What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-12-02 compared with 2020-12-03 · 576 added, 545 removed, 1099 unchanged (50% of the section changed)

2 unchanged sentences

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021, pursuant to Exchange Act Rule 13a-15.

Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer

concluded that our disclosure controls and procedures as of September 30, 2020 were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2021 were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As we continue the process to adopt ASU 2016-02, Leases (Topic 842), we expect that there will be additional changes in internal controls over financial reporting.

Report of Management on Internal Control Over Financial Reporting and Attestation Report of Independent Registered Public Accounting Firm

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LTG (R) William J.

Lennox Former Superindendent of the United States Military Academy at West Point;

Lennox Former Superintendent of the United States Military Academy at West Point;

Chief Executive Officer, Lennox Strategies, LLC

McWaters Former President and Chief Executive Officer, Universal Technical Institute, Inc.;

Former United States Secretary of Education

President and CEO of Fresh Start Women’s Foundation

Sanchez Former U.S.

Congresswoman;

Chief Executive Officer, Datamatica, LLC

Christopher S.

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Trammell Former Executive Vice President and Chief Financial Officer, Tenneco Inc.

Former Chairman of the Board, Universal Technical Institute, Inc.

(1) Effective as of November 30, 2020, Dr.

Paige and Mr.

White each voluntarily retired from our board of directors.

The information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2022 Annual Meeting of Stockholders within 120 days after the end of fiscal year ended September 30, 2021.

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Exhibit Number Description

3.1 Restated Certificate of Incorporation of the Registrant.

(Incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K dated December 23, 2004.)

3.2 Amended and Restated Bylaws of the Registrant.

(Incorporated by reference to Exhibit 3.2 to the Form 8-K filed by the Registrant on June 30, 2016.)

2.1# Stock Purchase Agreement by and among HCP ED Holdings, LLC, HCP ED Holdings, Inc., Michigan Institute of Aeronautics, Inc.

D/B/A MIAT College of Technology, and Universal Technical Institute, Inc.

dated March 29, 2021.

(Incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q dated May 7, 2021.)

3.1 Fifth Amended and Restated Certificate of Incorporation of Universal Technical Institute, Inc.

dated February 26, 2021.

(Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q dated May 7, 2021.)

3.2 Fourth Amended and Restated Bylaws of Universal Technical Institute, Inc., a Delaware Corporation (as amended on February 26, 2021).

(Incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q dated May 7, 2021).)

3.3 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock.

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(Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on March 3, 2017.)

Exhibit Number Description

10.4.1* Form of Restricted Stock Unit Agreement.

2 unchanged sentences

(Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant on September 10, 2014.)

Exhibit Number Description

10.4.3* Form of Performance Unit Award Agreement.

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(Incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the Registrant on October 21, 2019.)

10.18 Credit Agreement, dated May 12, 2021, by and among the Company, Universal Technical Institute of Arizona, LLC and Fifth Third Bank, National Association (incorporated herein by reference to Exhibit 10.1 to the Current report on Form 8-K filed with the SEC on May 12, 2021).

10.19 Term Promissory Note, issued by the Company, dated May 12, 2021 (incorporated herein by reference to Exhibit 10.2 to the Current report on Form 8-K filed with the SEC on May 12, 2021).

10.20 Deed of Trust, Security Agreement and Fixture Filing dated May 12, 2021 (incorporated herein by reference to Exhibit 10.3 to the Current report on Form 8-K filed with the SEC on May 12, 2021).

10.21 Universal Technical Institute, Inc.

2021 Equity Incentive Plan.

(Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on February 26, 2021).

21.1+ Subsidiaries of the Registrant.

Exhibit Number Description

23.1+ Consent of Deloitte & Touche LLP.

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101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit Number Description

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

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+ Filed herewith.

# Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Grant and Troy R.

Anderson, or either of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any documents related to this report and filed pursuant to the Securities Exchange Act of 1934, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Anderson, or either of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any documents related to this report and filed pursuant to the Securities Exchange Act of 1934, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

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Director December 2, 2021

/s/ Loretta L.

Sanchez Director December 2, 2021

/s/ Christopher S.

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Consolidated Statements of Operations for the years ended September 30, 2021, 2020 and 2019

Consolidated Statements of Other Comprehensive Income (Loss) for the years ended September 30, 2021, 2020 and 2019

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2021, 2020 and 2019

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2020, of the Company and our report dated December 3, 2020 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s change in method of accounting for leases as a result of the adoption of Accounting Standards Codification Topic 842, Leases, effective October 1, 2019.

Basis for Opinion

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We have audited the accompanying consolidated balance sheets of Universal Technical Institute, Inc.

and subsidiaries (the "Company") as of September 30, 2020 and 2019, the related consolidated statements of operations, of shareholders’ equity, and of cash flows for each of the three years in the period ended September 30, 2020, and the related notes (“collectively referred to financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of September 30, 2021 and 2020, the related consolidated statements of operations, of other comprehensive income (loss), of shareholders’ equity, and of cash flows for each of the three years in the period ended September 30, 2021, and the related notes (“collectively referred to as the financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 2, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, effective October 1, 2019, the Company adopted FASB ASC 842, Leases , using the modified retrospective approach.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenues - Proprietary Loan Program Revenue Recognition - Refer to Note 2 in the FY 2021 Form 10K

Critical Audit Matter Description

The portion of tuition revenue related to the Company’s proprietary loan program is considered a form of variable consideration, in accordance with ASC 606, Revenue from Contracts with Customers.

The Company estimates the amount it expects to collect on these loans by calculating the amount due compared to historical loan collections over the past 10 years, and recognizes that amount of estimated revenue over the student’s program, resulting in a Notes Receivable balance of $36.1 million as of September 30, 2021.

The Company evaluates the collectability rate of its outstanding loans each quarter, which requires significant management judgment.

The Company currently uses the actual collection experience over the past 10 years to determine the expected collection rate.

The key judgment made by management is the length of historical collection experience used to calculate the expected collection rate and requires a high degree of auditor judgement in determining the reasonableness of the period of time used by management to estimate the expected collection rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the expected collection rate for the proprietary loan program included the following, among others:

• Tested the design and effectiveness of the Company’s internal controls related to the Company’s evaluation of the proprietary loan program expected collection rate.

• Considered how the expected collection rate might change if the Company had used a different time period in the calculation of the expected collection rate, and what impact it would have on the financial statements.

• Performed a trend analysis by comparing recent repayment trends and collection rates by quarter over the past 3 years compared to the expected collection rate calculated to evaluate whether the expected collection rate estimate is reasonable.

• Recalculated the expected collection rate based on the actual collection rates of the loan portfolio for the most recent 10 years.

• Evaluated the underlying historical loan data by making selections of loans included in the data population and traced to source documentation, and recalculated the amount of the loan due as of the reporting date.

• Agreed monthly loan collection amounts for selected months to bank statements.

• Tested completeness of the loan data population by tracing a selection of students from historical accounting records to the underlying population used to calculate the expected collection rate.

/s/ DELOITTE & TOUCHE LLP

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Operating lease liability, current portion 14,075 23,666

Financing obligation, current — 1,554

Long-term debt, current portion 876 129

Other current liabilities 2,430 2,112

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Deferred tax liabilities, net 674 674

Deferred rent liability — 10,326

Financing obligation — 39,161

Operating lease liability 153,228 134,089

Long-term debt 29,850 131

Other liabilities 7,570 8,925

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Paid-in capital - preferred 68,853 68,853

Treasury stock, at cost, 82 and 6,865 shares as of September 30, 2020 and 2019, respectively

Treasury stock, at cost, 82 shares as of September 30, 2021 and 2020, respectively

( 365 ) ( 365 )

Retained deficit ( 21,996 ) ( 32,971 )

Accumulated other comprehensive income (loss) ( 279 ) —

Total shareholders’ equity 188,530 176,522

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Total operating expenses 320,136 304,632 339,306

Loss from operations ( 3,871 ) ( 7,802 ) ( 35,275 )

Other income (expense):

Income (loss) from operations 14,947 ( 3,871 ) ( 7,802 )

Other income:

Interest income 83 1,152 1,491

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Other income 518 135 1,467

Total other income (expense), net 1,277 137 ( 422 )

Loss before income taxes ( 2,594 ) ( 7,665 ) ( 35,697 )

Income tax benefit (expense) 10,602 ( 203 ) 3,015

Total other income, net 236 1,277 137

Income (loss) before income taxes 15,183 ( 2,594 ) ( 7,665 )

Income tax (expense) benefit ( 602 ) 10,602 ( 203 )

Net income (loss) $ 14,581 $ 8,008 $ ( 7,868 )

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands)

Year Ended September 30,

2021 2020 2019

Net income (loss) $ 14,581 $ 8,008 $ ( 7,868 )

Other comprehensive income (loss):

Unrealized loss on derivative contract ( 279 ) — —

Comprehensive income (loss) $ 14,302 $ 8,008 $ ( 7,868 )

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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Capital - Common Paid-in

Capital - Preferred Treasury Stock Retained

Earnings (Deficit) Total

Capital - Preferred Treasury Stock Retained Deficit Accumulated Other Comprehensive Income (Loss) Total

Shareholders’

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Balance as of September 30, 2018 32,169 $ 3 700 $ — $ 186,732 $ 68,853 ( 6,865 ) $ ( 97,388 ) $ ( 31,555 ) $ — $ 126,645

Adjustment for the adoption of ASC 606 — — — — — — — — 37,209 37,209

Net loss — — — — — — — — ( 7,868 ) — ( 7,868 )

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Balance as of September 30, 2019 32,499 $ 3 700 $ — $ 187,493 $ 68,853 ( 6,865 ) $ ( 97,388 ) $ ( 44,673 ) $ — $ 114,288

Net loss — — — — — — — — ( 7,868 ) ( 7,868 )

Adjustment for the adoption of ASC 842 — — — — — — — — 8,958 — 8,958

Net income — — — — — — — — 8,008 — 8,008

Issuance of common stock under employee plans 328 — — — — — — — — — —

1 unchanged sentence

Stock-based compensation — — — — 2,077 — — — — — 2,077

Shares issued for equity offering — — — — ( 47,870 ) — 6,783 97,023 — — 49,153

Preferred stock cash dividends declared — — — — — — — — ( 5,264 ) — ( 5,264 )

Balance as of September 30, 2020 32,730 $ 3 700 $ — $ 141,002 $ 68,853 ( 82 ) $ ( 365 ) $ ( 32,971 ) $ — $ 176,522

Adjustment for the adoption of ASC 842 — — — — — — — — 8,958 8,958

Net income — — — — — — — — 14,581 — 14,581

Cumulative effect from adoption of ASC 326 — — — — — — — — 1,644 — 1,644

Issuance of common stock under employee plans 251 — — — — — — — — — —

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Stock-based compensation — — — — 1,733 — — — — — 1,733

Shares issued for equity offering — — — — ( 47,870 ) — 6,783 97,023 — 49,153

Preferred stock cash dividends declared — — — — — — — — ( 5,250 ) — ( 5,250 )

Unrealized loss on derivative contract — — — — — — — — — ( 279 ) ( 279 )

Balance as of September 30, 2021 32,915 $ 3 700 $ — $ 142,314 $ 68,853 ( 82 ) $ ( 365 ) $ ( 21,996 ) $ ( 279 ) $ 188,530

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Net income (loss) $ 14,581 $ 8,008 $ ( 7,868 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 14,027 11,804 13,222

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Amortization of right-of-use assets for operating leases 15,605 24,273 —

Goodwill and intangible asset impairment expense — — 1,164

Bad debt expense 1,718 1,767 1,166

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Training equipment credits earned, net 364 541 302

Unrealized loss on derivative contract ( 279 ) — —

Other (gains) losses, net ( 13 ) ( 52 ) 561

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Deferred revenue 16,954 ( 2,192 ) 4,650

Income tax (receivable) payable ( 6,989 ) 166 ( 812 )

Income tax receivable 7,145 ( 6,989 ) 166

Accrued tool sets and other current liabilities 2,025 1,863 300

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Other liabilities ( 1,633 ) 739 321

Net cash provided by (used in) operating activities 11,032 21,746 ( 13,353 )

Net cash provided by operating activities 55,185 11,032 21,746

Cash flows from investing activities:

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Proceeds received upon maturity of investments 37,651 31,289 —

Proceeds from life insurance policy 1,566 — —

Purchase of trading securities — — ( 894 )

Proceeds from sales of trading securities — — 40,902

Capitalized costs for intangible assets — — ( 325 )

Proceeds from insurance policy 427 1,566 —

Return of capital contribution from unconsolidated affiliate 277 261 267

Net cash (used in) provided by investing activities ( 45,760 ) ( 6,152 ) 27,132

Net cash used in investing activities ( 22,951 ) ( 45,760 ) ( 6,152 )

Cash flows from financing activities:

Proceeds from term loan 31,150 — —

Debt issuance costs related to the term loan ( 272 ) — —

Proceeds from equity offering — 49,153 —

Payment of preferred stock cash dividend ( 5,250 ) ( 5,264 ) ( 5,250 )

Payment of financing obligation and finance leases ( 99 ) ( 1,319 ) ( 1,107 )

Payment of financing obligation, term loan and finance leases ( 383 ) ( 99 ) ( 1,319 )

Payment of payroll taxes on stock-based compensation through shares withheld ( 421 ) ( 698 ) ( 629 )

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Note 1 - Business Description

Universal Technical Institute, Inc.

(“we,” “us” or “our”) is the leading provider of postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians as measured by total average full-time enrollment and graduates.

We also provide programs for welders and computer numeric control (“CNC”) machining technicians.

We offer certificate, diploma or degree programs at 12 campuses across the United States under the banner of several well-known brands, including Universal Technical Institute, Motorcycle Mechanics Institute, Marine Mechanics Institute and NASCAR Technical Institute.

This excludes the Norwood, Massachusetts campus that was closed on July 31, 2020.

We also offer manufacturer specific advanced training (“MSAT”) programs, including student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers.

Founded in 1965, we have provided technical education for more than 55 years and have graduated more than 220,000 technicians.

Founded in 1965, with more than 225,000 graduates in its history, Universal Technical Institute, Inc.

(“we,” “us” or “our”) is a leading provider of transportation and technical training programs.

As of September 30, 2021, we offered certificate, diploma or degree programs at 12 campuses across the United States under the banner of several well-known brands, including Universal Technical Institute (“UTI”), Motorcycle Mechanics Institute and Marine Mechanics Institute (collectively, “MMI”) and NASCAR Technical Institute (“NASCAR Tech”).

Additionally, we offer manufacturer specific advanced training (“MSAT”) programs, including student-paid electives, at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers.

We work closely with over 35 original equipment manufacturers and industry brand partners to understand their needs for qualified service professionals.

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For further discussion, see Note 2 on “Summary of Significant Accounting Policies - Concentration of Risk” and Note 21 on “Government Regulation and Financial Aid.”

We offer the majority of our programs in a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs.

This blended learning format has allowed us to continue to offer our programs to our students during the COVID-19 pandemic and aligns with an increasing trend of online education now being offered as individuals seek life-long learning opportunities.

On-campus labs are designed to meet or exceed the current national guidelines recommended by the Centers for Disease Control (“CDC”) as well as state and local mandates, while still meeting our accreditation and curriculum requirements.

Note 2 - Summary of Significant Accounting Policies

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Tuition and fee revenue is recognized ratably over the term of the course or program offered.

Approximately 99 %, 99 % and 98 % of our revenues for each of the years ended September 30, 2020, 2019 and 2018, respectively, consisted of gross tuition.

Approximately 99 % of our revenues for each of the years ended September 30, 2021, 2020 and 2019, respectively, consisted of gross tuition.

The majority of our core programs are designed to be completed in 36 to 90 weeks, and our advanced training programs range from 12 to 23 weeks in duration.

We supplement our revenues with sales of textbooks and program supplies and other revenues, which are recognized as the transfer of goods or services occurs.

Deferred revenue represents the excess of tuition and fee payments received as compared to tuition and fees earned and is reflected as a current liability in our consolidated balance sheets because it is expected to be earned within the next 12 months.

We supplement our revenues with sales of textbooks and program

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

Through our proprietary loan program, we, in substance, provide the students who participate in this program with extended payment terms for a portion of their tuition.

Based on historical collection rates, we can demonstrate that a portion of these loans are collectible.

Accordingly, we recognize tuition and loan origination fees financed by the loan and any related interest revenue under the effective interest method required under the loan based on this collection rate.

supplies and other revenues, which are recognized as the transfer of goods or services occurs.

We provide dealer technician training or instructor staffing services to manufacturers.

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In order to provide funding for students who are not able to fully finance the cost of their education under traditional governmental financial aid programs, commercial loan programs or other alternative sources, we established a private loan program with a bank.

Through our proprietary loan program, we, in substance, provide the students who participate in this program with extended payment terms for a portion of their tuition.

Based on historical collection rates, we can demonstrate that a portion of these loans are collectible.

Under the terms of the proprietary loan program, the bank originates loans for our students who meet our specific credit criteria with the related proceeds used exclusively to fund a portion of their tuition.

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Estimating the collection rate requires significant management judgment.

Upon adoption of ASU 2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments (Topic 326) as of October 1, 2020, we revised our estimated collection rate to only include historical collections from the past ten years as we determined that such population better represents our current expected collections and aligns with the typical term of the loan.

The estimated amount is determined at the inception of the contract, and we recognize the related revenue as the student progresses through school.

Each reporting period, we update our assessment of the variable collection rate associated with the proprietary loan program.

Prior to adopting ASC 606 on October 1, 2017, we recognized revenue related to the proprietary loan program as cash was received.

Restricted Cash

Restricted cash includes funds held as collateral for certain of the surety bonds that our insurers issue on behalf of our campuses and admissions representatives with multiple states, which are required to maintain authorization to conduct our business, funds transferred in advance of loan purchases under our proprietary loan program and funds held for students from Title IV financial aid program funds that result in credit balances on a student’s account.

Allowance for Uncollectible Accounts

We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability, failure or refusal of our students to make required payments.

We offer a variety of payment plans to help students pay that portion of their education

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

expenses not covered by financial aid programs or alternate fund sources, which are unsecured and not guaranteed.

Allowance for Uncollectible Accounts

We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability, failure or refusal of our students to make required payments.

We offer a variety of payment plans to help students pay that portion of their education expenses not covered by financial aid programs or alternate fund sources, which are unsecured and not guaranteed.

Management analyzes accounts receivable, historical percentages of uncollectible accounts, customer credit worthiness and changes in payment history when evaluating the adequacy of the allowance for uncollectible accounts.

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There were no significant impairment charges required for the years ended September 30, 2021, 2020 and 2019.

Our goodwill balance of $ 8.2 million resulted from the acquisition of our motorcycle and marine education business in 1998 and is allocated to our MMI Orlando, Florida campus that provides the related educational programs.

Our goodwill balance of $ 8.2 million as of September 30, 2021, 2020 and 2019, resulted from the acquisition of our motorcycle and marine education business in 1998 and is allocated to our MMI Orlando, Florida campus that provides the related educational programs.

Goodwill represents the excess of the cost of an acquired business over the estimated fair values of the assets acquired and liabilities assumed.

1 unchanged sentence

Any resulting impairment charge would be recognized as an expense in the period in which impairment is identified.

On March 19, 2020, we suspended all in person classes at all of our campuses, including our Orlando, Florida campus, for the safety and protection of our students and staff, to help slow the spread of COVID-19, and to comply with state and local orders and restrictions.

On March 25, 2020, we began offering the classroom portion of our training online so that students who elected to remain enrolled in the program could continue their education from home.

During May of 2020, our Orlando, Florida campus reopened for students to complete hands-on labs, which have been re-designed to meet CDC, state and local guidelines for health, safety and social distancing.

While some student graduation dates have been delayed due to the closure, the average students enrolled at our Orlando, Florida campus only decreased by 3.8 % as compared to the prior year.

Even with the impacts of COVID-19, our new student enrollments at the Orlando, Florida campus increased by 3.4 % during 2020 over the prior year.

After performing a qualitative analysis, there were no indicators of goodwill impairment as of September 30, 2020.

After performing a qualitative a nalysis, there were no indicators of goodwill impairment as of September 30, 2021.

Self-Insurance Plans

3 unchanged sentences

Our recorded net liability related to self-insurance plans was $ 2.9 million as of September 30, 2021.

We lease the majority of our administrative and educational facilities under operating lease agreements.

Upon adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”) as of October 1, 2019, we derecognized our previously recorded deferred rent balance.

ASC 842 requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on

UNIVERSAL TECHNICAL INSTITUTE, INC.

2 unchanged sentences

(In thousands, except per share amounts)

We lease the majority of our administrative and educational facilities under operating lease agreements.

Upon adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”) as of October 1, 2019, we derecognized our previously recorded deferred rent balance.

ASC 842 requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases.

the balance sheet for substantially all leases, with the exception of short-term leases.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

We adopted ASC 842 under a modified retrospective method without the recasting of comparative periods’ financial information.

See Note 3 “Recent Accounting Pronouncements” for further detail regarding the adoption of ASC 842 and the impact on our financial statements and Note 10 “Leases” for our fiscal 2020 disclosures.

See Note 9 “Leases” for additional disclosures on our leases.

Advertising Costs

1 unchanged sentence

Stock-Based Compensation

Historically, we have issued restricted stock awards, restricted stock units and stock options.

Restricted stock awards and restricted stock units are subject to vesting with service and performance conditions.

Historically, we have issued restricted stock units and stock options.

Restricted stock units are subject to vesting with service and performance conditions.

We measure all share-based payments to employees at estimated fair value.

We recognize the compensation expense for restricted stock awards and restricted stock units with only service conditions on a straight-line basis over the requisite service period.

We granted restricted stock awards with both service and performance conditions during the year ended September 30, 2020.

We did not grant any stock options during the year ended September 30, 2020.

We recognize the compensation expense for restricted stock units with only service conditions on a straight-line basis over the requisite service period.

We granted restricted stock units with both service and performance conditions during the years ended September 30, 2021 and 2020.

We did not grant any stock options during the years ended September 30, 2021 and 2020.

Shares issued under our equity compensation plans are new shares.

Compensation expense associated with restricted stock awards, restricted stock units and performance units is measured based on the grant date fair value of our common stock, discounted for non-participation in anticipated dividends during the vesting period.

The requisite service period for restricted stock awards, restricted stock units and performance units is generally the vesting period.

Compensation expense associated with restricted stock units is measured based on the grant date fair value of our common stock.

The requisite service period for restricted stock units and performance units is generally the vesting period.

We estimate the fair value of performance units using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rates of return, and dividend yields.

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The tax benefit related to stock-based compensation recognized was $ 0.5 million, $ 0.5 million, and $ 0.4 million for the years ended September 30, 2021, 2020 and 2019, respectively.

See Note 14 for further discussion.

See Note 17 “Stock-Based Compensation” for further discussion.

We recognize deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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Deferred tax assets are reduced through a valuation allowance if it is more likely than not that the deferred tax assets will not be realized.

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See Note 14 “Income Taxes” for additional details.

Concentration of Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, short-term investments and receivables.

As of September 30, 2020, we held cash and cash equivalents of $ 76.8 million, restricted cash of $ 12.1 million and short-term held-to-maturity investments of $ 38.1 million.

As of September 30, 2021, we held cash and cash equivalents of $ 133.7 million and restricted cash of $ 12.3 million.

We place our cash and cash equivalents and restricted cash with high quality financial institutions and limit the amount of credit exposure with any one financial institution.

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We have the ability and intention to hold these investments until maturity and therefore have classified these investments as held-to-maturity and recorded them at amortized cost.

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We extend credit for tuition and fees, for a limited period of time, to a majority of our students.

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Costs related to the start-up of new campuses and programs are expensed as incurred.

Derivative Financial Instruments

On occasion, we may use interest rate swaps to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows, primarily with variable-rate debt.

We do not use derivative financial instruments for trading or speculative purposes.

We recognize all derivatives at fair value within the line items “Other current assets,” “Other assets,” “Other current liabilities,” and “Other liabilities” on the condensed consolidated balance sheet.

Management reviews our derivative positions and overall risk management strategy on a regular basis.

We only enter into transactions that we believe will be highly effective at offsetting the underlying risk, and we do not use derivatives for trading or speculative purposes.

We may choose to designate our derivative financial instruments, which are generally interest rate swaps, to hedge future interest payments on variable debt.

At inception of the transaction, we formally designate and document the derivative financial instrument as a hedge of a specific underlying exposure, the risk management objective, and strategy for undertaking the hedge transaction.

We formally assess both at inception and at least quarterly thereafter, the effectiveness of our hedging transactions.

Due to the high degree of effectiveness between the hedging instruments and the underlying exposures hedged, fluctuations in the value of the derivative financial instruments will generally be offset by the changes in the cash flows or fair value of the underlying exposures being hedged.

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Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in “Accumulated other comprehensive income (loss)” on the condensed consolidated balance sheets.

For cash flow hedges, we report the effective portion of the gain or loss as a component of “Accumulated other comprehensive income (loss)” and reclassify it to “Interest expense” in the condensed consolidated statements of operations over the corresponding period of the underlying hedged item.

The ineffective portion of the change in fair value of a derivative financial instrument is recognized in “Interest expense” at the time the ineffectiveness occurs.

To the extent the hedged forecasted interest payments on debt related to our interest rate swap is paid off, the remaining balance in “Accumulated other comprehensive income (loss)” is recognized in “Interest expense” in the condensed consolidated statements of operations.

See Note 13 “Derivative Financial Instruments” for additional disclosures related to our derivative financial instruments.

Reclassifications

Due to the new term loan that was executed during the year ended September 30, 2021, which is described in further detail in Note 12, we added two new lines to the condensed consolidated balance sheet:

“Long-term debt, current portion,” and “Long-term debt.” We have presented both the liabilities related to the term loan and finance leases in these new lines as of September 30, 2021.

For the period ended September 30, 2020, $ 0.1 million of short-term finance lease liabilities was reclassified from “Other current liabilities” to “Long-term debt, current portion” and long-term finance lease liabilities of $ 0.1 million were reclassified from “Other liabilities” to “Long-term debt” on the condensed consolidated balance sheet for comparable presentation.

Note 3 - Recent Accounting Pronouncements

Accounting Pronouncements Effective in Fiscal 2021

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which amended the FASB Accounting Standards Codification (“ASC”) by creating ASC 842 to replace ASC 840.

ASU 2016-02 requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases.

Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) to provide entities with relief from the costs of implementing certain aspects of the new leasing standard.

It also allows lessors to elect not to separate lease and non-lease components when certain conditions are met.

In March 2019, the FASB issued ASU 2019-01, Lease (Topic 842):

Codification Improvements (“ASU 2019-01”).

ASU 2019-01 clarifies certain items regarding lessor accounting.

It also clarifies the interim disclosure requirements during transition.

The new guidance in ASC 842 also provides a package of transition practical expedients that allow an entity to not reassess (1) whether any expired or existing contracts contain a lease, (2) the lease classification of any expired or existing lease, and (3) initial direct costs for any existing lease.

We adopted ASC 842 effective October 1, 2019, and elected the package of transition practical expedients.

We also elected additional transitional practical expedients that allow an entity to not reassess land easements not previously addressed under ASC 840 and to not recognize on the balance sheet leases with terms of less than 12 months.

We are using the modified retrospective method without the recasting of comparative periods’ financial information.

We did not elect the practical expedient to use hindsight in determining a lease term of the ROU assets at the adoption date.

As a result of adopting the new standard, we recognized an operating lease liability of $ 163.0 million and an operating lease ROU asset of $ 148.6 million on October 1, 2019.

The change resulted in the de-recognition of approximately $ 0.9 million of other assets and $ 15.3 million of other liabilities.

The standard did not materially impact our condensed consolidated statements of operations and cash flows.

In addition, we have two build-to-suit leases that were accounted for as financing obligations and related assets because we had continued involvement in the related facility after the construction period was completed.

The financing obligations are now classified as operating leases in accordance with the new standard as of the transition date, including recognition of operating lease ROU assets and lease liabilities.

The change resulted in the de-recognition of approximately $ 40.7 million existing deferred financing obligations and $ 31.6 million in related assets.

The net impact of the de-recognition and the adoption of ASC 842 as of October 1, 2019 was an increase in stockholders’ equity of approximately $ 9.1 million, with a subsequent adjustment during the three months ended March 31, 2020, which reduced the impact to stockholders’ equity by $ 0.1 million.

The transition also resulted in the recognition of rent expense, which was previously reported as interest expense under the former guidance.

See Note 10 “Leases” for our fiscal 2020 disclosures.

Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”).

ASU 2018-13 amends the disclosure requirements of ASC 820, changing the fair value measurement disclosure requirements of ASC 820 by adding new disclosure requirements, modifying existing disclosure requirements and eliminating other disclosure requirements.

We adopted ASU 2018-13 as of October 1, 2019.

There was no impact to our consolidated financial statements or disclosures.

Cloud Computing Arrangements

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and other Internal-use Software (Subtopic 350-40) (“ASU 2018-15”).

ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement (“CCA”) that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

Specifically, ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs

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should be capitalized in a CCA that is considered a service contract.

The effect of this new standard on our consolidated financial statements is dependent on our entry into any future cloud computing arrangements.

Accounting Pronouncements Effective in Fiscal 2021

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses:

Measurement of Credit Losses on Financial Instruments (Topic 326) .

This update significantly changes the way that entities will be required to measure credit losses.

This standard requires that entities estimate credit losses based upon an “expected credit loss” approach rather than the “incurred loss” approach, which is currently used.

The new approach will require entities to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable forecasts of collectability.

The change in approach is anticipated to impact the timing of recognition of credit losses.

This update significantly changes the way that entities measure credit losses.

The new standard requires that entities estimate credit losses based upon an “expected credit loss” approach rather than the historical “incurred loss” approach.

The new approach requires entities to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable forecasts of collectability.

The change in approach impacts the timing of recognition of credit losses.

This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2019.

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Upon adoption on October 1, 2020, we recorded an increase in our receivables balance related to our proprietary loan program of $ 1.6 million, with the corresponding amount recorded as an increase to retained earnings.

No other adjustments were deemed necessary in applying this new guidance, and we do not expect the adoption of ASU 2016-13 to have a material impact on our results of operations.

No other adjustments were deemed necessary in applying this new guidance.

Accounting Pronouncements Effective in Fiscal 2022

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The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

We are currently evaluating the impact that the update will have on our results of operations, financial condition and financial statement disclosures.

We have evaluated the new guidance and determined that there is no material impact on our results of operations, financial condition and financial statement disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met.

This new guidance only applies to contracts and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

An entity may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March

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12, 2020, up to the date that the financial statements are available to be issued.

The amendments in ASU 2020-04 do not apply to contract modifications made after December 31, 2022.

Given the interest rate for our new term loan (which is further described in Note 12) references LIBOR, we are currently evaluating the new reference rate reform practical expedients and will consider adopting this guidance when we are required to modify our contract for the discontinuation of LIBOR.

Note 4 - Revenue from Contracts with Customers

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Revenues are recognized as transfer of the services occurs.

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We provide postsecondary education and other services in the same geographical market, the United States.

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Currently, we do not have any contract assets that have not transferred to a receivable.

Our deferred revenue is considered a contract liability and primarily relates to our enrollment agreements where we received payments for tuition but we have not yet delivered the related training programs to satisfy the related performance obligations.

The advance consideration received from students or Title IV funding is deferred revenue until the training program has been delivered to the students.

The following table provides information about receivables and contract liabilities from contracts with customers:

September 30, 2020 September 30, 2019

The following table provides information about receivables and deferred revenue resulting from our enrollment agreements with students:

September 30,

Receivables, which includes Tuition and Notes Receivable $ 46,489 $ 53,144

Deferred revenue $ 57,648 $ 40,694

During the year ended September 30, 2020, the contract liabilities balance included decreases for revenues recognized during the period and increases related to new students who started school during the period.

Transaction Price Allocated to the Remaining Performance Obligations

Tuition and fee revenue is recognized ratably over the term of the course or program offered.

The majority of our programs are designed to be completed in 36 to 90 weeks, and our advanced training programs range from 12 to 23 weeks in duration.

Impacts of COVID-19

On March 19, 2020, we suspended all in person classes at all of our campuses for the safety and protection of our students and staff, to help slow the spread of COVID-19 and to comply with state and local orders and restrictions.

Upon the suspension of all in person classes, we provided all students with the opportunity to take a leave of absence or to continue their education via an online curriculum.

We do not recognize revenue while a student is on a leave of absence.

On March 25, 2020, we began offering the classroom portion of our training online so that the more than 8,000 students who elected to remain active in the program could continue their education remotely.

As our training is a combination of classroom lectures and hands-on labs, there is a portion of most classes that cannot be delivered online and needs to be completed in-person at the campus lab.

During the year ended September 30, 2020, as campuses were able to reopen, we transitioned our on-campus, in-person education model to a blended training model that combines instructor-facilitated online teaching and demonstrations with hands-on labs.

In May 2020, we resumed in-person labs at eight of our campus locations.

Four of our campuses resumed in-person labs in June 2020, and our final campus resumed in-person labs in Bloomfield, New Jersey on July 1, 2020.

On-campus labs have been re-designed to meet the health, safety and social distancing guidelines imposed by the Centers for Disease Control (“CDC”) and state and local jurisdictions, while still meeting our accreditation and curriculum requirements.

Upon the initial resumption of in-person labs, once a student returned to campus for in-person labs, under the new guidelines it takes on average approximately six to nine weeks for that student to catch up on the lab work that he was unable to complete during the campus closure and prior to his return.

As of September 30, 2020, approximately 5 % of students had not returned to campus to complete the in-person labs and remain only in the online portion of the curriculum, essentially only completing half of each course, while approximately 28 % of students were completing catch up labs, but over an extended period of time.

We continue to recognize revenue ratably over the term of the course or program offered, taking into consideration those only completing the online curriculum, and the catch-up period for active students and the impact it has on expected graduation dates.

As a result, as of September 30, 2020, we had deferred revenue of $ 6.1 million.

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Note 5 - Post-employment Benefits

On February 18, 2019, we announced that our campus in Norwood, Massachusetts is no longer accepting new student applications, and its last group of students started on March 18, 2019 and completed the curriculum in July 2020, with the campus closing on July 31, 2020.

The post-employment benefits incurred due to the campus closure were approximately $ 1.1 million.

Additionally, we periodically enter into agreements that provide post-employment benefits to personnel whose employment is terminated.

On October 21, 2019, we announced the retirement of our former President and Chief Executive Officer, Kimberly J.

McWaters, effective October 31, 2019.

During the twelve months ended September 30, 2020, we incurred post-employment benefit charges of $ 1.5 million and paid cash of $ 1.2 million, in accordance with Ms.

McWaters’ Retirement Agreement and Release of Claims, dated October 31, 2019.

The post-employment benefit liability, which is included in “Accounts payable and accrued expenses” on the accompanying consolidated balance sheets, is generally paid out ratably over the terms of the agreements, which range from 1 month to 24 months, with the final agreement expiring in 2021.

The post-employment benefit accrual activity for the years ended September 30, 2020 and 2019 was as follows:

Severance Other Total

Balance accrued as of September 30, 2018 $ 372 $ 9 $ 381

Post-employment benefit charges 1,637 90 1,727

Cash paid ( 1,159 ) ( 28 ) ( 1,187 )

Other non-cash adjustments (1)

( 129 ) ( 39 ) ( 168 )

Balance accrued as of September 30, 2019 $ 721 $ 32 $ 753

Post-employment benefit charges 2,223 57 2,280

Cash paid ( 2,210 ) ( 51 ) ( 2,261 )

Other non-cash adjustments (1)

131 ( 29 ) 102

Balance accrued as of September 30, 2020 $ 865 $ 9 $ 874

(1) Primarily relates to the reclassification of benefits between severance and other benefits.

During the year ended September 30, 2021, the deferred revenue balance included decreases for revenues recognized during the period and increases related to new students who started their training programs during the period.

Transaction Price Allocated to the Remaining Performance Obligations

Tuition and fee revenue is recognized ratably over the term of the course or program offered.

The majority of our undergraduate programs are designed to be completed in 36 to 90 weeks, and our advanced training programs range from 12 to 23 weeks in duration.

Impacts of COVID-19

During fiscal 2020, for most of our programs we transitioned our on-campus, in-person education model to a blended learning model that combines instructor-facilitated online teaching and demonstrations with hands-on labs so that our students could continue their education during the COVID-19 pandemic.

On-campus labs are designed to meet the current national guidelines recommended by the Centers for Disease Control (“CDC”) as well as state and local mandates, while still meeting our accreditation and curriculum requirements.

All of our campuses were fully operational during the year ended September 30, 2021, and as of September 30, 2021, all students were attending in-person labs at our campuses with less than 1 % of students with catch-up lab work outstanding.

As a result there was no deferred revenue related to the impact of COVID-19 as of September 30, 2021.

Note 5 - Receivables, net

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Other receivables 3,673 6,494

Receivables 37,204 19,034

Total receivables 19,938 37,204

allowance for uncollectible accounts ( 2,787 ) ( 1,793 )

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See Note 14 “Income Taxes” for further discussion.

The allowance for uncollectible accounts is estimated using our historical write-off experience applied to the receivable balances for students who are no longer attending school due to graduation or withdrawal or who are in school and have

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receivable balances in excess of financial aid available to them.

We write off receivable balances against the allowance for uncollectible accounts at the time we transfer the balance to a third party collection agency.

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Balance at end of period $ 2,787 $ 1,793 $ 1,097

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Note 6 - Investments

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We have the ability and intention to hold these investments until maturity and therefore have classified these investments as held-to-maturity and recorded them at amortized cost.

As of September 30, 2021, there were no outstanding held-to-maturity investments as all of the securities matured and there were no new purchases of held-to-maturity investments during fiscal 2021.

The amortized cost, gross unrealized gains or losses, and fair value of investments classified as held-to-maturity at September 30, 2020 were as follows:

September 30, 2020

Gross Unrealized Estimated Fair

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Corporate and municipal bonds $ 38,055 $ 10 $ ( 33 ) $ 38,032

Total as of September 30, 2020 $ 38,055 $ 10 $ ( 33 ) $ 38,032

Investments are exposed to various risks, including interest rate, market and credit risk.

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Assets measured or disclosed at fair value on a recurring basis consisted of the following:

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Fair Value Measurements Using

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36,124 — — 36,124

Corporate bonds (3)

33,119 33,119 — —

Municipal bonds, and other (3)

4,913 4,913 — —

Total assets at fair value on a recurring basis $ 98,224 $ 62,100 $ — $ 36,124

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Fair Value Measurements Using

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32,793 — — 32,793

Corporate bonds (3)

33,119 33,119 — —

Municipal bonds and other (3)

4,913 4,913 — —

Total assets at fair value on a recurring basis $ 114,147 $ 81,354 $ — $ 32,793

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(2) Notes receivable relate to our proprietary loan program.

(3) Corporate bonds, municipal bonds, and other are reflected as “Held-to-maturity investments” in our consolidated balance sheet as of September 30, 2020.

(3) Corporate bonds, municipal bonds and other are reflected as “Held-to-maturity investments” in our condensed consolidated balance sheet as of September 30, 2020.

Note 8 - Property and Equipment, net

Property and equipment, net consisted of the following:

Lives (in years) September 30,

September 30,

Land — $ 3,189 $ 3,189

Depreciable Lives (in years) 2021 2020

— $ 8,355 $ 3,189

Building and building improvements (1)

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Property and equipment, net $ 122,051 $ 72,743

As previously discussed in Note 3 “Summary of Significant Accounting Policies,” the adoption of ASC 842 as of October 1, 2019 resulted in the de-recognition of the assets associated with our financing obligations, which were previously included in

(1) During the year ended September 30, 2021, land and buildings and building improvements increased primarily due to the purchase of the building and land at our Avondale, Arizona campus location.

The total purchase price was approximately $ 45.2 million, of which $ 5.1 million was allocated to land and $ 40.1 million was allocated to buildings and building improvements based upon the appraised values.

Note 9 - Leases

As of September 30, 2021, we lease 9 of our 12 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases.

Additionally, as of September 30, 2021, we have recorded the lease for our new Austin, Texas campus which is expected to open during the second quarter of fiscal 2022.

Our facility leases have original lease terms ranging from 8 to 20 years and expire at

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“Buildings and building improvements.” In addition, certain items related to the build-to-suit leases in “Buildings and building improvements” were reclassified to “Leasehold improvements” as part of the adoption of ASC 842.

The following amounts, which are included in the above table, represented assets financed by financing obligations as of September 30, 2019:

September 30,

Assets financed by financing obligations, gross $ 45,816

accumulated depreciation and amortization ( 14,208 )

Assets financed by financing obligations, net $ 31,608

Note 10 - Leases

We lease 10 of our 12 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases.

Our lease for the Norwood, Massachusetts campus ended on July 31, 2020 when the campus closed.

During the year ended September 30, 2020, we relocated our corporate headquarters facility in conjunction with the expiration of the existing lease agreement, and entered into a new long-term lease agreement at a new facility.

We also modified our existing lease for our Sacramento campus by extending the term, and reducing the leased square footage effective as of January 1, 2022.

Our facility leases have original lease terms ranging from 8 to 20 years and expire at various dates through 2033.

various dates through 2033.

In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances.

We sublease certain portions of unused building space to third parties, which currently result in minimal income.

We sublease certain portions of unused building space to third parties, which as of September 30, 2021, resulted in minimal income.

All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on our consolidated balance sheets.

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The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the consolidated statement of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.”

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The components of lease expense during the year ended September 30, 2020 were as follows:

Lease Expense Year ended September 30, 2020

The components of lease expense during the years ended September 30, 2021 and 2020 were as follows:

Year ended September 30,

Lease Expense 2021 2020

Operating lease expense (1)

$ 22,623 $ 29,348

Finance lease expense:

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Total net lease expense $ 25,990 $ 32,833

(1) Excludes the expense for short-term leases not accounted for under ASC 842, which was not significant for the year ended September 30, 2020.

(1) Excludes the expense for short-term leases not accounted for under ASC 842, which was not significant for the years ended September 30, 2021 and 2020.

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Supplemental balance sheet, cash flow and other information related to our leases was as follows:

Leases Classification As of September 30, 2020

September 30,

Leases Classification 2021 2020

Operating lease assets Right-of-use assets for operating leases $ 159,075 $ 144,663

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Operating lease liabilities Operating lease liability, current portion $ 14,075 $ 23,666

Finance lease liabilities Other current liabilities 129

Finance lease liabilities Long-term debt, current portion 73 129

Operating lease liabilities Operating lease liability 153,228 134,089

Finance lease liabilities Other liabilities 131

Finance lease liabilities Long-term debt 23 131

Total lease liabilities $ 167,399 $ 158,015

(1) Finance lease assets are recorded net of accumulated amortization of $ 0.1 million as of September 30, 2020.

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Supplemental Disclosure of Cash Flow Information and Other Information Year ended September 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 25,617

Operating cash flows from finance leases 7

Financing cash flows from finance leases 99

Non-cash activity related to lease liabilities:

Lease assets obtained in exchange for new operating lease liabilities $ 20,321

Leases assets obtained in exchange for new finance lease liabilities 215

Lease Term and Discount Rate As of September 30, 2020

(1) Finance lease assets are recorded net of accumulated amortization of $ 0.1 million as of September 30, 2021 and 2020, respectively.

September 30,

Lease Term and Discount Rate 2021 2020

Weighted-average remaining lease term (in years):

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Finance leases 3.08 % 3.08 %

Year ended September 30,

Supplemental Disclosure of Cash Flow Information and Other Information 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 20,469 $ 25,617

Financing cash flows from finance leases 119 99

Non-cash activity related to lease liabilities:

Lease assets obtained in exchange for new operating lease liabilities $ 30,017 $ 20,321

Leases assets obtained in exchange for new finance lease liabilities — 215

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Maturities of lease liabilities were as follows:

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Long-term lease liabilities $ 153,228 $ 23

The maturities of lease liabilities as of September 30, 2020 includes the future minimum lease payments for the build-to-suit leases.

Disclosures Related to Periods Prior to the Adoption of ASC 842

As of September 30, 2019, minimum lease payments under non-cancelable operating leases by period were expected to be as follows (in thousands):

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Years ending September 30, Gross Sublease income Net

2020 $ 26,379 $ ( 362 ) $ 26,017

2021 23,531 ( 77 ) 23,454

2022 21,621 ( 78 ) 21,543

2023 10,461 ( 20 ) 10,441

2024 9,180 — 9,180

Thereafter 41,822 — 41,822

Total lease payments $ 132,994 $ ( 537 ) $ 132,457

Related Party Transactions for Leases

Rent expense includes rent paid to related parties, which was approximately $ 2.0 million for the years ended September 30, 2020, 2019, and 2018.

Since 1991, two of our properties comprising our Orlando, Florida location have been leased from entities controlled by John C.

White, a director on our Board of Directors.

White, a former director on our board of directors.

Effective as of November 30, 2020, Mr.

White voluntarily retired from our board of directors.

During October and November 2020, we paid rent expense to the entities controlled by Mr.

White of $ 0.3 million, and $ 2.0 million for the years ended September 30, 2020 and 2019.

The leases extend through August 19, 2022 and August 31, 2022 with annual base lease payments for the first year under this lease totaling approximately $ 0.3 million and $ 0.7 million, with annual adjustments based on the higher of (i) an amount equal to 4 % of the total annual rent for the immediately preceding year or (ii) the percentage of increase in the CPI.

These transactions were not considered significant as of September 30, 2020.

These transactions were not considered significant for the year ended September 30, 2021.

Note 10 - Investment in Unconsolidated Affiliate

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Therefore, we do not qualify as the primary beneficiary.

Accordingly, this investment is accounted for under the equity method of accounting and is included in other assets in our consolidated balance sheet.

We recognize our proportionate share of the JV’s net income or loss during each accounting period as a change in our investment.

Historically, the JV used an interest rate cap to manage interest rate risk associated with its floating rate debt.

This derivative instrument was designated as a cash flow hedge based on the nature of the risk being hedged.

As such, the effective portion of the gain or loss on the derivative was initially reported as a component of the JV’s accumulated other comprehensive income or loss, net of tax, and was subsequently reclassified into earnings when the hedged transaction affects earnings.

Any ineffective portion of the gain or loss was recognized in the JV’s current earnings.

Due to our equity method investment in the JV, when the JV reports a current year component of other comprehensive income (OCI), we, as an investor, likewise adjust our investment account for the change in investee equity.

In addition, we adjust our OCI for our share of the JV’s currently reported OCI item.

During the three months ended December 31, 2017, the JV refinanced the facility loan and discontinued its use of an interest rate cap.

Accordingly, this investment is accounted for under the equity method of accounting and is included in “Other assets” in our consolidated balance sheets.

We recognize our proportionate share of the JV's net income or loss during each accounting period and any return of capital as a change in our investment.

Our equity in earnings of unconsolidated affiliates was $ 0.4 million for the years ended September 30, 2021, 2020 and 2019.

Investment in our unconsolidated affiliate consists of the following:

September 30, 2020 September 30, 2019

September 30,

Carrying Value Ownership Percentage Carrying Value Ownership Percentage

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Balance at end of period $ 4,627 $ 4,494

Through September 30, 2019, the activity from equity in earnings of the unconsolidated affiliate was included in “Other (expense) income, net” on the condensed consolidated statements of operations.

In conjunction with the adoption of ASC 842, as previously described in Note 3 “Summary of Significant Accounting Policies,” beginning October 1, 2019, the activity is included in “Educational services and facilities” on the consolidated statements of operations.

Through September 30, 2019, the activity from equity in earnings of the unconsolidated affiliate was included in “Total other income, net” on the consolidated statements of operations.

In conjunction with the adoption of ASC 842, beginning October 1, 2019, the activity is included in “Educational services and facilities” on the consolidated statements of operations.

Note 11 - Accounts Payable and Accrued Expenses

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Accounts payable and accrued expenses $ 54,397 $ 51,891

Note 12 - Debt

September 30, 2021 September 30, 2020

Interest Rate Maturity Date Carrying Value of Debt (4)

Carrying Value of Debt (4)

Term Loan (1)

2.08 % May 2028 $ 30,886 $ —

Finance leases (2)

3.08 % Various 96 260

Total debt 30,982 260

Debt issuance costs presented with debt (3)

Total debt, net 30,726 260

current portion of long-term debt ( 876 ) ( 129 )

Long-term debt $ 29,850 $ 131

(1) Interest on the Term Loan (as defined below) accrues at annual rate equal to the monthly LIBOR plus 2.0 %.

(2) Our finance leases include finance lease arrangements related to various equipment with a weighted-average annual interest rate of approximately 3.08 %, which mature in varying installments between 2021 and 2023.

See Note 9 for additional details on our finance leases.

(3) The unamortized debt issuance costs as of September 30, 2021 relate entirely to the Term Loan.

(4) Our Term Loan and finance leases bear interest at rates commensurate with market rates and therefore the respective carrying values approximate fair value (Level 2).

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

In connection with the Avondale, Arizona building purchase in December 2020, we entered into a Credit Agreement with Fifth Third Bank, National Association (the “Lender”) on May 12, 2021 in the maximum principal amount of $ 31.2 million with a maturity of seven years (the “Term Loan”).

The Term Loan bears interest at the rate of LIBOR plus 2.0 %.

Principal and interest payments are due monthly.

The Term Loan is secured by a first priority lien on our Avondale, Arizona property, including all land and improvements.

Additionally, on May 12, 2021, we entered into an interest rate swap agreement with the Lender that effectively fixes the interest rate on 50 % of the principal amount of the Term Loan, or approximately $ 15.6 million, at 3.5 % for the entire loan term.

See Note 13 below for further discussion on the interest rate swap.

We are subject to customary affirmative and negative covenants under the Credit Agreement, including, without limitation, certain reporting obligations and certain limitations on restricted payments, and limitations on liens, encumbrances and indebtedness.

The Term Loan is also subject to certain financial maintenance covenants.

The debt service coverage ratio shall not be less than 1.25 to 1.00 and is defined as the ratio of the sum of consolidated income (loss) for the year, to the extent deducted in determining income for such period, before income taxes, interest expense, amortization, depreciation and other non-cash charges including net stock-based compensation, fees and expenses related to potential acquisitions and expansion of operations and certain non-recurring charges, including relating to restructuring, business optimization and diversification strategy, less any extraordinary non-recurring gains, interest income and non-cash gains (“Consolidated EBITDA”) (less dividends payable on our Series A Preferred Stock) and other extraordinary items to the current portion of long-term debt and interest paid during the period being measured (which commenced on September 30, 2021 and is tested annually thereafter on a trailing 12-month basis).

The funded debt to Consolidated EBITDA ratio is required to be no greater than 3.50 to 1.00 (which commenced on June 30, 2021 and is tested quarterly thereafter on a trailing 12-month basis).

Beginning on May 12, 2024, the Lender may request new appraisals of the Avondale property in order to maintain the ratio of the amortized loan balance to the value of the location at 70 %, the approximate ratio that existed at May 12, 2021.

Events of default under the Credit Agreement include, among others, the failure to make payments when due, breach of covenants (including certain financial maintenance covenants) and breach of representations or warranties.

If we fail to meet the minimum debt service coverage ratio, loan-to-value or debt yield and fail to cure such non-compliance within a time period acceptable to the Lender, we will be in default.

As of September 30, 2021, we were in compliance with all debt covenants.

Debt Maturities

Scheduled principal payments due on our debt for each year through the period ended September 30, 2026, and thereafter were as follows at September 30, 2021:

Maturity Term Loan Finance Leases Total

2022 $ 803 $ 73 $ 876

2023 832 23 855

2024 861 — 861

2025 892 — 892

2026 924 — 924

Thereafter 26,574 — 26,574

Subtotal 30,886 96 30,982

Debt issuance costs presented with debt ( 256 ) — ( 256 )

Total $ 30,630 $ 96 $ 30,726

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Note 13 - Derivative Financial Instruments

In the normal course of business, our operations are exposed to market risks, including the effect of changes in interest rates.

We may enter into derivative financial instruments to offset these underlying market risks.

See Note 2 for our derivative financial instruments policy.

On May 12, 2021, in connection with the Term Loan discussed in Note 12, we entered into an interest rate swap agreement with the Lender that effectively fixes the interest rate on 50 % of the principal amount of the Term Loan, or approximately $ 15.6 million, at 3.5 % for the entire loan term, or seven years (the “Swap”).

On May 12, 2021, the Swap was designated as an effective cash flow hedge for accounting and tax purposes.

The ineffective portion of the change in fair value of a derivative financial instrument is recognized in “Interest expense” at the time the ineffectiveness occurs.

Of the net amount of the existing losses that are reported in “Accumulated other comprehensive income (loss)” as of September 30, 2021, we estimate that $ 0.2 million will be reclassified to “Interest expense” within the next twelve months.

As of September 30, 2021, the notional amount of our Swap was approximately $ 15.4 million.

Fair Value of Derivative Instruments

The following table presents the fair value of our Swap (Level 2) which is designated as a cash flow hedge and the related classification on the condensed consolidated balance sheet as of September 30, 2021:

Interest Rate Swap

Other current liabilities $ 194

Other liabilities 85

Total fair value of liabilities designated as hedging instruments $ 279

Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)

The table below presents the effect of cash flow hedge accounting for our Swap on “Accumulated other comprehensive income (loss)” as of September 30, 2021:

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income

Year Ended September 30, 2021

Interest Rate Swap $ ( 365 ) Interest expense $ ( 86 )

Effect of Cash Flow Hedge Accounting on the Condensed Consolidated Statement of Operations

The table below presents the effect of cash flow hedge accounting for our Swap on the condensed consolidated statement of operations for the year ended September 30, 2021:

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Interest Expense

Interest Rate Swap

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income $ ( 86 )

Note 14 - Income Taxes

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2021 2020 2019

Current benefit (expense):

Current (expense) benefit:

United States federal $ 5 $ 11,250 $ 2

State ( 607 ) ( 303 ) ( 205 )

Total current benefit (expense) 10,947 ( 203 ) 203

Deferred benefit (expense):

Total current (expense) benefit ( 602 ) 10,947 ( 203 )

Deferred (expense) benefit:

United States federal — ( 345 ) —

State — — ( 66 )

Total deferred benefit (expense) ( 345 ) — 2,812

Total income tax benefit (expense) $ 10,602 $ ( 203 ) $ 3,015

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The income tax provision differs from the tax that would result from application of the statutory federal tax rate of 21.0 % to pre-tax income for the years ended September 30, 2020 and September 30, 2019, and 24.5 % to pre-tax income for the year ended September 30, 2018.

Total deferred (expense) benefit — ( 345 ) —

Total income tax (expense) benefit $ ( 602 ) $ 10,602 $ ( 203 )

The income tax provision differs from the tax that would result from application of the statutory federal tax rate of 21.0 % to pre-tax income for the years ended September 30, 2021, 2020 and 2019.

The reasons for the differences are as follows:

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2021 2020 2019

Income tax benefit at statutory rate $ 545 $ 1,610 $ 8,746

Income tax (expense) benefit at statutory rate $ ( 3,188 ) $ 545 $ 1,610

State income taxes, net of federal tax benefit ( 480 ) ( 246 ) ( 165 )

Change in federal statutory rate — — ( 12,645 )

Decrease (increase) in valuation allowance 3,229 6,135 ( 1,514 )

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Other, net ( 163 ) ( 102 ) ( 134 )

Total income tax benefit (expense) $ 10,602 $ ( 203 ) $ 3,015

Total income tax (expense) benefit $ ( 602 ) $ 10,602 $ ( 203 )

The components of the deferred tax assets (liabilities) recorded in the accompanying consolidated balance sheets were as follows:

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Deferred revenue 4,595 4,406

Deferred rent liability — 3,024

Financing obligation — 10,178

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

September 30,

Net operating losses 5,442 6,729

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Net deferred tax liabilities $ ( 674 ) $ ( 674 )

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The following table summarizes the activity for the valuation allowance for the years ended September 30, 2021, 2020 and 2019:

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Balance at end of period $ 13,492 $ 17,449 $ 25,673

(1) Of this total, approximately $ 9.6 million and $ 2.3 million related to our adoption of ASC 606 as of October 1, 2017 and our adoption of ASC 842 as of October 1, 2019, respectively.

We have valuation allowances of $ 17.4 million and $ 25.7 million against the deferred tax assets as of September 30, 2020 and September 30, 2019, respectively, based on our assessment of the ability to utilize the deferred tax assets.

(1) The write-offs during the year ended September 30, 2020 of $ 2.3 million related to our adoption of ASC 842 as of October 1, 2019.

We have valuation allowances of $ 13.5 million and $ 17.4 million against the deferred tax assets as of September 30, 2021, and 2020, respectively, based on our assessment of the ability to utilize the deferred tax assets.

The valuation allowances established relate to all federal and state deferred tax assets, for which we determined that it was more likely than not that a benefit will not be realized.

In assessing whether a valuation allowance was required for the deferred tax assets, we considered all available positive and negative evidence.

A significant piece of negative evidence was the cumulative losses incurred in recent years.

The CARES Act, which was enacted on March 27, 2020, made tax law changes to provide financial relief to companies as a result of the business impacts of COVID-19.

Key income tax provisions of the CARES Act include changes in net operating loss (“NOL”) carryback and carryforwards rules, acceleration of alternative minimum tax credit recovery, increase of the net interest expense deduction limit and charitable contribution limit, and immediate write-off of qualified improvement property.

The CARES Act allows us to carryback $ 20.3 million and $ 13.0 million of NOLs arising in the years ended September 30, 2019 and September 30, 2018, respectively, generating a tax refund of approximately $ 11.3 million.

During the three months ended March 31, 2020, we recorded a receivable for the expected refund.

Approximately $ 4.2 million was received during the year ended September 30, 2020, leaving approximately $ 7.1 million in the receivable balance as of September 30, 2020.

In assessing whether a valuation allowance was required for the deferred tax assets, we considered the weight of all available positive and negative evidence.

During the year ended September 30, 2020, we recorded an income tax refund of approximately $ 11.3 million as a result of certain provisions of the CARES Act, of which $ 7.1 million remained outstanding as of September 30, 2020.

As of September 30, 2021, we have received the remaining outstanding income tax refund.

For additional information on the CARES Act, see the “COVID-19 and the CARES Act” section of Note 21 on “Government Regulation and Financial Aid.”

As of September 30, 2021, we had approximately $ 12.9 million and $ 44.2 million in net operating losses for federal and state tax purposes, respectively.

Approximately $ 2.3 million of the federal net operating losses expire in the year 2039 if not utilized, while the rest can be carryforward indefinitely.

The state net operating losses expire in the years 2027 through 2040 if not utilized.

The federal net operating losses can be carryforward indefinitely, while the state net operating losses expires in the years 2027 through 2042 if not utilized.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations.

ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

on the basis of the technical merits.

We believe that all of our tax positions meet the more-likely-than not test and therefore no uncertain tax positions were recorded as of September 30, 2021.

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The statute of limitations for adjustment of the net operating losses utilized on these tax returns remains open an additional three to four years, depending on jurisdiction, from the date these returns were filed.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Note 15 - Commitments and Contingencies

Licensing Agreements

In fiscal 1999, we entered into a licensing agreement that gives us the right to use certain materials and trademarks in the development of our courses.

The agreement was amended in November 2009.

Under the terms of the amended agreement, we are required to pay a flat fee per student for each program a student completes.

There are no minimum license fees required to be paid.

The agreement terminates upon the written notice of either party providing not less than ninety days notification of intent to terminate.

License fees related to this agreement were $ 0.5 million, $ 0.6 million and $ 0.7 million for the years ended September 30, 2020, 2019 and 2018, respectively, and were recorded in educational services and facilities expenses.

In May 2007, we entered into a licensing agreement that gives us the right to use certain trademarks, trade names, trade dress and other intellectual property in connection with the operation of our campuses and courses.

The agreement was amended January 2019 and expires December 31, 2026.

We are committed to pay royalties based upon minimum amounts specified in the agreement, throughout the term.

The agreement required a minimum royalty payment of $ 1.0 million in calendar year 2020.

The expense related to these agreements was $ 1.2 million, $ 1.4 million and $ 1.6 million for the years ended September 30, 2020, 2019 and 2018, respectively, and was recorded in educational services and facilities expenses.

Annual payments range between $ 1.0 million and $ 1.5 million throughout the licensing period.

In July 2013, we entered into a training and materials agreement that gives us the right to use certain materials and trademarks in development of our courses.

Under the terms of the agreement, we are required to pay a flat fee per student for each related program a student completes.

There is an immaterial minimum annual fee required to be paid upon commencement of the program and annually thereafter.

The agreement terminates upon the written notice of either party providing not less than 90 days notification of intent to terminate.

The expense related to this agreement was $ 0.1 million for the years ended September 30, 2020, 2019 and 2018, respectively, and was recorded in educational services and facilities expenses.

In April 2015, we entered into a licensing agreement that gives us the right to use certain trademarks in connection with the operation of our campuses and courses.

The agreement has an initial term of four years , with options for three annual renewals totaling a seven year term.

The maximum license fee over seven years is $ 2.3 million.

The expense related to this agreement was $ 0.3 million, $ 0.2 million and $ 0.4 million for the years ended September 30, 2020, 2019 and 2018, respectively, and was recorded in educational services and facilities expenses.

Vendor Relationships

We have an agreement with a vendor that allows us to purchase promotional tool kits for our students at a discount from the vendor’s list price.

In addition, we earn credits that are redeemable for equipment from the vendor that we use in our business.

We have entered into various licensing agreements with varying expiration dates that give us the right to use certain materials, trademarks, trade names, trade dress, and other intellectual property in connection with the operation of our campuses and the development of our courses.

The expense for the license fees under these various agreements totaled $ 2.0 million, $ 2.2 million and $ 2.2 million for the years ended September 30, 2021, 2020 and 2019, respectively, and were recorded in “Educational services and facilities expenses” on the consolidated statements of operations.

Snap-on Tools Product Support Agreement

We have an agreement with Snap-on Tools that allows us to purchase promotional tool kits for our students at a discount from the list price.

In addition, we earn credits that are redeemable for equipment from the Snap-on Tools that we use in our business.

Credits are earned on our purchases as well as purchases made by students enrolled in our programs.

We have agreed to grant the vendor exclusive access to our campuses, to display advertising and to use their tools to train our students.

We have agreed to grant Snap-On Tools exclusive access to our campuses, to display advertising and to use their tools to train our students.

The credits under this agreement may be redeemed in multiple ways, which historically has been for additional equipment at the full retail list price, which is more than we would be required to pay using cash.

2 unchanged sentences

Any product credits remaining at termination will expire 60 days after the date of termination.

A net prepaid expense with the vendor resulted from an excess of credits earned over credits used of $ 5.5 million and $ 6.4 million as of September 30, 2020 and 2019, respectively, included in other current assets in our consolidated balance sheets.

A net prepaid expense with Snap-on Tools resulted from an excess of credits earned over credits used of $ 4.8 million and $ 5.5 million as of September 30, 2021 and 2020, respectively, included in “Other current assets” in our consolidated balance sheets.

Students are provided a Career Starter Tool Set Voucher which can be redeemed for a tool set near graduation.

The cost of the tool sets, net of the credit, is accrued during the time period in which the students begin attending school until they have progressed to the point that the promotional tool set vouchers are provided.

Our consolidated balance sheets include an accrued tool set liability of $ 3.1 million and $ 2.6 million as of September 30, 2020 and 2019, respectively.

Additionally, our liability to the vendor for vouchers redeemed by students was $ 1.9 million and $ 2.1 million as of September 30, 2020 and 2019, respectively, and is included in accounts payable and accrued expenses in our consolidated balance sheets.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Deferred Compensation Plans

We have established a deferred compensation plan (“the Plan”) effective April 1, 2010, into which certain members of management are eligible to defer a maximum of 75 % of their regular compensation and a maximum of 100 % of their incentive compensation.

Non-employee members of our Board of Directors are eligible to defer up to 100 % of their cash compensation.

The amounts deferred by the participant under this Plan are credited with earnings or losses based upon changes in values of participant elected notional investments.

Each participant is fully vested in the amounts deferred.

We may make contributions at the discretion of our Board of Directors that will generally vest according to a five year vesting schedule.

Distribution elections under the Plan may be for separation from service distribution or in-service distribution.

We are not obligated to fund the Plan;

however, we have purchased life insurance policies on the participants in order to fund the related benefits and such policies have been placed into a rabbi trust.

Our obligations under the Plan totaled $ 3.0 million and $ 4.3 million as of September 30, 2020 and 2019, respectively, and are included in other liabilities while the cash surrender value of the life insurance policies totaled $ 3.3 million and $ 4.8 million as of September 30, 2020 and 2019, respectively, and are included in other assets in our consolidated balance sheets.

Our consolidated balance sheets include an “Accrued tool sets” liability of $ 3.3 million and $ 3.1 million as of September 30, 2021 and 2020, respectively.

Additionally, our liability to Snap-on Tools for vouchers redeemed by students was $ 1.6 million and $ 1.9 million as of September 30, 2021 and 2020, respectively, and is included in “Accounts payable and accrued expenses” in our consolidated balance sheets.

Each of our campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant certificates, diplomas or degrees to its students.

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As of September 30, 2021, the total face amount of these surety bonds was approximately $ 15.3 million.

In the ordinary conduct of our business, we are periodically subject to lawsuits, demands in arbitration, investigations, regulatory proceedings or other claims, including, but not limited to, claims involving current or former students, routine employment matters, business disputes and regulatory demands.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

employment matters, business disputes and regulatory demands.

When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure.

7 unchanged sentences

On June 9, 2016, our Board of Directors voted to eliminate the quarterly cash dividend on our common stock.

Any future common stock dividends require the approval of a majority of the voting power of the Series A Preferred Stock.

Preferred Stock

1 unchanged sentence

As of September 30, 2021 and 2020, 700,000 shares of Series A Preferred Stock were issued and outstanding.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

The liquidation preference associated with the Series A Preferred Stock was $ 100 per share at September 30, 2021 and 2020.

On June 24, 2016, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with Coliseum Holdings I, LLC (“Purchaser”) to sell to the Purchaser 700,000 shares of Series A Preferred Stock for a total purchase price of $ 70.0 million.

The proceeds from the offering were used to fund strategic initiatives to drive growth including;

the transformation plan, expansion to new markets with metro campuses and the creation of new programs in existing markets with under-utilized campus facilities.

The Series A Preferred Stock is perpetual, and therefore does not have a maturity date.

In conjunction with this purchase, we incurred $ 1.2 million in stock issuance costs, which were recorded as a reduction of the additional paid-in capital associated with the Series A Preferred Stock.

The description below provides a summary of certain material terms of the Series A Preferred Stock as set forth in the Certificate of Designations (“Certificate of Designations”) of the Series A Preferred Stock:

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Cash Dividends are payable semi-annually in arrears on September 30 and March 31 of each year, and will begin to accrue on the first day of the applicable dividend period.

We paid Cash Dividends of $ 5.3 million during the years ended September 30, 2020 and September 30, 2019.

We paid Cash Dividends of $ 5.3 million during the years ended September 30, 2021 and 2020 .

The Series A Preferred Stock includes participation rights such that, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay to each holder of the Series A Preferred Stock a dividend on an as converted basis.

If we are required to or elect to obtain stockholder and regulatory approval and if such approval is not obtained within the time periods set forth in the Certificate, the dividend rates with respect to the Cash Dividend and Accrued Dividend will be increased by 5.0 % per year, not to exceed a maximum of 14.5 % per year, subject to downward adjustment on obtaining the foregoing approvals.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

increased by 5.0 % per year, not to exceed a maximum of 14.5 % per year, subject to downward adjustment on obtaining the foregoing approvals.

Liquidation Preference

4 unchanged sentences

The liquidation preference associated with the Series A Preferred Stock was $ 100 per share at September 30, 2021 and 2020.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Holders of Series A Preferred Stock are entitled to vote with the holders of shares of common stock on an as converted basis, subject to the Continuing Caps as discussed below.

12 unchanged sentences

In August 2020, the Purchaser notified us that it intended to distribute all 700,000 Series A Preferred Stock to its members, and that certain of its members would subsequently distribute their Series A Preferred Stock to (i) limited partners affiliated with the Purchaser and certain other entities for whom Coliseum Capital Management, LLC (an affiliate of the Purchaser) holds voting and dispositive power with respect to the Series A Preferred Stock (the “Affiliated Holders”), which six Affiliated Holders, following such distribution, will own Series A Preferred Stock that would represent, on an as converted basis, approximately 24.9 % of our outstanding shares of common stock and voting power, and (ii) limited partners unaffiliated with the Purchaser (the “Unaffiliated Holders”), which 12 Unaffiliated Holders, following such distribution, each will own Series A Preferred Stock that would represent, on an as converted basis, 9.9 % or less of our outstanding shares of common stock and voting power (collectively, the “Distributions”).

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

In connection with the Distributions, our board of directors, based on advice of legal counsel, determined that:

4 unchanged sentences

The Affiliated Holders may, at any time, request that we seek Education Regulatory Approval or make a good faith determination that such approval is not required.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Optional Conversion by Purchaser

1 unchanged sentence

Following the Distributions, the Conversion Cap currently applies to the Affiliated Holders.

Additionally, the recipients of the Series A Preferred Stock in the Distributions entered into standard lock-up agreements with the Company restricting the transfer or sale of the Series A Preferred Stock, or any common stock convertible therefrom, for a period of 180 days from the September 14, 2020 distribution date.

Optional Conversion by Our Company

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Holders of the Series A Preferred Stock will be able to convert their shares into common stock if neither the Investor Voting Cap nor Conversion Cap is in effect.

If they do not provide notice of conversion within 10 days of receipt of the redemption notice, the redemption will proceed at a price per share equal to the product of the current conversion rate and 2.5 times the conversion price.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

they do not provide notice of conversion within 10 days of receipt of the redemption notice, the redemption will proceed at a price per share equal to the product of the current conversion rate and 2.5 times the conversion price.

If either the Investor Voting Cap or Conversion Cap is in effect at the date of the notice of redemption, the holder may request that we obtain the necessary regulatory approval for its removal.

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If either the Investor Voting Cap or Conversion Cap is in effect at the date of the notice of redemption, the holder may request that we obtain the necessary regulatory approval for its removal.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Anti-dilution

21 unchanged sentences

We may also use a portion of the net proceeds to fund potential strategic acquisitions of complementary businesses, assets, services or technologies.

Share Repurchase Program

On December 20, 2011, our Board of Directors authorized the repurchase of up to $ 25.0 million of our common stock in the open market or through privately negotiated transactions.

The timing and actual number of shares purchased will depend on a variety of factors such as price, corporate and regulatory requirements and prevailing market conditions.

We may terminate or limit the share repurchase program at any time without prior notice.

During the year ended September 30, 2020, we did not repurchase shares.

The last stock repurchase under this stock repurchase program was during fiscal 2015.

As of September 30, 2020, we have repurchased 1,677,570 shares at an average price per share of $ 9.09 and a total cost of approximately $ 15.3 million under this program.

Under the terms of the Certificate of Designations, stock purchases under this program require the approval of a majority of the voting power of the Series A Preferred Stock.

UNIVERSAL TECHNICAL INSTITUTE, INC.

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(In thousands, except per share amounts)

Share Repurchase Program

On December 10, 2020, our Board of Directors authorized a new share repurchase plan that would allow for the repurchase of

up to $ 35.0 million of our common stock in the open market or through privately negotiated transactions.

This new share

repurchase plan replaced the previously authorized plan from fiscal 2012.

Any repurchases under this new stock repurchase program require the approval of a majority of the voting power of our Series A Preferred Stock.

We did not repurchase any

shares during the year ended September 30, 2021.

Note 17 - Stock-Based Compensation

Incentive Compensation Plans

We have two stock-based compensation plans:

the Management 2002 Stock Option Program (“2002 Plan”) and the 2003 Incentive Compensation Plan, as amended (“2003 Plan”).

The 2002 Plan was approved by our Board of Directors on April 1, 2002 and provided for the issuance of options to purchase 0.7 million shares of our common stock.

On February 25, 2003, our Board of Directors authorized an additional 0.1 million options to purchase our common stock under the 2002 Plan.

We do not intend to grant any additional options under the 2002 Plan.

The 2003 Plan was approved by our Board of Directors and adopted effective December 22, 2003 upon consummation of our initial public offering and amended on February 28, 2007 and February 22, 2012 by our stockholders.

The 2003 Plan, as amended, authorizes the issuance of various common stock awards, including stock options, restricted stock awards and restricted stock units, for approximately 6.3 million shares of our common stock.

As of September 30, 2020, 2.2 million shares of common stock were reserved for issuance under the 2003 Plan, of which 1.3 million shares are available for future grant.

When recording our stock-based compensation expense, we account for forfeitures as they occur.

The following table summarizes the operating expense line and the impact on net income (loss) in the consolidated statements of operations in which stock-based compensation expense has been recorded for the years ended September 30, 2020, 2019, and 2018:

Year Ended September 30,

2020 2019 2018

Educational services and facilities $ 64 $ — $ —

Selling, general and administrative 2,013 1,440 1,864

Total stock-based compensation expense $ 2,077 $ 1,440 $ 1,864

Income tax benefit $ 519 $ 360 $ 466

Stock Options

We issue stock options with exercise prices equal to the closing price of our stock on the grant date and which vest upon issuance.

The expiration date of stock options granted under the 2003 Plan is the earlier of the seven or ten-year anniversary of the grant date, based on the terms of the individual grant;

the one-year anniversary of the termination of the participant’s employment by reason of death or disability;

90 days after the date of the participant’s termination of employment if caused by reasons other than death, disability, cause, material breach or unsatisfactory performance;

or on the termination date if termination occurs for reasons of cause, material breach or unsatisfactory performance.

Our stock-based compensation is governed by the 2021 Equity Incentive Compensation Plan (“2021 Plan”).

The 2021 Plan was adopted by our Board of Directors in January 2021 and approved by our shareholders at the February 2021 annual meeting.

The 2021 Plan replaces the Management 2002 Stock Option Program and the 2003 Incentive Compensation Plan, as amended (the “Former Plans”).

Under the 2021 Plan, we are authorized to issue incentive compensation convertible into up to 2.0 million shares of common stock, increased by 0.7 million shares that remained available for future grants of awards under the Former Plans immediately prior to termination.

Additionally, subject to and in accordance with the 2021 Plan, 1.5 million shares that are subject to outstanding awards under the Former Plans that are subsequently expired, forfeited, or are otherwise terminated will also become available for awards under the 2021 Plan.

As of September 30, 2021, 2.6 million shares remained available for future grants under the 2021 Plan.

Stock-Based Compensation Expense

We measure the cost of employee services received in exchange for awards of restricted stock units based on the market value of our common shares at the date of grant.

The fair value of the restricted stock units is amortized on a straight-line basis over the requisite service period.

Certain restricted stock units are subject to a performance condition established at the date of grant (or “Performance Units”).

We estimate the fair value of Performance Units using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rates of return, and dividend yields.

Expected volatilities are derived using a method that calculates historical volatility over a period equal to the length of the measurement period for UTI.

We use a risk-free rate of return that is equal to the yield of a zero-coupon U.S.

Treasury bill that is commensurate with each measurement period, and we assume that any dividends paid were reinvested.

Actual results against the performance condition are measured at the end of the performance period, which typically coincides with the vesting period.

The fair value of the Performance Units is amortized on a straight-line basis over the requisite service period based upon the fair market value on the date of grant, adjusted for the anticipated or actual achievement against the established performance condition.

We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model.

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We evaluate our assumptions on the date of each grant.

In determining our expected term, we have reviewed our historical share option exercise experience and determined it does not provide a reasonable basis upon which to estimate an expected term due to our limited historical award and exercise experience.

Therefore, we have historically assumed the life of the options to be the term of the grant.

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We determine the risk-free interest rate of our awards using the implied yield currently available for zero-coupon U.S.

Government issues with a remaining term equal to the expected life of the options.

The expected volatility considers the volatility of the Company’s common stock that has been traded for a period commensurate with the expected life.

The expected term of options granted represents the period of time that options granted are expected to be outstanding based on historical experience.

We have used an expected dividend yield of zero in the Black-Scholes option pricing model.

We did not grant stock options during the years ended September 30, 2021 and 2020.

We granted 210,000 stock options during the year ended September 30, 2019.

We granted 210,000 stock options during the year ended September 30, 2019 which became fully vested and exercisable on the date of the grant.

The following assumptions were used to value options granted during the year ended September 30, 2019:

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Expected dividends — %

The following table summarizes stock option activity under the 2003 Plan for the years ended September 30, 2020, 2019 and 2018:

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For all stock-based compensation expense, we account for forfeitures as they occur.

Year Ended September 30,

2021 2020 2019

Educational services and facilities $ 60 $ 64 $ —

Selling, general and administrative 1,748 2,013 1,440

Total stock-based compensation expense $ 1,808 $ 2,077 $ 1,440

Income tax benefit $ 452 $ 519 $ 360

Stock Options

During fiscal 2019, we issued stock options with an exercise price equal to the closing price of our stock on the grant date which vested upon issuance.

These options, under the Former Plans, have an expiration date of seven years .

Under the 2021 Plan, the maximum term of any option granted under the 2021 Plan is ten years and, unless otherwise permitted by our Compensation Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date.

The following table summarizes stock option activity under the Former Plans and the 2021 Plan for the years ended September 30, 2021, 2020 and 2019:

Shares Weighted

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Outstanding as of September 30, 2018 — $ — — $ —

Granted 210 $ 3.14

Exercised — $ —

Forfeited — $ —

Outstanding as of September 30, 2019 210 $ 3.14 6.19 $ 483

Granted — $ —

Exercised — $ —

Forfeited — $ —

Outstanding as of September 30, 2020 210 $ 3.14 5.18 $ 407

Outstanding as of September 30, 2021 210 $ 3.14 3.14 $ 760

Stock options exercisable as of September 30, 2021 210 $ 3.14 4.18 $ 760

As of September 30, 2020, there was no unrecognized stock-based compensation expense related to stock options.

Restricted Stock Units and Performance Units

Restricted Stock Units

Our restricted stock units are issued at fair market value, which is based on the closing price of our stock on the grant date.

Restricted stock units generally vest ratably over a three year service period from the date of grant.

As of September 30, 2021, unrecognized stock compensation expense related to restricted stock units was $ 2.6 million which is expected to be recognized over a weighted average period of 2.0 years.

Performance Units

Our outstanding Performance Units vest over a two or three year service period from the date of the grant and are based upon a mix of certain pre-established targets for revenue, compounded annual total shareholder return for the measurement period

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(In thousands, except per share amounts)

Restricted Stock Units and Performance Units

The following table summarizes the activity for restricted stock units and performance units granted under the 2003 Plan for the years ended September 30, 2020, 2019 and 2018:

and net income.

On the settlement date for each measurement period, participants will receive shares of our common stock equal to 0 % to 187.5 % of the performance units originally granted depending on the actual achievement against the performance metrics for that measurement period.

The performance units vest subject to a market condition and on the settlement date which is expected to be no later than two and a half months after the end of each measurement period.

As of September 30, 2021, unrecognized stock compensation expense related to performance units was $ 1.7 million, which is expected to be recognized over a weighted average period of 2.3 years.

The following table summarizes the activity for restricted stock units and Performance Units granted under the Former Plans and 2021 Plan for the years ended September 30, 2021, 2020 and 2019:

(In thousands) Weighted Average

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Granted — $ — — $ —

Adjustment to grant based on achieved attainment level — $ — 23 $ —

Vested ( 228 ) $ 3.17 ( 108 ) $ 3.11

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Granted 306 $ 7.46 314 $ 7.72

Adjustment to September 2017 grant based on achieved attainment level — $ — 23

Adjustment to grant based on achieved attainment level — $ — 33

Vested ( 141 ) $ 2.62 ( 100 ) $ 2.32

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Granted 376 $ 6.11 371 $ 6.37

Adjustment to September 2017 grant based on achieved attainment level — $ — 33

Adjustment to grant based on achieved attainment level — $ — 11 $ —

Vested ( 130 ) $ 6.31 ( 39 ) $ 2.48

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Outstanding as of September 30, 2021 548 $ 6.56 642 $ 6.97

Restricted Stock Units

Our restricted stock units are issued at fair market value, which is based on the closing prices of our stock on the grant date, discounted for non-participation in anticipated dividends during the vesting period.

The restrictions on these units generally lapse ratably over a three or four year period based on the terms of the individual grant.

The restrictions associated with our restricted stock units awarded under the 2003 Plan will lapse upon the death, disability, or if, within one year following a change of control, employment is terminated without cause or for good reason.

If employment is terminated for any other reason, all shares of restricted stock shall be forfeited upon termination.

As of September 30, 2020, unrecognized stock compensation expense related to restricted stock units was $ 1.8 million which is expected to be recognized over a weighted average period of 2.4 years.

Performance Units

The performance condition for performance units is compounded annual total shareholder return (“TSR”) for the measurement periods included in the grant.

On the settlement date for each measurement period, participants will receive shares of our common stock equal to 0 % to 150 % of the performance units originally granted depending on the total stockholder return for that measurement period.

The performance units vest subject to a market condition and on the settlement date which is expected to be no later than two and a half months after the end of each measurement period.

We estimate the fair value of performance units using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rates of return, and dividend yields.

Expected volatilities are derived using a method that calculates

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historical volatility over a period equal to the length of the measurement period for UTI.

We use a risk-free rate of return that is equal to the yield of a zero-coupon U.S.

Treasury bill that is commensurate with each measurement period, and we assume that any dividends paid were reinvested.

To receive the performance units awarded for a measurement period, participants are required to be employed by us on the settlement date unless one of the following conditions is met.

Upon death or disability of a participant, the participant will receive a pro-rated number of performance units reflecting actual performance through the vesting date and the number of months of the performance period during which the participant was employed.

If an employee is terminated without cause or leaves for good reason within one year following certain changes in control, a determination of whether, and to what extent the performance condition has been achieved will be based on actual performance against the stated criteria through the separation date.

If an employee is terminated without cause or leaves for good reason after the one-year anniversary of certain changes in control, the participant will receive a pro-rated number of performance units reflecting actual performance through the separation date and the number of complete twelve-month periods of the performance period during which the participant was employed.

If employment is terminated for any other reason, all unvested performance units shall be forfeited upon termination.

As of September 30, 2020, unrecognized stock compensation expense related to performance units was $ 1.6 million, which is expected to be recognized over a weighted average period of 1.4 years.

Note 18 - Earnings per Share

We calculate basic earnings per share pursuant to the two-class method as a result of the issuance of the Series A Preferred Stock on June 24, 2016.

We calculate basic earnings per common share (“EPS”) pursuant to the two-class method as a result of the issuance of the Series A Preferred Stock on June 24, 2016.

Our Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis.

The two-class method is an earnings allocation formula that determines earnings per share for common stock and participating securities according to dividend and participation rights in undistributed earnings.

The two-class method is an earnings allocation formula that determines EPS for common stock and participating securities according to dividend and participation rights in undistributed earnings.

Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends.

The Series A Preferred Stock is not included in the computation of basic earnings per common share in periods in which we have a net loss as the Series A Preferred Stock is not contractually obligated to share in our net losses.

The Series A Preferred Stock is not included in the computation of basic EPS in periods in which we have a net loss, as the Series A Preferred Stock is not contractually obligated to share in our net losses.

Diluted earnings per common share is calculated using the more dilutive of the two-class method or as-converted method.

The two-class method uses net income available to common shareholders and assumes conversion of all potential shares other than the participating securities.

The two-class method uses net income available to common shareholders and assumes conversion of all potential shares

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other than the participating securities.

The as-converted method uses net income and assumes conversion of all potential shares including the participating securities.

Dilutive potential common shares include outstanding stock options, unvested restricted share awards and units and convertible preferred stock.

The basic and diluted weighted average shares outstanding are the same for years ended September 30, 2019 and 2018 as a result of the net loss available to common shareholders and anti-dilutive impact of the potentially dilutive securities.

Dilutive potential common shares include outstanding stock options, unvested restricted stock units, unvested performance units and convertible preferred stock.

The basic and diluted weighted average shares outstanding are the same for year ended September 30, 2019 as a result of the net loss available to common shareholders and anti-dilutive impact of the potentially dilutive securities.

The following table summarizes the computation of basic and diluted earnings per common share under the two-class or as-converted method, as well as the anti-dilutive shares excluded:

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Net income (loss) available to common shareholders $ 5,684 $ 1,609 $ ( 13,118 )

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Year Ended September 30,

2020 2019 2018

Weighted average basic shares outstanding 32,766 29,812 25,438

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54,144 51,134 46,971

(1) The dilutive shares under the as-converted method assume conversion of the preferred stock and are presented here merely for reference.

(1) The dilutive shares under the as-converted method assume conversion of the Series A Preferred Stock and are presented here merely for reference.

In a net income position, diluted earnings per share is determined by the more dilutive of the two-class method or the as-converted method.

Note 18 - Defined Contribution Employee Benefit Plan

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Note 19 - Employee Benefit Plans

We sponsor a defined contribution 401(k) plan, under which our employees elect to withhold specified amounts from their wages to contribute to the plan and we have a fiduciary responsibility with respect to the plan.

The plan provides for matching a portion of employees’ contributions at management’s discretion.

All contributions and matches by us are invested at the direction of the employee in one or more mutual funds or cash.

We made matching contributions of approximately $ 1.0 million for the years ended September 30, 2020, 2019 and 2018.

We made matching contributions of approximately $ 1.1 million, $ 1.0 million and $ 1.0 million to the 401(k) plan for the years ended September 30, 2021, 2020 and 2019, respectively.

Additionally, we have a deferred compensation plan into which certain members of management are eligible to defer a maximum of 75 % of their regular compensation and a maximum of 100 % of their incentive compensation.

We are not obligated to fund the deferred compensation plan;

however, we have purchased life insurance policies on the participants in order to fund the related benefits and such policies have been placed into a rabbi trust.

Our obligations under the deferred compensation plan totaled $ 2.8 million and $ 3.0 million as of September 30, 2021 and 2020, respectively, and are included in “Other liabilities” while the cash surrender value of the life insurance policies totaled $ 3.1 million and $ 3.3 million as of September 30, 2021 and 2020, respectively, and are included in “Other assets” in our consolidated balance sheets.

Note 20 - Segment Information

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These operations do not currently meet the quantitative criteria for segments and therefore are reflected in the “Other” category.

Our equity method investments and other non-Postsecondary Education operations are also included within the Other category.

Our equity method investment and other non-postsecondary education operations are also included within the “Other” category.

Corporate expenses are allocated to “Postsecondary Education” and the “Other” category based on compensation expense.

Depreciation and amortization includes amortization of assets subject to finance leases or financing obligations.

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(In thousands, except per share amounts)

Summary information by reportable segment is as follows:

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Revenues $ 323,476 $ 11,607 $ 335,083

Loss from operations ( 3,493 ) ( 378 ) ( 3,871 )

Income (loss) from operations 15,841 ( 894 ) 14,947

Depreciation and amortization (1)

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11,698 106 11,804

Net loss ( 7,149 ) ( 719 ) ( 7,868 )

Net income (loss) 8,386 ( 378 ) 8,008

Year Ended September 30, 2019

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Net loss ( 7,149 ) ( 719 ) ( 7,868 )

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Postsecondary Education Other Consolidated

As of September 30, 2021

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Total assets $ 435,144 $ 6,837 $ 441,981

(1) Excludes depreciation of training equipment obtained in exchange for services of $ 1.3 million, $ 1.4 million and $ 1.4 million for the years ended September 30, 2020, 2019 and 2018, respectively.

(1) Includes depreciation of training equipment obtained in exchange for services of $ 1.2 million for the year ended September 30, 2021.

(2) Excludes depreciation of training equipment obtained in exchange for services of $ 1.3 million and $ 1.4 million for the years ended September 30, 2020 and 2019, respectively.

Note 21 - Government Regulation and Financial Aid

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Below, we discuss certain, specific elements of this regulatory environment.

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State Authorization

To operate and offer postsecondary programs, and to be certified to participate in Title IV Programs, each of our institutions must obtain and maintain authorization from the state in which it is physically located (“Home State”).

To engage in recruiting activities outside of its Home State, each institution also may be required to obtain and maintain authorization from the states in which it is recruiting students.

To engage in recruiting or educational activities outside of its Home State, each institution also may be required to obtain and maintain authorization from the states in which it is recruiting or engaging in educational activities.

The level of regulatory oversight varies substantially from state to state and is extensive in some states.

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Our institutions must submit annual reports, and at times, supplemental reports, to demonstrate ongoing compliance and improvement.

ACCSC requires institutions to disclose certain institutional information to current and prospective students, as well as to the public, and requires that our schools and programs meet various performance standards as a condition of continued accreditation.

ACCSC requires institutions to disclose certain institutional information to current and prospective students, as well as to the public, and requires that our schools and

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programs meet various performance standards as a condition of continued accreditation.

Institutions must periodically renew their accreditation by completing a comprehensive renewal of accreditation process.

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All of our institutions are certified to participate in Title IV Programs.

In fiscal 2020, we derived approximately 66 % of our revenues, on a cash basis as defined by ED, from Title IV Programs.

Significant factors relating to Title IV Programs that could adversely affect us include:

• The 90/10 Rule .

As a condition of participation in Title IV Programs, proprietary institutions must agree when they sign their PPA to derive at least 10% of their revenues for each fiscal year from sources other than Title IV Program funds.

A proprietary institution is subject to sanctions if it exceeds the 90% level for a single year, and loses its eligibility to participate in Title IV Programs if it derives more than 90% of its revenue from Title IV Programs for two consecutive fiscal years.

As of September 30, 2020, our institutions’ annual Title IV percentages as calculated under the 90/10 rule ranged from approximately 65 % to 68 %.

As a condition of participation in Title IV Programs, proprietary institutions must agree when they sign their PPA to comply with the 90/10 rule.

Under the current 90/10 rule, to remain eligible to participate in the federal student aid programs, a proprietary institution must derive at least 10% of their revenues for each fiscal year from sources other than Title IV Program funds.

Under the American Rescue Plan Act of 2021 (“ARPA”), a proprietary institution must derive at least 10 percent of its revenue from sources other than “Federal education assistance funds.” Federal education assistance funds are defined as “federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution.” Pursuant to ARPA, the earliest this revision to the 90/10 rule may take effect is for institutional fiscal years beginning on or after January 1, 2023.

We are currently reviewing the potential impact of the change in the 90/10 rule created under ARPA and will be monitoring any proposed or final regulations promulgated by ED to carry out this change.

• Administrative Capability .

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ED’s administrative capability standards also include thresholds and expectations for federal student loan cohort default rates (discussed below), satisfactory academic progress, and loan counseling.

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funds, or place the institution on provisional certification as a condition of its continued participation or take other actions against the institution.

Failure to satisfy any of the standards may lead ED to find the institution ineligible to participate in Title IV Programs, require the institution to repay Title IV Program funds, change the method of payment of Title IV Program funds, place the institution on provisional certification as a condition of its continued participation or take other actions against the institution.

• Three-Year Student Loan Default Rates.

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As of September 30, 2021, only Universal Technical Institute of Texas was subject to a 30-day delay in receiving the first disbursement on federal student loans for first-time borrowers due to a three-year cohort default rate that was 15% or greater for one of the three most recent years.

The 30-day delay was lifted as of September 30, 2020 for Universal Technical Institute of Phoenix due to the three-year cohort default rate falling below 15%.

• Financial Responsibility.

All institutions participating in Title IV Programs also must satisfy specific ED standards of financial responsibility.

Among other things, an institution must meet all of its financial obligations, including required refunds to students and any Title IV Program liabilities and debts, be current in its debt payments, comply with certain past performance requirements, not receive an adverse, qualified, or disclaimed opinion by its accountants in its audited financial statements.

Among other things, an institution must meet all of its financial obligations, including required refunds to students and any Title IV Program liabilities and debts, be current in its debt payments, comply with certain past performance requirements, and not receive any adverse, qualified, or disclaimed opinion by its accountants in its audited financial statements.

Each year, ED also evaluates institutions’ financial responsibility by calculating a “composite score,” which utilizes information provided in the institutions’ annual audited financial statements.

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(1) the equity ratio which measures the institution’s capital resources, ability to borrow and financial viability;

(2) the primary reserve ratio which measures the institution’s ability to support current operations from expendable resources;

(2) the primary reserve ratio which measures the institution’s ability to support current

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operations from expendable resources;

and (3) the net income ratio which measures the institution’s ability to operate at a profit.

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Recent and significant negotiated rulemakings include the Gainful Employment Rulemaking, the Borrower Defense to Repayment Rulemaking, and the Accreditation and Innovation Rulemaking.

New regulations associated with these rulemakings took effect on July 1, 2020.

We devote significant effort to understanding the effects of these regulations on our business and to developing compliant solutions that also are congruent with our business, culture, and mission to serve our students and industry relationships.

However, we cannot predict with certainty how these new and developing regulatory requirements will be applied or whether each of our schools will be able to comply with all of the requirements in the future.

New regulations associated with these rulemakings took effect on July 1, 2020, and additional, new rules took effect on July 1, 2021.

Additionally, on May 26, 2021, ED announced its intention to establish multiple rulemaking committees and for these committees to prepare proposed regulations.

These regulations could involve revisiting and potentially revising regulations across 14 different topics areas identified by ED, including the rules governing changes in ownership, standards of administrative capability, borrower defense to repayment, closed school loan discharges, mandatory pre-dispute arbitration clauses, and gainful employment.

It is expected that these negotiated rulemakings would occur throughout 2022 and 2023, and that any resulting rules would become effective during that time or thereafter.

ED has also invited public commentary on other matters around potential gaps in post secondary outcomes including retention, completion, loan repayment and student loan default.

The potential outcome, if any, from these announced actions is unknown at this time.

We devote significant effort to understanding the effects of ED regulations and rulemakings on our business and to developing compliant solutions that also are congruent with our business, culture, and mission to serve our students and industry relationships.

Other Federal and State Student Aid Programs

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ED, consistent with its authority under then-existing statutes and regulations, issued guidance on March 5, 2020, outlining a range of accommodations intended to address interruptions of study related to COVID-19.

On March 27, 2020, President Trump signed the CARES Act, which provides additional flexibilities and accommodations, beyond those offered

On March 27, 2020, President Trump signed the CARES Act, which provided additional flexibilities and accommodations, beyond those offered by the ED in its March 5, 2020 guidance, particularly with regard to the campus-based assistance programs, the measurement of satisfactory academic progress, and the return of unearned Title IV Program funds to ED.

Shortly thereafter, on April 3, 2020, ED issued further guidance, providing additional regulatory flexibilities, and in some cases, implementing the accommodations provided for in the CARES Act.

ED periodically updated and supplemented this guidance over the following months.

Guidance also was published regarding immigration, discrimination, safety, and privacy issues, as well as the Higher Education Emergency Relief Fund (“HEERF”) established under the CARES Act.

On December 11, 2020, ED published a notice in the Federal Register extending the end dates of COVID-19-related waivers and modifications, and introducing several new flexibilities using its authority granted by the Higher Education Relief Opportunities for Students (“HEROES”) Act of 2003.

In most cases the waivers and modifications were extended through the end of the payment period that begins after the date on which the federally-declared national emergency related to COVID-19 is rescinded.

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by the ED in its March 5, 2020 guidance, particularly with regard to the campus-based assistance programs, the measurement of satisfactory academic progress and the return of unearned Title IV Program funds to ED.

Shortly thereafter, on April 3, 2020, ED issued further guidance, providing additional regulatory flexibilities, and in some cases, implementing the accommodations provided for in the CARES Act.

ED periodically updated and supplemented this guidance over the following months.

Guidance also has been published regarding immigration, discrimination, safety, and privacy issues, as well as the Higher Education Emergency Relief Fund (“HEERF”) established under the CARES Act.

We have reviewed and implemented many of the flexibilities created by the CARES Act and ED’s guidance, including the opportunity to temporarily offer distance education, discussed below.

On December 27, 2020, President Trump signed a $2.3 trillion spending bill that combined a $1.4 trillion omnibus appropriations bill for federal fiscal year 2021 with $900 billion in supplemental appropriations to provide relief for the COVID-19 pandemic.

As part of the omnibus appropriations bill, Congress simplifies the Free Application for Federal Student Aid, provides a $15 million increase to the Federal Supplemental Educational Opportunity Grant program, and adds an additional $10 million for Federal Work Study.

This latter piece of legislation is known as the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (“CRRSAA”).

The CRRSAA extends the Paycheck Protection Program and allocates to it an additional $284.5 billion, and includes The Higher Education Emergency Relief Fund II (“HEERF II”), which makes an addition $22.7 billion available to higher education institutions to mitigate the impact of the COVID-19 pandemic.

Of this amount, private, proprietary institutions are allocated approximately $681 million and may only use HEERF II funding to provide emergency financial aid grants to students.

On January 14, 2021, ED made extensive guidance available regarding the administration of the HEERF II program.

On March 11, 2021, President Biden signed into law the ARPA, a $1.9 trillion economic relief package.

The ARPA provides almost $40 billion in funding available to higher education institutions under the Higher Education Emergency Relief III (“HEERF III”).

Of this amount, private, proprietary institutions are allocated approximately $396 million and may only use HEERF III funding to provide emergency financial aid grants to students.

On May 11, 2021, ED published guidance regarding the administration of the HEERF III program.

On March 31, 2021, ED published its Guide for Compliance Attestation Engagements of Proprietary Schools Expending Higher Education Emergency Relief Fund Grants (the “Guide”).

We completed the required audit of our participation in the HEERF grant program for the year ended September 30, 2020 which was filed with the ED on July 26, 2021.

We have reviewed and implemented many of the flexibilities created by Congress and ED’s guidance.

We continue to review new guidance from ED and to implement available legislative and regulatory relief as applicable.

Distance Education

In response to the COVID-19 pandemic, ED provided broad approval for institutions to use distance learning modalities without going through the standard ED approval process for payment periods that begin on or before December 31, 2020.

ED also permitted accreditors to waive their distance review requirements.

ACCSC has granted institutions temporary approval to offer distance education through December 31, 2020 for the end of the emergency.

State agencies have also provided distance education flexibility, but the processes and expiration dates for temporary distance education approval vary by state, and states have been granting extensions to these temporary approvals as they approach expiration.

We have availed ourselves of this temporary flexibility in all our programs and we are in full compliance with all state and ACCSC requirements.

To afford us additional flexibility beyond the current temporary approval period(s), we have initiated the approval process with ACCSC, state agencies, or both to be able of offer distance education and a blended learning format for all of our programs on a more permanent basis.

Additionally, as a result of previously implementing our Tech II curriculum, we are currently approved to offer distance education at our Avondale, Arizona, Rancho Cucamonga, California, Sacramento, California, Orlando, Florida, Dallas-Ft.

Worth, Texas, Long Beach, California and Bloomfield, New Jersey campuses for our Automotive/Diesel Tech II programs by ACCSC, state agencies, or both.

In response to the COVID-19 pandemic, ED provided broad approval for institutions to use distance education without going through the standard ED approval process.

ED also permitted accreditors to waive their distance education review requirements.

Taking advantage of these flexibilities, we transitioned our students into blended program formats, which permitted their non-clinical training to be offered online.

ED’s temporary flexibilities currently remain in place, and will continue through the end of the payment period that begins after the date on which the federally-declared national emergency related to COVID-19 is rescinded.

However, having observed that our blended learning programs offer a range of academic, operational, and financial efficiencies, we have determined to seek the permanent approvals that will permit us to continue offering blended learning programming after the noted temporary flexibilities have expired.

We also continue to work to ensure that our blended learning programming complies with applicable distance education rules and standards, including ED’s new distance education rules, which became effective July 1, 2021.

We intend to offer our Automotive, Diesel, Automotive/Diesel, Motorcycle and Marine programs in a blended learning format on a permanent basis.

Additionally, we intend to continue to invest in our blended learning platform and curriculum to further enhance the student experience and student outcomes.

To date, we have received approval from ACCSC to permanently offer blended format programs that utilize both distance and on-ground education.

Additionally, we have received permanent approvals by all state education authorizing agencies to offer blended format programs.

Finally, we are working to secure approval from the Florida State veterans agency to classify our MMI non-degree, blended programs as resident training for purposes of VA benefits, to ensure that veterans enrolling in these programs can access their VA benefits after December 21, 2021, when applicable waivers are currently set to expire.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Note 22 - Higher Education Emergency Relief Fund under the CARES Act

The CARES Act established the HEERF.

Fiscal 2020 HEERF I Grants for Students and for Significant Changes to the Delivery of Instruction Due to the Coronavirus under the CARES Act

In 2020, the CARES Act established the HEERF.

The HEERF includes approximately $14.0 billion in relief funds to be distributed directly to institutions of higher education.

8 unchanged sentences

The allocations to the higher education institutions were set by a formula prescribed in the CARES Act, which is weighted significantly by the number of full-time students who are Pell-eligible, but also takes into consideration the total population of the school and the number of students who were not enrolled full-time online before the COVID-19 outbreak.

ED utilized the most recent data available from the Integrated Postsecondary Education Data System and Federal Student Aid for this

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

ED utilized the most recent data available from the Integrated Postsecondary Education Data System and Federal Student Aid for this calculation.

In May 2020, we were granted approximately $ 33.0 million in HEERF funds for emergency grants to students and to cover institutional costs associated with significant changes to the delivery of instruction due to coronavirus.

11 unchanged sentences

• The use of funds must be documented and reported.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

As explained in the HEERF Agreements for the Institutional Portions, we have “discretion in determining how to allocate and use the funds provided under the CARES Act, provided the funds will be spent only on those costs for which Recipient has a reasoned basis for concluding such costs have a clear nexus to significant changes to the delivery of instruction due to the coronavirus.” Institutional costs that the ED has specifically designated as allowable include:

14 unchanged sentences

In order to comply with these new guidelines, we incurred costs for sanitization supplies, partitions, labor hours and other related expenses to ensure safety and social distancing.

Additionally, we purchased laptops to provide to our students to assist their transition to the online blended

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

training model.

Additionally, we purchased laptops to provide to our students to assist their transition to the online blended training model.

We also incurred costs as we continued to improve and enhance the delivery of our online instruction for students.

8 unchanged sentences

As of September 30, 2020, $ 2.7 million remained in our G5 account with the ED and is not included in our “Cash and cash equivalents” on our consolidated balance sheet.

We drew down the remaining $ 1.8 million for the eligible costs incurred during the year ended September 30, 2020 in October 2020.

As of September 30, 2020, there was approximately $ 0.8 million of institutional funds remaining to be used for allowable costs incurred after September 30, 2020, which are expected to be used during the first quarter of our fiscal 2021.

Note 22 - Quarterly Financial Summary (Unaudited)

Summarized quarterly financial information for fiscal 2020 and 2019 is as follows:

Year ended September 30, 2020 First

Revenues $ 87,234 $ 82,717 $ 54,483 $ 76,327 $ 300,761

Income (loss) from operations 4,254 ( 499 ) ( 13,779 ) 6,153 ( 3,871 )

Net income (loss) 4,684 10,142 ( 13,268 ) 6,450 8,008

Earnings (loss) per share:

Basic $ 0.07 $ 0.18 $ ( 0.45 ) $ 0.10 $ 0.05

Diluted $ 0.07 $ 0.18 $ ( 0.45 ) $ 0.09 $ 0.05

Year ended September 30, 2019 First

Revenues $ 83,050 $ 81,746 $ 79,042 $ 87,666 $ 331,504

(Loss) income from operations ( 7,205 ) ( 5,580 ) ( 455 ) 5,438 ( 7,802 )

Net (loss) income ( 7,717 ) ( 5,263 ) ( 365 ) 5,477 ( 7,868 )

Earnings (loss) per share:

Basic $ ( 0.36 ) $ ( 0.26 ) $ ( 0.07 ) $ 0.09 $ ( 0.52 )

Diluted $ ( 0.36 ) $ ( 0.26 ) $ ( 0.07 ) $ 0.09 $ ( 0.52 )

The sum of quarterly per share information does not equal amounts for the full year as quarterly calculations are performed on a discrete basis.

Additionally, securities may have had an anti-dilutive effect during individual quarters but not for the full year.

During the year ended September 30, 2021, we incurred $ 0.9 million in allowable costs related to the changes in the delivery of instruction due to the coronavirus, thereby utilizing the remaining available funds.

Of the $ 0.9 million incurred, $ 0.3 million was recorded in “Educational services and facilities” and $ 0.6 million was recorded in “Selling, general and administrative” on the consolidated statements of operations for the year ended September 30, 2021.

During the year ended September 30, 2021, we drew down the remaining $ 2.7 million in funds from our G5 account with the ED.

UNIVERSAL TECHNICAL INSTITUTE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

Fiscal 2021 HEERF II Grant for Students under the CRRSAA and HEERF III Grant for Students under the ARPA

The CRRSAA includes HEERF II, which makes an additional $22.7 billion available to higher education institutions.

Of this amount, private, proprietary institutions are allocated approximately $681 million.

The statute permits proprietary institutions to use HEERF II funds to provide financial aid grants to students, and requires that institutions prioritize the grants to students with exceptional need, such as students who receive Pell Grants.

On January 14, 2021, ED issued guidance regarding the administration of the HEERF II program.

In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, we were granted approximately $ 16.8 million for purposes of funding HEERF II student grants.

The ARPA provides almost $40 billion in funding available to higher education institutions under the HEERF III.

Of this amount, private, proprietary institutions are allocated approximately $396 million and may only use HEERF III funding to provide emergency financial aid grants to students.

In accordance with the ED’s allocation schedule, during the year ended September 30, 2021, we were granted approximately $ 9.9 million for purposes of funding HEERF III student grants.

During the year ended September 30, 2021, we awarded approximately $ 19.7 million in HEERF II and HEERF III grants to over 10,660 students.

The HEERF II and HEERF III funds were drawn down as student grants were distributed with approximately $ 0.3 million included in “Restricted cash” on our consolidated balance sheet as of September 30, 2021 which relates to pending student grants and outstanding checks.

Note 23 - Subsequent Events

On November 1, 2021, we completed the acquisition contemplated by the previously announced Stock Purchase Agreement (the “Purchase Agreement”), dated March 29, 2021, by and among UTI, HCP Ed Holdings, LLC, a Delaware limited liability company (“Seller”), HCP Ed Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Seller (“HCP”), and Michigan Institute of Aeronautics, Inc.

d/b/a MIAT College of Technology, a Michigan corporation and wholly subsidiary of HCP (“MIAT”).

MIAT is a post-secondary school that offers vocational and technical certificates and degrees across aviation maintenance, energy technology, wind energy technology, robotics and automation, non-destructive testing, heating ventilation air conditioning and refrigeration (“HVACR”), and welding disciplines.

HCP is MIAT’s holding company that owns no assets other than the issued and outstanding shares of MIAT.

The acquisition is part of our growth and diversification strategy and will allow us to expand MIAT programs throughout UTI brand campuses and extend UTI’s presence and programs into the Canton, MI market where MIAT has been for over 50 years.

Other expected synergies include operating and purchasing cost efficiencies and broadening the opportunity for student growth at the MIAT campuses by leveraging the national our marketing and admissions infrastructure.

Under the terms of the Purchase Agreement, we acquired all of the issued and outstanding shares of capital stock of HCP from the Seller for total consideration of $ 26.0 million in cash, subject to closing working capital adjustments.

As a result, HCP is now a wholly-owned subsidiary of UTI, and MIAT remains as a wholly-owned subsidiary of HCP.

The consideration paid was funded by available operating cash.

In connection with this acquisition, we incurred transaction costs of $ 0.8 million during the year ended September 30, 2021, which are included in “Selling, general and administrative” expenses in the accompanying consolidated statements of operations.

As of the date of this filing, the initial accounting for the business combination, including the allocation of the purchase price to the identifiable assets acquired and the liabilities assumed, is incomplete.

We have engaged a third party specialist to assist with the valuation of the property, plant and equipment and intangible assets.

We expect to disclose a preliminary allocation of the November 1, 2021 purchase price in our Form 10-Q for the three months ended December 31, 2021.

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 9A. Controls and Procedures