Stockholders’ Equity

Stock Incentive Plans

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 used 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 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, 2014:



	Number of Shares		Weighted Average Grant Price and Fair Value
Non vested, December 31, 2013	190,761		$	38.61
Shares granted	272,550		36.73
Vested shares	(87,445	)	38.69
Shares forfeited	(15,097	)	41.64
Non vested, December 31, 2014	360,769		$	37.03

The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2015:



	Number of Shares		Weighted Average Grant Price and Fair Value
Non vested, December 31, 2014	360,769		$	37.03
Shares granted	127,469		35.15
Vested shares	(164,144	)	37.85
Shares forfeited	(30,675	)	36.76
Non vested, December 31, 2015	293,419		$	35.86

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

There were no 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, 2016. The Company recognized income tax benefits of $2,022,000, $2,467,000, and $2,064,000 from vested restricted stock and restricted stock units for the years ended December 31, 2014, 2015 and 2016, respectively.

At December 31, 2016, 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 1.6 years.

As a result of termination of employment, the Company accepted the following common shares for forfeiture: 15,097 shares for $628,639 in 2014, 22,066 shares for $815,886 in 2015, and 31,370 shares for $611,335 in 2016.

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 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, 2014 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, 2013	501,202		$	28.82
Options granted	—		$	—
Awards exercised	(46,198	)	$	13.66
Options forfeited	(20,603	)	$	37.04
Outstanding, December 31, 2014	434,401		$	30.04	2.14	$	3,080
Exercisable, December 31, 2014	434,401		$	30.04	2.14	$	3,080

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2015 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, 2014	434,401		$	30.04
Options granted	—		$	—
Awards exercised	(55,382	)	$	3.29
Options forfeited	(49,147	)	$	35.97
Outstanding, December 31, 2015	329,872		$	33.65	1.30	$	359
Exercisable, December 31, 2015	329,872		$	33.65	1.30	$	359

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	329,872		$	33.65
Options granted	—		$	—
Awards exercised	(16,878	)	$	7.00
Options forfeited	(53,025	)	$	37.09
Outstanding, December 31, 2016	259,969		$	34.68	0.53	$	246
Exercisable, December 31, 2016	259,969		$	34.68	0.53	$	246

The following table summarizes information regarding stock option exercises:



	Year Ended December 31,
	2014		2015		2016
	(In thousands)
Proceeds from stock options exercised	$	631	$	182	$	118
Intrinsic value of stock options exercised	$	1,033	$	1,057	$	290
Tax benefit from exercises	$	193	$	54	$	94

There were 365,832, 317,961 and 247,993 anti-dilutive stock options excluded from the calculation of diluted net income per common share for the years ended December 31, 2014, 2015 and 2016, respectively.

Stock-Based Compensation Expense

As of December 31, 2016, there were 437,971 shares subject to outstanding awards under the 2011 Incentive Plan, and 259,969 shares subject to outstanding awards under the 2007 Incentive Plan and the 2002 Stock Plan.

For the years ended December 31, 2014, 2015 and 2016, the Company recognized $5,369,000, $5,912,000 and $5,211,000 in stock-based compensation expense, and recognized a total income tax benefit of $2,022,000, $2,467,000 and $2,064,000, respectively.



	Year Ended December 31,
	2014		2015		2016
	(In thousands)
Instructional costs and services	$	1,274	$	1,598	$	1,497
Selling and promotional	568		684		672
General and administrative	3,527		3,630		3,042
Total stock-based compensation expense	$	5,369	$	5,912	$	5,211

Repurchase

During the year ended December 31, 2014, the Company repurchased shares of the Company’s common stock, par value $0.01 per share. The chart below provides 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⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ^{(2) (3)}
January 1, 2014	—	$	—	—	—	$	9,417,721
January 20, 2014	—	$	—	—	147,284	9,417,721
January 1, 2014 - January 30, 2014	—	$	—	—	147,284	9,417,721
February 1, 2014 - February 28, 2014	—	$	—	—	147,284	9,417,721
March 1, 2014 - March 31, 2014	40,000	$	35.26	40,000	107,284	9,417,721
April 1, 2014 - April 30, 2014	185,000	$	34.60	185,000	14,784	6,217,221
May 1, 2014 - May 31, 2014	139,568	$	35.11	139,568	—	1,836,055
June 1, 2014 - June 30, 2014	51,760	$	34.95	51,760	—	27,043
June 13, 2014	—	$	—	—	—	15,027,043
July 1, 2014 - September 31, 2014	—	$	—	—	—	15,027,043
October 1, 2014 - October 31, 2014	—	$	—	—	114,634	15,027,043
November 1, 2014 - November 30, 2014	30,000	$	35.48	30,000	84,634	15,027,043
December 1, 2014 - December 31, 2014	84,634	$	34.09	84,634	—	15,027,043
Total	530,962	$	34.78	530,962	—	$	15,027,043

During the year ended December 31, 2015, the Company repurchased shares of the Company’s common stock, par value $0.01 per share. The chart below provides 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⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ^{(2) (3)}
January 1, 2015	—	$	—	—	—	$	15,027,043
January 1, 2015 - January 31, 2015	—	$	—	—	116,910	15,027,043
February 1, 2015 - February 28, 2015	—	$	—	—	116,910	15,027,043
March 1, 2015 - March 31, 2015	100,000	$	31.69	100,000	66,910	13,442,543
April 1, 2015 - April 30, 2015	203,820	$	30.84	203,820	—	9,220,841
May 1, 2015 - May 31, 2015	200,000	$	25.59	200,000	—	4,102,131
June 1, 2015 - June 30, 2015	160,000	$	24.93	160,000	—	114,029
June 30, 2015	—	$	—	—	—	15,114,029
July 1, 2015 - July 31, 2015	—	$	—	—	—	15,114,029
August 1, 2015 - August 31, 2015	—	$	—	—	—	15,114,029
September 1, 2015 - September 30, 2015	129,849	$	23.15	129,849	—	12,107,835
October 1, 2015 - October 31, 2015	211,040	$	23.19	211,040	—	7,214,395
November 1, 2015 - November 30, 2015	199,391	$	22.11	199,391	—	2,806,575
December 1, 2015 - December 31, 2015	118,746	$	22.39	118,746	—	148,008
Total	1,322,846	$	25.34	1,322,846	—	$	148,008

During the year ended December 31, 2016, the Company did not repurchase shares of the Company’ s common stock, par value $0.01 per share. The chart below provides detail as to the maximum number of shares that may yet be purchased under the existing plans.



	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)}
January 1, 2016	—	$	—	—	—	$	148,008
January 1, 2016 – January 31, 2016	—	—		—	315,231	148,008
February 1, 2016 – February 29, 2016	—	—		—	315,231	148,008
March 1, 2016 – March 31, 2016	—	—		—	315,231	148,008
April 1, 2016 – April 30, 2016	—	—		—	316,935	148,008
May 1, 2016 – May 31, 2016	—	—		—	316,935	148,008
June 1, 2016 – June 30, 2016	—	—		—	330,816	148,008
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
October 1, 2016 – October 31, 2016	—	—		—	336,434	148,008
November 1, 2016 – November 30, 2016	—	—		—	336,434	148,008
December 1, 2016 – December 31, 2016	—	—		—	336,434	148,008
Total	—	—		—	336,434	$	148,008

On December 9, 2011, the Company’s Board of Directors approved a stock repurchase program for our common stock, under which the Company may annually purchase up to the cumulative number of shares issued or deemed issued in that year under the Company’s 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 is funded using the Company’s available cash.

On May 14, 2012, the Company’s Board of Directors authorized a program to repurchase up to $20 million of shares of the Company’s common stock. On each of March 14, 2013, June 13, 2014, and June 12, 2015 the Company’s Board of Directors increased the authorization by an additional $15 million of shares, for a cumulative increase of $45 million of shares and a total authorization of $65 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 the Company to acquire any shares, and purchases may be commenced or suspended at any time based on market conditions and other factors as the Company deems appropriate.

The Company was deemed to have repurchased 56,272 and 49,512 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants during the 12 months ended December 31, 2015 and 2016, respectively. During the 12 months ended December 31, 2014, the Company was deemed to have repurchased 30,973 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants and to cover the exercise and minimum tax-withholding requirements of expiring stock options. These repurchases were not part of the stock repurchase program authorized by the Company’s Board of Directors.

During the years ended December 31, 2014 and 2015, the Company repurchased and retired 530,962, and 1,322,846, shares of common stock, respectively. No shares of common stock were repurchased and retired in 2016.