x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | |
SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 01-0724376 |
(State or other jurisdiction of | (I.R.S. Employer |
Incorporation or organization) | Identification No.) |
Large accelerated filer o | Accelerated filer x |
Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
Page | |
As of September 30, 2016 | As of December 31, 2015 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents (Note 2) | $ | 137,691 | $ | 105,734 | |||
Accounts receivable, net of allowance of $8,645 in 2016 and $13,012 in 2015 | 5,878 | 7,917 | |||||
Prepaid expenses | 5,553 | 10,746 | |||||
Income tax receivable | 1,182 | — | |||||
Deferred income taxes | 4,833 | 6,714 | |||||
Total current assets | 155,137 | 131,111 | |||||
Property and equipment, net | 99,155 | 109,281 | |||||
Assets held for sale | 2,100 | — | |||||
Investments | 14,561 | 15,915 | |||||
Goodwill | 33,899 | 38,634 | |||||
Other assets, net | 8,472 | 8,955 | |||||
Total assets | $ | 313,324 | $ | 303,896 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 19,095 | $ | 21,072 | |||
Deferred revenue | 24,888 | 29,727 | |||||
Total current liabilities | 43,983 | 50,799 | |||||
Deferred income taxes | 12,558 | 15,944 | |||||
Total liabilities | 56,541 | 66,743 | |||||
Commitments and contingencies (Note 2) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $.01 par value; Authorized shares - 10,000; no shares issued or outstanding | — | — | |||||
Common stock, $.01 par value; Authorized shares - 100,000; 16,075 issued and outstanding in 2016; 15,989 issued; and outstanding in 2015 | 161 | 160 | |||||
Additional paid-in capital | 176,066 | 173,700 | |||||
Retained earnings | 80,556 | 63,293 | |||||
Total stockholders’ equity | 256,783 | 237,153 | |||||
Total liabilities and stockholders’ equity | $ | 313,324 | $ | 303,896 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenue | $ | 73,803 | $ | 76,291 | $ | 234,514 | $ | 241,998 | |||||||
Costs and expenses: | |||||||||||||||
Instructional costs and services | 28,357 | 29,167 | 86,968 | 89,123 | |||||||||||
Selling and promotional | 13,139 | 14,062 | 44,592 | 47,233 | |||||||||||
General and administrative | 17,125 | 17,616 | 50,703 | 54,845 | |||||||||||
Loss on disposals of long-lived assets | 4,323 | 43 | 5,048 | 60 | |||||||||||
Loss on assets held for sale | 822 | — | 822 | — | |||||||||||
Impairment of goodwill | 4,735 | — | 4,735 | — | |||||||||||
Depreciation and amortization | 4,910 | 4,891 | 14,624 | 14,178 | |||||||||||
Total costs and expenses | 73,411 | 65,779 | 207,492 | 205,439 | |||||||||||
Income from operations before interest income and income taxes | 392 | 10,512 | 27,022 | 36,559 | |||||||||||
Interest income | 37 | 37 | 111 | 78 | |||||||||||
Income before income taxes | 429 | 10,549 | 27,133 | 36,637 | |||||||||||
Income tax expense | 85 | 3,796 | 10,524 | 13,994 | |||||||||||
Equity investment income/(loss) | (18 | ) | 4 | 653 | (20 | ) | |||||||||
Net income | $ | 326 | $ | 6,757 | $ | 17,262 | $ | 22,623 | |||||||
Net Income per common share: | |||||||||||||||
Basic | $ | 0.02 | $ | 0.41 | $ | 1.07 | $ | 1.34 | |||||||
Diluted | $ | 0.02 | $ | 0.41 | $ | 1.07 | $ | 1.33 | |||||||
Weighted average number of common shares: | |||||||||||||||
Basic | 16,074,701 | 16,562,177 | 16,057,710 | 16,843,587 | |||||||||||
Diluted | 16,233,229 | 16,661,795 | 16,174,723 | 16,974,042 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
(Unaudited) | |||||||
Operating activities | |||||||
Net income | $ | 17,262 | $ | 22,623 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 14,624 | 14,178 | |||||
Stock-based compensation | 3,972 | 4,083 | |||||
Investment (income)/loss | (653 | ) | 20 | ||||
Deferred income taxes | (1,505 | ) | (563 | ) | |||
Loss on disposals of long-lived assets | 5,048 | 60 | |||||
Loss on assets held for sale | 822 | — | |||||
Impairment of goodwill | 4,735 | — | |||||
Other | 10 | 55 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net of allowance for bad debt | 2,039 | (2,787 | ) | ||||
Prepaid expenses and other assets | 5,146 | (3,534 | ) | ||||
Income tax receivable | (1,182 | ) | 813 | ||||
Accounts payable and accrued liabilities | (2,791 | ) | (866 | ) | |||
Deferred revenue | (4,839 | ) | 8,726 | ||||
Net cash provided by operating activities | 42,688 | 42,808 | |||||
Investing activities | |||||||
Capital expenditures | (9,670 | ) | (19,564 | ) | |||
Equity investment | (950 | ) | (319 | ) | |||
Dividends received from equity investment | 2,957 | — | |||||
Note receivable | — | (226 | ) | ||||
Capitalized program development costs and other assets | (1,464 | ) | (966 | ) | |||
Net cash used in investing activities | (9,127 | ) | (21,075 | ) | |||
Financing activities | |||||||
Cash paid for repurchase of common stock | (630 | ) | (23,064 | ) | |||
Cash received from issuance of common stock | 28 | 29 | |||||
Excess tax benefit from stock-based compensation | (1,002 | ) | (503 | ) | |||
Net cash used in financing activities | (1,604 | ) | (23,538 | ) | |||
Net increase/(decrease) in cash and cash equivalents | 31,957 | (1,805 | ) | ||||
Cash and cash equivalents at beginning of period | 105,734 | 115,634 | |||||
Cash and cash equivalents at end of period | 137,691 | 113,829 | |||||
Supplemental disclosure of cash flow information | |||||||
Income taxes paid | 14,894 | 14,246 |
• | American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military and public safety communities through American Military University, or AMU, and American Public University, or APU. APUS is regionally accredited by the Higher Learning Commission. |
• | National Education Seminars, Inc., which operates as Hondros College of Nursing, or HCON, provides nursing education to students at four campuses in the State of Ohio as well as online to serve the needs of the nursing and healthcare communities. HCON is nationally accredited by the Accrediting Council of Independent Colleges and Schools, or ACICS, and the RN-to-BSN Program is accredited by the Commission on Collegiate Nursing Education. In June 2016, HCON was notified that its Diploma in Practical Nursing and Associates Degree in Nursing programs have been granted pre-accreditation candidacy status by the National League for Nursing Commission for Nursing Education Accreditation effective through June 23, 2019. |
• | American Public Education Segment, or APEI Segment. This segment reflects the operational activities at APUS, other corporate activities, and minority investments. |
• | Hondros College of Nursing Segment, or HCON Segment. This segment reflects the operational activities of HCON. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||
2016 | 2015 | 2016 | 2015 | |||
Title IV programs | 29.5% | 31.2% | 29.2% | 31.8% | ||
DoD tuition assistance programs | 35.2% | 34.8% | 35.7% | 34.7% | ||
VA education benefits | 22.3% | 21.5% | 22.1% | 20.9% | ||
Cash and other sources | 12.9% | 12.5% | 12.9% | 12.6% |
APEI Segment | HCON Segment | Total Goodwill | |||||||||
Goodwill as of December 31, 2015 | $ | — | $ | 38,634 | $ | 38,634 | |||||
Goodwill acquired | — | — | — | ||||||||
Accumulated impairment | — | (4,735 | ) | (4,735 | ) | ||||||
Goodwill as of September 30, 2016 | $ | — | $ | 33,899 | $ | 33,899 |
APEI Segment | HCON Segment | Total Goodwill | |||||||||
Gross carrying amount of Goodwill as of December 31, 2015 | $ | — | 38,634 | 38,634 | |||||||
Accumulated impairment | — | (4,735 | ) | (4,735 | ) | ||||||
Net carrying amount of Goodwill as of September 30, 2016 | $ | — | $ | 33,899 | $ | 33,899 |
Gross Carrying Amount | Accumulated Amortization | Accumulated Impairment | Net Carrying Amount | ||||||||||||
Finite-lived intangible assets | |||||||||||||||
Curricula | $ | 405 | $ | 394 | $ | — | $ | 11 | |||||||
Non-compete agreements | 86 | 50 | — | 36 | |||||||||||
Student contracts and relationships | 3,870 | 2,243 | — | 1,627 | |||||||||||
Total finite-lived intangible assets | 4,361 | 2,687 | — | 1,674 | |||||||||||
Indefinite-lived intangible assets | |||||||||||||||
Trade name | 1,998 | — | — | 1,998 | |||||||||||
Accreditation, licensing and Title IV | 1,686 | — | — | 1,686 | |||||||||||
Affiliation agreements | 37 | — | — | 37 | |||||||||||
Total indefinite-lived intangible assets | 3,721 | — | — | 3,721 | |||||||||||
Total intangible assets | $ | 8,082 | $ | 2,687 | $ | — | $ | 5,395 |
Number of Shares | Weighted-Average Grant Price and Fair Value | |||||
Non-vested, December 31, 2015 | 293,419 | $ | 35.86 | |||
Shares granted | 336,125 | $ | 16.34 | |||
Vested shares | (121,298 | ) | $ | 38.18 | ||
Shares forfeited | (30,069 | ) | $ | 26.64 | ||
Non-vested, September 30, 2016 | 478,177 | $ | 21.89 |
Number of Options | Weighted Average Exercise Price | Weighted-Average Contractual Life (Years) | Aggregate Intrinsic Value (In thousands) | ||||||||||
Outstanding, December 31, 2015 | 329,872 | $ | 33.65 | 1.30 | 359 | ||||||||
Options granted | — | $ | — | ||||||||||
Awards exercised | (4,000 | ) | $ | 7.00 | |||||||||
Awards forfeited | (53,025 | ) | $ | 37.09 | |||||||||
Outstanding, September 30, 2016 | 272,847 | $ | 33.37 | 0.78 | $ | 345 | |||||||
Exercisable, September 30, 2016 | 272,847 | $ | 33.37 | 0.78 | $ | 345 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Instructional costs and services | $ | 274 | $ | 378 | $ | 1,077 | $ | 1,156 | |||||||
Selling and promotional | 168 | 165 | 524 | 493 | |||||||||||
General and administrative | 813 | 797 | 2,371 | 2,434 | |||||||||||
Stock-based compensation expense in operating income | 1,255 | 1,340 | 3,972 | 4,083 | |||||||||||
Tax benefit | (504 | ) | (546 | ) | (1,566 | ) | (1,669 | ) | |||||||
Stock-based compensation expense, net of tax | $ | 751 | $ | 794 | $ | 2,406 | $ | 2,414 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Revenue: | |||||||||||||||
American Public Education Segment | $ | 67,065 | $ | 69,233 | $ | 212,859 | $ | 219,263 | |||||||
Hondros College of Nursing Segment | 6,738 | 7,058 | 21,655 | 22,735 | |||||||||||
Total Revenue | $ | 73,803 | $ | 76,291 | $ | 234,514 | $ | 241,998 | |||||||
Depreciation and amortization: | |||||||||||||||
American Public Education Segment | $ | 4,550 | $ | 4,558 | $ | 13,619 | $ | 13,297 | |||||||
Hondros College of Nursing Segment | 360 | 333 | 1,005 | 881 | |||||||||||
Total Depreciation and amortization | $ | 4,910 | $ | 4,891 | $ | 14,624 | $ | 14,178 | |||||||
Income (loss) from continuing operations before interest income and income taxes: | |||||||||||||||
American Public Education Segment | $ | 5,659 | $ | 10,049 | $ | 31,211 | $ | 34,179 | |||||||
Hondros College of Nursing Segment | (5,267 | ) | 463 | (4,189 | ) | 2,380 | |||||||||
Total income (loss) from continuing operations before interest income and income taxes | $ | 392 | $ | 10,512 | $ | 27,022 | $ | 36,559 | |||||||
Interest income, net: | |||||||||||||||
American Public Education Segment | $ | 37 | $ | 37 | $ | 111 | $ | 78 | |||||||
Hondros College of Nursing Segment | — | — | — | — | |||||||||||
Total Interest income, net | $ | 37 | $ | 37 | $ | 111 | $ | 78 | |||||||
Income Tax expense (benefit): | |||||||||||||||
American Public Education Segment | $ | 2,100 | $ | 3,634 | $ | 12,111 | $ | 13,071 | |||||||
Hondros College of Nursing Segment | (2,015 | ) | 162 | (1,587 | ) | 923 | |||||||||
Total Income Tax expense (benefit) | $ | 85 | $ | 3,796 | $ | 10,524 | $ | 13,994 | |||||||
Capital expenditures: | |||||||||||||||
American Public Education Segment | $ | 2,694 | $ | 6,314 | $ | 8,992 | $ | 18,448 | |||||||
Hondros College of Nursing Segment | 72 | 487 | 678 | 1,116 | |||||||||||
Total Capital expenditures | $ | 2,766 | $ | 6,801 | $ | 9,670 | $ | 19,564 |
As of September 30, 2016 | As of December 31, 2015 | ||||||
(Unaudited) | |||||||
(In thousands) | |||||||
Assets: | |||||||
American Public Education Segment | $ | 264,230 | $ | 250,118 | |||
Hondros College of Nursing Segment | 49,094 | 53,778 | |||||
Total Assets | $ | 313,324 | $ | 303,896 |
• | American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military and public safety communities. APUS is an online university that includes American Military University, or AMU, and American Public University, or APU. APUS has regional institutional accreditation through the Higher Learning Commission, or the HLC. |
• | National Education Seminars, Inc., which operates as Hondros College of Nursing, or HCON, provides nursing education to students at four campuses in the State of Ohio, as well as online, to serve the needs of the nursing and healthcare communities. HCON’s programs are offered in a quarterly format to approximately 1,200 students. |
• | breach of contract, if the institution failed to perform its obligations under the terms of a contract with the student; |
• | substantial misrepresentation, if the institution or its agents made a substantial misrepresentation on which the borrower reasonably relied to the borrower's detriment when the borrower decided to attend or to continue attending the institution; or |
• | judgment against the institution, if a governmental agency or the borrower as an individual or a member of a class obtained a non-default favorable judgment against the institution before a court or administrative agency. |
• | is a proprietary institution that fails in the previous fiscal year the 90/10 non-Title IV revenue requirement; |
• | is a publicly-traded institution that receives certain warnings from the SEC or fails to timely file timely required reports; or |
• | has a cohort default rate of 30% or greater for each of the two most recent official calculations. |
• | is a defendant in certain lawsuits and other actions that have resulted in or could result in liability or monetary damages; |
• | is required by its accrediting agency to submit a teach-out plan for certain reasons; |
• | has gainful employment programs that could become ineligible for Title IV based on their final debt-to-earnings rates for the next award year; or |
• | is a proprietary institution and has a composite score of less than 1.5 and has a withdrawal of owner’s equity by any means, including by declaring a dividend. |
• | significant fluctuation in the amount of Title IV funds received by the institution; |
• | citation by a state agency or authorizing agency for failing requirements; |
• | failure of a financial stress test developed by ED; |
• | high annual dropout rates, as calculated by ED; |
• | action by an accrediting agency to place the institution on probation or issue a show-cause order for failure to meet one or more accrediting standards; |
• | violation of a provision in or default on a loan agreement; or |
• | pending claims for borrower relief discharge or an expectation that a significant number of borrower relief claims will be filed related to the institution, as determined by ED. |
• | American Public Education Segment, or APEI Segment. This segment reflects the operational activities of APUS, other corporate activities, and minority investments. |
• | Hondros College of Nursing Segment, or HCON Segment. This segment reflects the operational activities of HCON. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Costs and expenses: | |||||||||||
Instructional costs and services | 38.4 | 38.2 | 37.1 | 36.8 | |||||||
Selling and promotional | 17.8 | 18.4 | 19.0 | 19.5 | |||||||
General and administrative | 23.2 | 23.1 | 21.6 | 22.7 | |||||||
Loss on disposals of long-lived assets | 5.9 | — | 2.2 | — | |||||||
Loss on sale of assets | 1.1 | — | 0.4 | — | |||||||
Impairment of goodwill | 6.4 | — | 2.0 | — | |||||||
Depreciation and amortization | 6.7 | 6.4 | 6.2 | 5.9 | |||||||
Total costs and expenses | 99.5 | 86.1 | 88.5 | 84.9 | |||||||
Income from operations before interest income and income taxes | 0.5 | 13.9 | 11.5 | 15.1 | |||||||
Interest income | 0.1 | — | — | — | |||||||
Income from operations before income taxes | 0.6 | 13.9 | 11.5 | 15.1 | |||||||
Income tax expense | 0.1 | 5.0 | 4.5 | 5.8 | |||||||
Equity investment gain/(loss) | — | — | 0.3 | — | |||||||
Net Income | 0.5 | % | 8.9 | % | 7.3 | % | 9.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Revenue: | |||||||||||||||
American Public Education Segment | $ | 67,065 | $ | 69,233 | $ | 212,859 | $ | 219,263 | |||||||
Hondros College of Nursing Segment | 6,738 | 7,058 | 21,655 | 22,735 | |||||||||||
Total Revenue | $ | 73,803 | $ | 76,291 | $ | 234,514 | $ | 241,998 | |||||||
Income (loss) from continuing operations before interest income and income taxes: | |||||||||||||||
American Public Education Segment | $ | 5,659 | $ | 10,049 | $ | 31,211 | $ | 34,179 | |||||||
Hondros College of Nursing Segment | (5,267 | ) | 463 | (4,189 | ) | 2,380 | |||||||||
Total income (loss) from continuing operations before interest income and income taxes | $ | 392 | $ | 10,512 | $ | 27,022 | $ | 36,559 |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3) | |||||||||||||
July 1, 2016 – July 31, 2016 | — | $ | — | — | 336,125 | $ | 148,008 | ||||||||||
August 1, 2016 – August 31, 2016 | — | — | — | 336,125 | 148,008 | ||||||||||||
September 1, 2016 – September 30, 2016 | — | — | — | 336,125 | 148,008 | ||||||||||||
Total | — | $ | — | — | 336,125 | $ | 148,008 |
(1) | On December 9, 2011, our Board of Directors approved a stock repurchase program for our common stock, under which we may annually purchase up to the cumulative number of shares issued or deemed issued under our equity incentive and stock purchase plans. Repurchases may be made from time to time in the open market at prevailing market prices or in privately negotiated transactions based on business and market conditions. The stock repurchase program may be suspended or discontinued at any time and will be funded using our available cash. |
(2) | On May 14, 2012, our Board of Directors authorized a program to repurchase up to $20 million of shares of our common stock. On each of March 14, 2013, June 13, 2014, and June 12, 2015 our Board of Directors increased the authorization by $15 million of shares, for a cumulative increase of $45 million of shares. Subject to market conditions, applicable legal requirements and other factors, the repurchases may be made from time to time in the open market or privately negotiated transactions. The authorization does not obligate us to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors as we deem appropriate. |
(3) | During the nine month period ended September 30, 2016, we were deemed to have repurchased 30,069 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants. These repurchases were not part of the stock repurchase program authorized by our Board of Directors as described in footnotes 1 and 2 to this table. |
Exhibit No. | Exhibit Description |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
EX-101.INS ** | XBRL Instance Document |
EX-101.SCH ** | XBRL Taxonomy Extension Schema Document |
EX-101.CAL ** | XBRL Taxonomy Extension Calculation Linkbase Document |
EX-101.DEF ** | XBRL Taxonomy Extension Definition Linkbase Document |
EX-101.LAB ** | XBRL Taxonomy Extension Label Linkbase Document |
EX-101.PRE ** | XBRL Taxonomy Extension Presentation Linkbase Document |
AMERICAN PUBLIC EDUCATION, INC. | ||
/s/ Dr. Wallace E. Boston | November 14, 2016 | |
Dr. Wallace E. Boston | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
/s/ Richard W. Sunderland, Jr. | November 14, 2016 | |
Richard W. Sunderland, Jr. | ||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial Officer and Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of American Public Education, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Dr. Wallace E. Boston |
Name: Dr. Wallace E. Boston | |
Title: President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of American Public Education, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Richard W. Sunderland, Jr. |
Name: Richard W. Sunderland, Jr. | |
Title: Executive Vice President and Chief Financial Officer |
By: | /s/ Dr. Wallace E. Boston |
Name: Dr. Wallace E. Boston | |
Title: President and Chief Executive Officer | |
November 14, 2016 |
By: | /s/ Richard W. Sunderland, Jr. |
Name: Richard W. Sunderland, Jr. | |
Title: Executive Vice President and Chief Financial Officer | |
November 14, 2016 |
Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2016 |
Nov. 04, 2016 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | AMERICAN PUBLIC EDUCATION INC | |
Entity Central Index Key | 0001201792 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,095,956 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 8,645 | $ 13,012 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized shares (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares (in shares) | 100,000,000 | 100,000,000 |
Common stock, issued (in shares) | 16,075,000 | 15,989,000 |
Common stock, outstanding (in shares) | 16,075,000 | 15,989,000 |
Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Revenue | $ 73,803 | $ 76,291 | $ 234,514 | $ 241,998 |
Costs and expenses: | ||||
Instructional costs and services | 28,357 | 29,167 | 86,968 | 89,123 |
Selling and promotional | 13,139 | 14,062 | 44,592 | 47,233 |
General and administrative | 17,125 | 17,616 | 50,703 | 54,845 |
Loss on disposals of long-lived assets | 4,323 | 43 | 5,048 | 60 |
Loss on assets held for sale | 822 | 0 | 822 | 0 |
Impairment of goodwill | 4,735 | 0 | 4,735 | 0 |
Depreciation and amortization | 4,910 | 4,891 | 14,624 | 14,178 |
Total costs and expenses | 73,411 | 65,779 | 207,492 | 205,439 |
Income from operations before interest income and income taxes | 392 | 10,512 | 27,022 | 36,559 |
Interest income | 37 | 37 | 111 | 78 |
Income before income taxes | 429 | 10,549 | 27,133 | 36,637 |
Income tax expense | 85 | 3,796 | 10,524 | 13,994 |
Equity investment income/(loss) | (18) | 4 | 653 | (20) |
Net income | $ 326 | $ 6,757 | $ 17,262 | $ 22,623 |
Net Income per common share: | ||||
Basic (in dollars per share) | $ 0.02 | $ 0.41 | $ 1.07 | $ 1.34 |
Diluted (in dollars per share) | $ 0.02 | $ 0.41 | $ 1.07 | $ 1.33 |
Weighted average number of common shares: | ||||
Basic (in shares) | 16,074,701 | 16,562,177 | 16,057,710 | 16,843,587 |
Diluted (in shares) | 16,233,229 | 16,661,795 | 16,174,723 | 16,974,042 |
Nature of the Business |
9 Months Ended | ||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
Nature of the Business | Nature of the Business American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education to approximately 92,200 students through the operations of two subsidiary institutions:
The Company’s institutions are licensed or otherwise authorized, or are in the process of obtaining such licenses or authorizations, to offer postsecondary education programs by state authorities to the extent the institutions believe such licenses or authorizations are required, and are certified by the United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs. The Company's operations are organized into two reportable segments:
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Basis of Presentation |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited interim Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. All intercompany transactions have been eliminated in consolidation. The interim Consolidated Financial Statements do not include all of the information and notes required by GAAP for complete financial statement presentations. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company's consolidated results of operations, financial position, and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated Financial Statements and accompanying notes in its audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2015. Certain prior year amounts have been reclassified to conform with the current presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in these interim Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-02 must be adopted using a modified retrospective approach. Application will be required as of the beginning of the earliest comparative period presented. ASU 2016-02 requires lessees to record, at lease inception, a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Under ASU 2016-02, lessees may elect not to recognize lease liabilities and right-of-use assets for most leases with terms of 12 months or less. ASU 2016-02 requires lease liabilities to be measured at the present value of the lease payments over the lease term. ASU 2016-02 provides that right-of-use assets are measured based on the liability, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs. Pursuant to ASU 2016-02, expenses related to finance leases will be the sum of interest on the lease obligation and amortization of the right-of use asset and expenses related to operating leases will generally be recognized on a straight-line basis. In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)” (“ASU 2016-15”). ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-15 clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The Company is currently evaluating, but has not yet determined, the impact that implementation of these standards may have on its Consolidated Financial Statements and disclosures. There have been no other applicable material pronouncements issued since the filing of the Company's Annual Report. Restricted Cash Cash and cash equivalents includes funds held for students for unbilled educational services that were received from Title IV programs. As a trustee of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of each subsidiary institution's program participation agreement with ED. Restricted cash on the Company's Consolidated Balance Sheets was $2.4 million and $3.3 million as of September 30, 2016 (unaudited) and December 31, 2015, respectively. Changes in restricted cash that represent funds held for students as described above are included in cash flows from operating activities on the Company's Consolidated Statements of Cash Flows because these restricted funds are related to a core activity of its operations. Commitments and Contingencies The Company accrues for costs associated with contingencies including, but not limited to, regulatory compliance and legal matters when such costs are probable and can be reasonably estimated. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved. The Company bases these accruals on management’s estimate of such costs, which may vary from the ultimate cost and expenses associated with any such contingency. From time to time the Company may be involved in litigation in the normal course of its business. The Company is not currently subject to any pending material legal proceedings. Concentration APUS students utilize various payment sources and programs to finance educational expenses. These programs include funds from Department of Defense, or DoD, tuition assistance programs, education benefit programs administered by the U.S. Department of Veterans Affairs, or VA education benefits, and federal student aid from Title IV programs, as well as cash and other sources. Reductions in or changes to DoD tuition assistance, VA education benefits, Title IV programs and other payment sources could have a significant impact on the Company’s business, operations, financial condition and cash flows. A summary of APEI Segment revenue derived from APUS students by primary funding source for the three and nine months ended September 30, 2016 and September 30, 2015 is included in the table below (unaudited).
HCON students also utilize various payment sources and programs to finance educational expenses, including Title IV programs and VA education benefits. For the nine months ended September 30, 2016, approximately 84.4% of the HCON Segment’s revenue was derived from Title IV programs. |
Property and Equipment |
9 Months Ended |
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Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment All property and equipment is recorded at cost less accumulated depreciation, except the acquired assets of HCON, which were recorded at fair value at the acquisition date. Depreciation and amortization are calculated on a straight-line basis over the estimated useful lives of the assets. Our Partnership At a DistanceTM system, or PAD, is a customized student information and services system used by APUS to manage admissions, online orientation, course registrations, tuition payments, grade reporting, progress toward degrees, and various other functions. Costs associated with this system have been capitalized in accordance with Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, Subtopic 350-40, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and classified as property and equipment. These costs are amortized over the estimated useful life of five years. The carrying amounts of long-lived assets are reviewed whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. During the three months and nine months ended September 30, 2016, the Company's APEI Segment disposed of $4.3 million and $5.0 million in long-lived assets, respectively, primarily consisting of a loss that resulted from the abandoned development of a new student course registration engine. It was no longer probable development would be completed and the software placed in service due to programming difficulties that could not be resolved in a timely basis and without additional cost. The original carrying value of the software and incurred loss was $4.0 million. The losses on long-lived assets are included as loss on disposals of long-lived assets in these interim Consolidated Financial Statements. |
Assets Held for Sale |
9 Months Ended |
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Sep. 30, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Assets Held for Sale | Assets Held for Sale Assets held for sale represent excess real property located in Charles Town, West Virginia for our APEI Segment, no longer in use due to the relocation of employees to a new facility. Long-lived assets are classified as held for sale when the assets are expected to be sold within the next 12 months and meet the other relevant held-for-sale criteria. As such, the property is recorded at the lower of the carrying value or fair value, less cost to sell, until such time as the asset is sold. The fair value of the asset of $2.1 million, as determined by an independent appraisal, was less than the carrying value, and therefore the Company recognized a loss of $0.5 million during the three and nine months ended September 30, 2016. During the three months ended September 30, 2016, the Company's APEI Segment sold certain excess real property located in Charles Town, West Virginia, with a carrying value of $1.1 million for a net sales price of $0.8 million. This property was no longer in use due to relocation of employees to another facility. In connection with the sale, the Company recorded a loss on sale of $0.3 million. In connection with the items noted above, during the three and nine months ended September 30, 2016, the Company's APEI Segment had a loss on assets held for sale of $0.8 million included in loss on assets held for sale in these interim Consolidated Financial Statements. |
Investments |
9 Months Ended |
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Sep. 30, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investments | Investments In February 2013, the Company made a $4.0 million investment in preferred stock of Fidelis Education, Inc., or Fidelis Education, representing approximately 21.6% of its fully diluted equity. Fidelis Education offers a learning relationship management platform that has the goal of improving education advising and career mentoring services offered to students as they pursue college degrees. On February 1, 2016, the Company made an additional $950,000 investment in preferred stock of Fidelis Education increasing its investment in Fidelis Education to approximately 22% of its fully diluted equity. In connection with the investment, the Company is entitled to certain rights, including the right to representation on the Board of Directors of Fidelis Education. The Company accounts for its investments in Fidelis Education under the equity method of accounting. Therefore, the Company recorded the investments at cost and recognizes its share of earnings or losses in Fidelis Education in the periods for which they are reported with a corresponding adjustment in the carrying amount of the investment. On September 30, 2012, the Company made a $6.8 million investment in preferred stock of NWHW Holdings, Inc., or NWHW holdings, a holding company that operates an information technology training company, New Horizons Worldwide, Inc., or New Horizons, representing approximately 19.9% of the fully diluted equity of NWHW Holdings. During the three months ended September 30, 2016, the Company received a dividend of $3.0 million from NWHW Holdings. The Company accounts for its investment in NWHW Holdings using the equity method of accounting, and therefore recorded a corresponding reduction in the amount of its investment. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets In connection with its November 1, 2013 acquisition of HCON, the Company applied ASC 805, Business Combinations, using the acquisition method of accounting. The Company recorded $38.6 million of goodwill, representing the excess of the purchase price over the amount assigned to the net assets acquired and the fair value assigned to identified intangible assets, and recorded $8.1 million of identified intangible assets. In accordance with ASC 350, Intangibles-Goodwill and Other, the Company assesses goodwill for impairment on or around each anniversary date of the acquisition, and more frequently if events and circumstances indicate that goodwill might be impaired. Goodwill impairment testing consists of an optional qualitative assessment as well as a two-step quantitative test. Step one involves comparing the fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the carrying value is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference. In connection with the preparation of these interim consolidated financial statements, the Company completed a qualitative assessment to determine if an interim goodwill impairment test was necessary. Due to relevant circumstances that included, but were not limited to: (1) HCON's under performance against internal targets; (2) the challenging higher education competitive and regulatory environment, particularly for proprietary institutions; (3) overall financial performance; and (4) the uncertain status of ACICS, the Company concluded it was more likely than not the fair value of HCON was less than its carrying amount; therefore, the Company proceeded with step one of the goodwill impairment test. Step one of the goodwill impairment test identified that HCON’s fair value was less than the carrying value. Accordingly, step two testing was completed in order to determine the amount of the impairment. In step two, the fair value of all assets and liabilities was estimated for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of goodwill was then compared to the recorded goodwill to determine the amount of impairment. Step two testing indicated that the fair value of goodwill was $33.9 million or $4.7 million less than its carrying value. There was no impairment of the intangible assets. As a result, the Company recorded a pretax, non-cash charge of $4.7 million for the three and nine months ended September 30, 2016 to reduce the carrying value of its goodwill. The Company utilized an independent valuation firm to determine the fair value of HCON. The independent valuation firm weighted the results of four different valuation methods: (1) discounted cash flow; (2) guideline company method; (3) guideline transaction method - comparable transactions; and (4) guideline transaction method - private equity transactions. Under the income approach, fair value was determined based on estimated discounted future cash flows of HCON. The cash flows were discounted by an estimated risk weighted-average cost of capital, which was intended to reflect the overall level of inherent risk of HCON. Under the market approach, pricing terms from other transactions in the higher education market were used to determine the value of HCON. Values derived under the four valuation methods were then weighted to estimate HCON's enterprise value. Determining the fair value of HCON is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, EBITDA margins, discount rates and future market conditions, among others. Given the current competitive and regulatory environment, and the uncertainties regarding the related impact on HCON’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim goodwill impairment test will prove to be accurate predictions of the future. If the Company’s assumptions are not achieved, the Company may record additional goodwill impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material. Changes in the carrying amount of goodwill by reportable segment during the nine months ended September 30, 2016 are as follows (in thousands) (unaudited):
The following table presents the components of the net carrying amount of goodwill by reportable segment as of September 30, 2016 (in thousands) (unaudited):
Other intangible assets in our HCON Segment consist of the following as of September 30, 2016 (in thousands) (unaudited):
Identified intangible assets are amortized in a manner that reflects the estimated economic benefit of the intangible assets. The intangible assets Curricula and Non-compete agreements are amortized on a straight-line basis. The Student contracts and relationships intangible asset is amortized using an accelerated method. |
Net Income Per Common Share |
9 Months Ended |
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Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Net Income Per Common Share | Net Income Per Common Share Basic net income per common share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share increases the shares used in the per share calculation by the dilutive effects of options and restricted stock awards. Stock options are not included in the computation of diluted earnings per share when their effect is anti-dilutive. There were 246,074 and 248,674 anti-dilutive stock options excluded from the calculation for the three and nine months ended September 30, 2016, respectively, compared to 298,991 and 324,353 anti-dilutive stock options excluded from the calculation for the three and nine months ended September 30, 2015. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is subject to U.S. Federal income taxes as well as income taxes of multiple state jurisdictions. For Federal and state tax purposes, the tax years from 2013 to 2015 remain open to examination. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation On March 15, 2011, the Company’s Board of Directors adopted the American Public Education, Inc. 2011 Omnibus Incentive Plan, or the 2011 Incentive Plan, and the Company’s stockholders approved the 2011 Incentive Plan on May 6, 2011, at which time the 2011 Incentive Plan became effective. Upon effectiveness of the 2011 Incentive Plan, the Company ceased making awards under the American Public Education, Inc. 2007 Omnibus Incentive Plan, or the 2007 Incentive Plan. The 2011 Incentive Plan allows the Company to grant up to 2,000,000 shares plus any shares of common stock that are subject to outstanding awards under the 2007 Incentive Plan or the American Public Education, Inc. 2002 Stock Plan, or the 2002 Stock Plan, that terminate due to expiration, forfeiture, cancellation or otherwise without the issuance of such shares. Prior to 2012, the Company issued a mix of stock options and restricted stock, but since 2011 the Company has not issued any stock options. Restricted Stock and Restricted Stock Unit Awards Stock-based compensation expense related to restricted stock and restricted stock unit grants is expensed over the vesting period using the straight-line method for Company employees and the graded-vesting method for members of the Board of Directors, and is measured using the Company's stock price on the date of grant. The Company estimates forfeitures of share-based awards at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from original estimates. The table below summarizes the restricted stock and restricted stock unit awards activity for the nine months ended September 30, 2016 (unaudited):
Option Awards The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model. Prior to 2012, the Company calculated the expected term of stock option awards using the “simplified method” in accordance with Securities and Exchange Commission Staff Accounting Bulletins No. 107 and 110 because the Company lacked historical data and was unable to make reasonable assumptions regarding the future. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of peers with similar attributes. In addition, the Company determines the risk-free interest rate by selecting the U.S. Treasury five-year constant maturity, quoted on an investment basis in effect at the time of grant for that business day. Estimates of fair value are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made under FASB ASC Topic 718. Options previously granted vest ratably over periods of three to five years and expire in seven to ten years from the date of grant. Option activity is summarized as follows (unaudited):
Stock-Based Compensation Expense Stock-based compensation expense charged against income during the three and nine month periods ended September 30, 2016 and 2015 is as follows (unaudited):
As of September 30, 2016, there was $6.6 million of total unrecognized compensation cost, representing unrecognized compensation cost associated with non-vested restricted stock and restricted stock units. The total remaining cost is expected to be recognized over a weighted average period of 1.7 years. |
Segment Information |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company has two operating segments that are managed in the following reportable segments: •American Public Education Segment, or APEI Segment; and •Hondros College of Nursing Segment, or HCON Segment. In accordance with FASB ASC Topic 280, Segment Reporting, the chief operating decision-maker has been identified as the Company's Chief Executive Officer. The Company's Chief Executive Officer reviews operating results to make decisions about allocating resources and assessing performance for the APEI Segment and HCON Segment. A summary of financial information by reportable segment is as follows (unaudited):
A summary of the Company’s consolidated assets by reportable segment is as follows (current period unaudited):
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Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in these interim Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-02 must be adopted using a modified retrospective approach. Application will be required as of the beginning of the earliest comparative period presented. ASU 2016-02 requires lessees to record, at lease inception, a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Under ASU 2016-02, lessees may elect not to recognize lease liabilities and right-of-use assets for most leases with terms of 12 months or less. ASU 2016-02 requires lease liabilities to be measured at the present value of the lease payments over the lease term. ASU 2016-02 provides that right-of-use assets are measured based on the liability, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs. Pursuant to ASU 2016-02, expenses related to finance leases will be the sum of interest on the lease obligation and amortization of the right-of use asset and expenses related to operating leases will generally be recognized on a straight-line basis. In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)” (“ASU 2016-15”). ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. ASU 2016-15 clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The Company is currently evaluating, but has not yet determined, the impact that implementation of these standards may have on its Consolidated Financial Statements and disclosures. There have been no other applicable material pronouncements issued since the filing of the Company's Annual Report. |
Restricted Cash | Restricted Cash Cash and cash equivalents includes funds held for students for unbilled educational services that were received from Title IV programs. As a trustee of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of each subsidiary institution's program participation agreement with ED. Restricted cash on the Company's Consolidated Balance Sheets was $2.4 million and $3.3 million as of September 30, 2016 (unaudited) and December 31, 2015, respectively. Changes in restricted cash that represent funds held for students as described above are included in cash flows from operating activities on the Company's Consolidated Statements of Cash Flows because these restricted funds are related to a core activity of its operations. |
Commitments and Contingencies | Commitments and Contingencies The Company accrues for costs associated with contingencies including, but not limited to, regulatory compliance and legal matters when such costs are probable and can be reasonably estimated. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved. The Company bases these accruals on management’s estimate of such costs, which may vary from the ultimate cost and expenses associated with any such contingency. From time to time the Company may be involved in litigation in the normal course of its business. The Company is not currently subject to any pending material legal proceedings. |
Concentration | Concentration APUS students utilize various payment sources and programs to finance educational expenses. These programs include funds from Department of Defense, or DoD, tuition assistance programs, education benefit programs administered by the U.S. Department of Veterans Affairs, or VA education benefits, and federal student aid from Title IV programs, as well as cash and other sources. Reductions in or changes to DoD tuition assistance, VA education benefits, Title IV programs and other payment sources could have a significant impact on the Company’s business, operations, financial condition and cash flows. |
Basis of Presentation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
American Public Education Segment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of APEI segment revenue | A summary of APEI Segment revenue derived from APUS students by primary funding source for the three and nine months ended September 30, 2016 and September 30, 2015 is included in the table below (unaudited).
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Goodwill and Intangible Assets (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | Changes in the carrying amount of goodwill by reportable segment during the nine months ended September 30, 2016 are as follows (in thousands) (unaudited):
The following table presents the components of the net carrying amount of goodwill by reportable segment as of September 30, 2016 (in thousands) (unaudited):
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Schedule of Indefinite-Lived Intangible Assets | Other intangible assets in our HCON Segment consist of the following as of September 30, 2016 (in thousands) (unaudited):
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Schedule of Finite-Lived Intangible Assets | Other intangible assets in our HCON Segment consist of the following as of September 30, 2016 (in thousands) (unaudited):
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of restricted stock and restricted stock unit awards | The table below summarizes the restricted stock and restricted stock unit awards activity for the nine months ended September 30, 2016 (unaudited):
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Summary of option activity | Option activity is summarized as follows (unaudited):
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Summary of stock-based compensation cost charged against income | Stock-based compensation expense charged against income during the three and nine month periods ended September 30, 2016 and 2015 is as follows (unaudited):
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of financial information by reportable segment | A summary of financial information by reportable segment is as follows (unaudited):
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Summary of consolidated assets by reportable segment | A summary of the Company’s consolidated assets by reportable segment is as follows (current period unaudited):
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Nature of the Business (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
subsidiary
student
campus
segment
| |
Segment Reporting Information [Line Items] | |
Number of students | student | 92,200 |
Number of subsidiaries | subsidiary | 2 |
Number of reportable segments | segment | 2 |
Hondros College of Nursing Segment | |
Segment Reporting Information [Line Items] | |
Number of campuses | campus | 4 |
Basis of Presentation - Restricted Cash (Details) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accounting Policies [Abstract] | ||
Restricted cash | $ 2.4 | $ 3.3 |
Basis of Presentation - Concentration (Details) - Customer Concentration Risk - Sales Revenue, Services, Net |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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American Public Education Segment | Title IV programs | ||||
Concentration Risk [Line Items] | ||||
Percentage of segment revenue | 29.50% | 31.20% | 29.20% | 31.80% |
American Public Education Segment | DoD tuition assistance programs | ||||
Concentration Risk [Line Items] | ||||
Percentage of segment revenue | 35.20% | 34.80% | 35.70% | 34.70% |
American Public Education Segment | VA education benefits | ||||
Concentration Risk [Line Items] | ||||
Percentage of segment revenue | 22.30% | 21.50% | 22.10% | 20.90% |
American Public Education Segment | Cash and other sources | ||||
Concentration Risk [Line Items] | ||||
Percentage of segment revenue | 12.90% | 12.50% | 12.90% | 12.60% |
Hondros College of Nursing Segment | Title IV programs | ||||
Concentration Risk [Line Items] | ||||
Percentage of segment revenue | 84.40% |
Property and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Property, Plant and Equipment [Line Items] | |||
Property and equipment, net | $ 99,155 | $ 99,155 | $ 109,281 |
Loss of property and equipment disposal | $ 4,000 | ||
Software and Software Development Costs | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, useful life | 5 years | ||
American Public Education Segment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, disposal amount | $ 4,300 | $ 5,000 | |
American Public Education Segment | Software Development | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, net | $ 4,000 |
Investments (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|---|
Feb. 01, 2016 |
Sep. 30, 2012 |
Feb. 28, 2013 |
Sep. 30, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Schedule of Equity Method Investments [Line Items] | ||||||
Payments to acquire equity method investments | $ 950,000 | $ 319,000 | ||||
Fidelis Education | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Payments to acquire equity method investments | $ 950,000 | $ 4,000,000 | ||||
Equity method investment, ownership percentage | 22.00% | 21.60% | ||||
NWHW Holdings | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Payments to acquire equity method investments | $ 6,800,000 | |||||
Equity method investment, ownership percentage | 19.90% | |||||
Dividends received from equity investment | $ 3,000,000 |
Net Income Per Common Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Stock option | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive stock options (in shares) | 246,074 | 298,991 | 248,674 | 324,353 |
Income Taxes (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Earliest Tax Year | |
Income Tax Examination [Line Items] | |
Tax years open to examination | 2013 |
Latest Tax Year | |
Income Tax Examination [Line Items] | |
Tax years open to examination | 2015 |
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Mar. 15, 2011 |
|
Restricted Stock and Restricted Stock Units Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation cost | $ 6.6 | |
Unrecognized compensation cost, weighted average period | 1 year 8 months | |
Minimum | Stock option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options previously granted vesting period | 3 years | |
Options previously granted expiration period | 7 years | |
Maximum | Stock option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options previously granted vesting period | 5 years | |
Options previously granted expiration period | 10 years | |
2011 Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares available for grant (in shares) | 2,000,000 |
Stock-Based Compensation - Summary of Restricted Stock Awards Activity (Details) - Restricted Stock and Restricted Stock Units Awards |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Number of Shares | |
Non vested, beginning balance (in shares) | shares | 293,419 |
Shares granted (in shares) | shares | 336,125 |
Vested shares (in shares) | shares | (121,298) |
Shares forfeited (in shares) | shares | (30,069) |
Non vested, ending balance (in shares) | shares | 478,177 |
Weighted-Average Grant Price and Fair Value | |
Non vested, beginning balance (in dollars per share) | $ / shares | $ 35.86 |
Shares granted (in dollars per share) | $ / shares | 16.34 |
Vested shares (in dollars per share) | $ / shares | 38.18 |
Shares forfeited (in dollars per share) | $ / shares | 26.64 |
Non vested, ending balance (in dollars per share) | $ / shares | $ 21.89 |
Segment Information - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Information - Summary of Consolidated Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Assets: | ||
Total Assets | $ 313,324 | $ 303,896 |
American Public Education Segment | ||
Assets: | ||
Total Assets | 264,230 | 250,118 |
Hondros College of Nursing Segment | ||
Assets: | ||
Total Assets | $ 49,094 | $ 53,778 |
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