Stockholders’ Equity

Stock Incentive Plans

On March 31, 2017 the Company’s Board of Directors adopted the American Public Education, Inc. 2017 Omnibus Incentive Plan, or 2017 Incentive Plan, and on May 12, 2017, or the Effective Date, the Company’s stockholders approved the 2017 Incentive Plan, at which time the 2017 Incentive Plan became effective. Upon effectiveness of the 2017 Incentive Plan, the Company ceased making awards under the American Public Education, Inc. 2011 Omnibus Incentive Plan, or the 2011 Incentive Plan. The 2017 Incentive Plan allows the Company to grant up to 1,675,000 shares, as well as shares of the Company’s common stock that were available for issuance under the 2011 Incentive Plan as of the Effective Date. In addition, the number of shares of common stock available under the 2017 Incentive Plan will be increased from time to time by the number of shares subject to outstanding awards granted under the 2011 Incentive Plan that terminate by expiration, forfeiture, cancellation or otherwise without issuance of such shares following the Effective Date. 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. The 2017 Incentive Plan includes a provision that allows individuals who have reached certain service and retirement eligibility criteria on the date of grant an accelerated service period of one year. The Company recognizes compensation expense for these individuals over the accelerated period.

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 APEI’s stock price on the date of grant. The Company also 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 sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2016:



	Number of Shares		Weighted Average Grant Price and Fair Value
Non vested, December 31, 2015	293,419		$	35.86
Shares granted	336,434		16.34
Vested shares	(152,714	)	35.83
Shares forfeited	(39,168	)	25.46
Non vested, December 31, 2016	437,971		$	21.54

The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2017:



	Number of Shares		Weighted Average Grant Price and Fair Value
Non vested, December 31, 2016	437,971		$	21.54
Shares granted	279,729		23.35
Vested shares	(212,984	)	25.98
Shares forfeited	(43,454	)	21.04
Non vested, December 31, 2017	461,262		$	20.91

The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2018:



	Number of Shares		Weighted Average Grant Price and Fair Value
Non vested, December 31, 2017	461,262		$	20.91
Shares granted	302,781		27.00
Vested shares	(222,069	)	21.33
Shares forfeited	(51,632	)	22.94
Non vested, December 31, 2018	490,342		$	24.23

There were 35,688 shares of restricted stock or restricted stock units excluded in the computation of diluted net income per common share for the year ended December 31, 2018. There were no shares of restricted stock or restricted stock units excluded in the computation of diluted net income per share for the years ended December 31, 2017 and December 31, 2016.

At December 31, 2018, total unrecognized compensation expense in the amount of $5.1 million relates to non-vested restricted stock and restricted stock units which will be recognized over a weighted average period of 1.7 years.

As a result of termination of employment, the Company accepted the following common shares for forfeiture: 31,370 shares for $611,335 in 2016, 43,454 shares for $914,272 in 2017, and 48,814 shares for $1,118,842 in 2018.

Option Awards

The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model. 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 necessarily 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.

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2016 and the changes during the periods then ended is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Contractual Life (years)	Aggregate Intrinsic Value
						(in thousands)
Outstanding, December 31, 2015	329,871		$	33.65
Options granted	—		—
Awards exercised	(16,878	)	7.00
Options forfeited	(53,024	)	37.09
Outstanding, December 31, 2016	259,969		$	34.68	0.53	$	246
Exercisable, December 31, 2016	259,969		$	34.68	0.53	$	246

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2017 and the changes during the periods then ended is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Contractual Life (years)	Aggregate Intrinsic Value
						(in thousands)
Outstanding, December 31, 2016	259,969		$	34.68
Options granted	—		—
Awards exercised	(14,002	)	6.99
Options forfeited	(136,351	)	35.24
Outstanding, December 31, 2017	109,616		$	37.52	0.01	$	—
Exercisable, December 31, 2017	109,616		$	37.52	0.01	$	—

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2018 and the changes during the periods then ended is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Contractual Life (years)	Aggregate Intrinsic Value
						(in thousands)
Outstanding, December 31, 2017	109,616		$	37.52
Options granted	—		—
Awards exercised	—		—
Options forfeited	(109,616	)	37.52
Outstanding, December 31, 2018	—		$	—		$	—
Exercisable, December 31, 2018	—		$	—		$	—

The following table summarizes information regarding stock option exercises:



	Year Ended December 31,
	2016		2017		2018
	(In thousands)
Proceeds from stock options exercised	$	118	$	98	$	—
Intrinsic value of stock options exercised	$	290	$	194	$	—
Tax benefit from exercises	$	94	$	60	$	—

There were 247,993, 123,267 and 0 anti-dilutive stock options excluded from the calculation of diluted net income per common share for the years ended December 31, 2016, 2017 and 2018, respectively.

Stock-Based Compensation Expense

As of December 31, 2018, there were 281,775 and 208,567 shares subject to outstanding awards under the 2017 Incentive Plan and the 2011 Incentive Plan, respectively.

For the years ended December 31, 2016, 2017 and 2018, the Company recognized stock-based compensation expense as follows:



	Year Ended December 31,
	2016		2017		2018
	(In thousands)
Instructional costs and services	$	1,497	$	1,310	$	1,610
Selling and promotional	672		789		512
General and administrative	3,042		4,147		5,058
Total stock-based compensation expense	$	5,211	$	6,246	$	7,180

The Company recognized income tax benefits of $2,064,000, $2,473,000, and $1,910,000 from vested restricted stock and restricted stock units for the years ended December 31, 2016, 2017 and 2018, respectively.

Repurchase

During the years ended December 31, 2016, December 31, 2017, and December 31, 2018 the Company did not repurchase shares of the Company’s common stock, par value $0.01 per share, other than shares deemed to have been repurchased to satisfy employee minimum tax withholding requirements in connection with the vesting of restricted stock grants.