year, which reflects activity after the completion of the CEC merger on August 1, 2018, and includes a $28.7 million purchase accounting reduction to the value of contract liabilities acquired in the merger.

Instructional and support costs.

Consolidated instructional and support costs increased to $530.6 million in 2019, compared to $371.5 million in 2018, principally due to the inclusion of instructional and support costs of CEC.

Consolidated instructional and support costs as a percentage of revenues decreased to 53.2% in 2019 from 58.6% in 2018 due to cost synergies realized as a result of the CEC merger.

General and administration expenses.

Consolidated general and administration expenses increased to $272.4 million in 2019, from $194.0 million in 2018, principally due to the inclusion of general and administration expenses of CEC, as well as increased investments in branding initiatives and partnerships with brand ambassadors.

Consolidated general and administration expenses as a percentage of revenues decreased to 27.3% in 2019 from 30.6% in 2018 due to cost synergies realized as a result of the CEC merger.

Amortization of intangible assets .

Amortization expense related to intangible assets acquired in the merger with CEC was $61.7 million in 2019 compared to $25.7 million in 2018.

Merger and integration costs.

Merger and integration costs were $21.9 million in 2019 compared to $45.7 million in 2018, and reflect expenses for legal, accounting, integration support services, and severance costs incurred in connection with the merger with CEC.

In 2019, merger and integration costs also includes $6.0 million of right-of-use lease asset impairment charges related to redundant leased space that was vacated during the year.

Impairment of intangible assets.

In 2018, we recorded a goodwill impairment loss of $13.9 million and an intangible asset impairment loss of $5.7 million based on analyses performed during the year with respect to our acquisition of NYCDA.

In addition, we recognized a $0.3 million charge to increase our liability for leases on facilities no longer in use in 2018.

We had no adjustments in 2019.

Income (loss) from operations.

Consolidated income from operations was $110.5 million in 2019 compared to a loss from operations of $22.7 million in 2018, principally due to higher revenues due to enrollment growth and lower merger and integration costs and impairment charges than in 2018.

Other income.

Other income increased to $13.2 million in 2019 compared to $3.6 million in 2018, as a result of the inclusion of $3.4 million of investment income from partnership interests acquired in the CEC merger and other investments, higher yields on money markets and marketable securities, and an increase in our cash balance.

Other income is net of interest expense, which was $0.8 million and $0.7 million in 2019 and 2018, respectively.

Provision (benefit) for income taxes.

Income tax expense was $42.6 million in 2019, compared to a benefit of $3.5 million in 2018.

Our effective tax rate for 2019 was 34.4%, compared to 18.1% in 2018.

The tax rate in 2019 was unfavorably impacted by changes in previously deferred compensation arrangements, resulting in a discrete charge of $11.5 million during the first quarter of 2019 to reduce the Company's deferred tax asset related to these arrangements.

This charge is offset by favorable adjustments related to tax windfalls recognized through share-based payment arrangements.

Our effective tax rate, excluding these and other discrete tax adjustments, was 28.5% in 2020.

Net income (loss).

Net income was $81.1 million in 2019 compared to a net loss of $15.7 million in 2018 due to the factors discussed above.

Net income was $86.3 million in 2020 compared to $81.1 million in 2019 due to the factors discussed above.

Liquidity and Capital Resources

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We were in compliance with all applicable covenants related to the Amended Credit Facility as of December 31, 2021.

At December 31, 2020, we had $141.8 million outstanding on our Revolving Credit Facility.

We had no borrowings outstanding as of December 31, 2019.

As of December 31, 2020 and 2021, we had $141.8 million and $141.6 million, respectively, outstanding under our Revolving Credit Facility.

During the years ended December 31, 2020 and 2021, we paid $1.0 million and $2.7 million, respectively, of interest and unused commitment fees related to our Revolving Credit Facility.

Our net cash provided by operating activities decreased in 2020 to $142.9 million, as compared to $202.1 million for the same period in 2019.

The decrease in net cash from operating activities was primarily driven by a decrease in working capital as a result of several one-time events, including a $25.3 million payment in the fourth quarter to acquire a full license to continue using the Jack Welch name and likeness for the Jack Welch Management Institute.

Capital expenditures were $46.8 million for the year ended December 31, 2020, compared to $38.7 million for 2019.

Capital expenditures for the year ending December 31, 2021 are expected to be between 4%-5% of revenue.

In August 2020, we completed a public offering of 2,185,000 shares of our common stock for total cash proceeds of $220.2 million, net of underwriting discounts and offering costs of $9.2 million.

The funds from the stock offering were used to acquire Torrens University and related assets in Australia and New Zealand.

Our net cash provided by operating activities increased in 2021 to $180.5 million, as compared to $142.9 million for the same period in 2020.

The increase in net cash from operating activities was primarily driven by the inclusion of a full-year of ANZ operations, partially offset by lower earnings in the USHE segment.

Capital expenditures increased to $49.4 million for the year ended December 31, 2021, compared to $46.8 million for 2020, due to the inclusion of ANZ, partially offset by lower facilities investments.

The Board of Directors declared an annual cash dividend of $2.40 per common share, payable in equal parts quarterly.

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During the year ended December 31, 2021, we invested $5.9 million to repurchase 76,969 shares of common stock.

At December 31, 2020, we had $250 million in repurchase authorization to use through December 31, 2021.

As of December 31, 2021, we had $250 million in repurchase authorization to use through December 31, 2022.

We believe that existing cash and cash equivalents, cash generated from operating activities, and if necessary, cash available under our Amended Credit Facility will be sufficient to meet our requirements for at least the next 12 months.

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We earned interest income of $1.1 million, $4.0 million, and $10.6 million in each of the years ended December 31, 2021, 2020, and 2019, respectively.

Contractual Obligations

The table below sets forth our contractual commitments associated with lease liabilities as of December 31, 2020 (in thousands):

Our material cash commitments include minimum lease payments required under our lease agreements, capital commitments related to our four limited partnership investments and commitment fees associated with our credit facility.

The table below sets forth our contractual cash commitments associated with lease liabilities as of December 31, 2021 (in thousands):

Payments Due By Period

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Lease liabilities $ 223,769 $ 34,086 $ 60,561 $ 48,800 $ 80,322

$ 159,988 $ 40,336 $ 50,231 $ 34,523 $ 34,898

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(1) Excludes $60.0 million of legally binding minimum payments for leases signed but not yet commenced.

Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2020, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority.

Therefore, $0.3 million of unrecognized tax benefits have been excluded from the contractual obligations table above.

Due to the uncertainty with respect to the timing of future borrowings associated with our credit facility, we are unable to make reasonably reliable estimates of any commitment fees charged on the unused portion of the credit facility.

Therefore, the maximum estimated commitment fee of $0.6 million per annum is excluded from the contractual obligations table above.

As of December 31, 2020, the Company has a commitment to invest up to $1.8 million in three limited partnership investments through 2027.

As of December 31, 2021, we have a commitment to invest up to $2.9 million in our four limited partnership investments through 2031.

Due to the uncertainty with respect to the timing of future cash flows associated with the limited partnership investments, we are unable to make reasonably reliable estimates of the period in which such additional investments may take place.

Therefore, $1.8 million of potential limited partnership investment commitments have been excluded from the contractual obligations table above.

Off-Balance Sheet Arrangements

As of December 31, 2020, we do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of the Securities Exchange Commission Regulation S-K.

As of December 31, 2021, our maximum estimated commitment fee is $0.6 million per annum related to the unused portion of our credit facility.

Recently Issued Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis