Stockholders’ Equity

Stock Incentive Plans

The American Public Education, Inc. 2017 Omnibus Incentive Plan, or 2017 Incentive Plan, became effective on May 12, 2017, or the Effective Date. 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. 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

The fair value of APEI’s restricted stock and restricted stock unit awards is calculated based on the closing price of APEI’s stock on the date of grant. The estimated fair value of these awards is recognized as stock-based compensation expense and 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. APEI recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant, and multiplying the corresponding number of shares earned based upon such achievement by the closing price of APEI’s stock on the date of grant. To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent previously recognized, compensation cost is reversed. 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, 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

The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2019:



	Number of Shares		Weighted Average Grant Price and Fair Value
Non vested, December 31, 2018	490,342		$	24.23
Shares granted	333,635		29.48
Vested shares	(255,918	)	22.98
Shares forfeited	(21,119	)	26.86
Non vested, December 31, 2019	546,940		$	27.81

There were no shares of restricted stock or restricted stock units excluded in the computation of diluted net income per share for the year ended December 31, 2017. There were 35,688 and 37,738 shares of restricted stock or restricted stock units excluded in the computation of diluted net income per common share for the years ended December 31, 2018 and 2019, respectively.

At December 31, 2019, total unrecognized compensation expense in the amount of $7.3 million relates to non-vested restricted stock, restricted stock units, and stock options, which will be recognized over a weighted average period of 1.8 years.

As a result of termination of employment, the Company accepted the following common shares for forfeiture: 43,454 shares for $914,272 in 2017, 48,814 shares for $1,118,842 in 2018, and 17,825 shares for $488,974 in 2019.

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 the Company’s common stock. In addition, the Company determines the risk-free interest rate by selecting the U.S. Treasury constant maturity for the same maturity as the estimated life of the option, 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. Prior to 2012, the Company issued a mix of stock options and restricted stock, but since 2011 the Company did not issue any stock options until 2019 when options were issued to the Company’s new Chief Executive Officer. Options currently outstanding vest ratably over a period of three years and expire in ten years from the date of grant.

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	—		$	—		$	—

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2019 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, 2018	—	$	—
Options granted	43,134	23.77		10
Awards exercised	—	—
Options forfeited	—	—
Outstanding, December 31, 2019	43,134	$	23.77	9.73	$	156
Exercisable, December 31, 2019	—	$	—		$	—

The following table sets forth the assumptions used in calculating the fair value at the date of grant of each option award granted:



	Year Ended December 31,
	2017			2018			2019
Expected volatility	—		%	—		%	47.37		%
Expected dividends	—		%	—		%	—		%
Expected term, in years	0			0			10
Risk-free interest rate	—		%	—		%	1.74		%
Weighted-average fair value of options granted during the year	$	—		$	—		$	13.91

The following table summarizes information regarding stock option exercises:



	Year Ended December 31,
	2017		2018		2019
	(In thousands)
Proceeds from stock options exercised	$	98	$	—	$	—
Intrinsic value of stock options exercised	$	194	$	—	$	—
Tax benefit from exercises	$	60	$	—	$	—

There were 123,267 anti-dilutive stock options excluded from the calculation of diluted net income per common share for the year ended December 31, 2017. There were no anti-dilutive stock options excluded from the calculation of diluted net income per common share for the year ended December 31, 2018. There were 43,134 anti-dilutive stock options excluded from the calculation of diluted net income per share for the year ended December 31, 2019.

Stock-Based Compensation Expense

As of December 31, 2019, there were 484,400 and 62,540 shares subject to outstanding awards under the 2017 Incentive Plan and the 2011 Incentive Plan, respectively.

For the years ended December 31, 2017, 2018 and 2019, the Company recognized stock-based compensation expense as follows:



	Year Ended December 31,
	2017		2018		2019
	(In thousands)
Instructional costs and services	$	1,310	$	1,610	$	1,570
Selling and promotional	789		512		766
General and administrative	4,147		5,058		3,624
Total stock-based compensation expense	$	6,246	$	7,180	$	5,960

The Company recognized income tax benefits of $2.5 million, $1.9 million, and $2.0 million from vested restricted stock and restricted stock units for the years ended December 31, 2017, 2018 and 2019, respectively.

Repurchase

During the years ended December 31, 2017 and 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. During the year ended December 31, 2019, the Company repurchased 1,416,304 shares of the Company’s common stock, par value $0.01 per share. The chart and footnotes below provide the detail as to the Company’s repurchases during the period.



	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⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾⁽³⁾
January 1, 2019	—	$	—	—	—	$	148,008
January 1, 2019 – January 31, 2019	—	—		—	283,876	148,008
February 1, 2019 – February 28, 2019	—	—		—	283,876	148,008
March 1, 2019 – March 31, 2019	—	—		—	283,876	148,008
April 1, 2019 – April 30, 2019	—	—		—	284,252	148,008
May 1, 2019 – May 31, 2019	129,973	29.38		129,973	299,060	31,181,393
June 1, 2019 – June 30, 2019	197,488	29.03		197,488	299,060	25,448,317
July 1, 2019 – July 31, 2019	218,699	30.79		218,699	299,436	18,714,574
August 1, 2019 – August 31, 2019	220,000	28.16		220,000	299,436	12,519,374
September 1, 2019 – September 30, 2019	199,921	24.12		199,921	352,104	7,697,280
October 1, 2019 – October 31, 2019	229,849	22.34		229,849	352,480	2,562,453
November 1, 2019 – November 30, 2019	110,374	23.21		110,374	352,480	673
December 1, 2019 – December 31, 2019	110,000	27.23		110,000	352,480	22,004,700
Total	1,416,304	$	26.83	1,416,304	352,480	$	22,004,700

(1)

On December 9, 2011, our Board of Directors approved a stock repurchase program for our common stock, under which we could annually purchase up to the cumulative number of shares issued or deemed issued in that year 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 does not obligate us to repurchase any shares, may be suspended or discontinued at any time, and is funded using our available cash.

(2)

On May 2, 2019, the Company’s Board of Directors authorized the repurchase of up to $35.0 million of the Company’s common stock, and on December 5, 2019, the Board approved an additional authorization of up to $25.0 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 in privately negotiated transactions. The authorization does not obligate the Company to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors the Company deem appropriate. The Company may purchase shares at management’s discretion in the open market, in privately negotiated transactions, in transactions structured through investment banking institutions, or a combination of the foregoing. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares under this authorization. The amount and timing of repurchases are subject to a variety of factors, including liquidity, cash flow, stock price and general business and market conditions. The Company has no obligation to repurchase shares and may modify, suspend or discontinue the repurchase program at any time. The authorization under this program is in addition to the Company’s repurchase program under which we may annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plan.


(3)	During the year-ended December 31, 2019, the Company was deemed to have repurchased 83,214 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 programs authorized by our Board of Directors as described in footnotes 1 and 2 of this table.