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Share-Based Compensation Plans | 12 Months Ended
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Dec. 31, 2012
Share-Based Compensation Plans | 13. Share-Based Compensation Plans Adoption of Equity Plans On September 27, 2008 the University’s shareholders approved the adoption of the 2008 Equity Incentive Plan (“Incentive Plan”) and the 2008 Employee Stock Purchase (“ESPP”). A total of 4,200 shares of the University’s common stock was originally authorized for issuance under the Incentive Plan. On January 1 of each subsequent year in accordance with the terms of the Incentive Plan, the number of shares authorized for issuance under the Incentive Plan automatically increased by 2.5% of the number of shares of common stock issued and outstanding on December 31, raising the total number of shares of common stock authorized for issuance under the Incentive Plan to 9,847 shares effective January 1, 2013. Although the ESPP has not yet been implemented, a total of 1,050 shares of the University’s common stock have been authorized for sale under the ESPP. Incentive Plan Restricted Stock During fiscal year 2012, the University granted 552 shares of common stock with a service vesting condition to certain of its executives, officers, faculty and employees. The restricted shares have voting rights and vest evenly at 20% over each of the next five years. Upon vesting, shares will be held in lieu of taxes equivalent to the minimum statutory tax withholding required to be paid when the restricted stock vests. In 2012, 2011, and 2010 the University granted 11, 6, and 4 shares of common stock, to certain of the non-employee members of the University’s board of directors. The restricted shares have voting rights and vest within one year of the date of grant. A summary of the activity related to restricted stock granted under the University’s Incentive Plan is as follows:
|  | Total Shares |  |  | Weighted Average Grant Date Fair Value per Share |
Outstanding as of December 31, 2009 |  |  | 9 |  |  | $ | 14.88 |
Granted |  |  | 4 |  |  | $ | 25.16 |
Vested |  |  | (9 | ) |  | $ | 14.88 |
Forfeited, canceled or expired |  |  | — |  |  |  |  |
Outstanding as of December 31, 2010 |  |  | 4 |  |  | $ | 25.16 |
Granted |  |  | 6 |  |  | $ | 13.88 |
Vested |  |  | (4 | ) |  | $ | 25.16 |
Forfeited, canceled or expired |  |  | — |  |  |  |  |
Outstanding as of December 31, 2011 |  |  | 6 |  |  | $ | 13.88 |
Granted |  |  | 563 |  |  | $ | 17.04 |
Vested |  |  | (6 | ) |  | $ | 13.88 |
Forfeited, canceled or expired |  |  | (10 | ) |  | $ | 17.03 |
Outstanding as of December 31, 2012 |  |  | 553 |  |  | $ | 17.04 |
As of December 31, 2012, there was approximately $7,531 of total unrecognized share-based compensation cost, net of estimated forfeitures, related to unvested restricted stock awards. These costs are expected to be recognized over a weighted average period of 2.6 years. Stock Options During 2011 and 2010, the University granted time vested options to purchase shares of common stock with an exercise price equal to the fair market value on the date of grant. The time vested options vest ratably over a period of five years for employees and expire ten years from the date of grant. A summary of the activity related to stock options granted under the University’s Incentive Plan is as follows:
|  | Summary of Stock Options Outstanding |
|  | Total Shares |  |  | Weighted Average Exercise Price per Share |  |  | Weighted Average Remaining Contractual Term (Years) |  |  | Aggregate Intrinsic Value ($)(1) |
Outstanding as of December 31, 2009 |  |  | 3,350 |  |  | $ | 12.30 |  |  |  |  |  |  |  |  |
Granted |  |  | 922 |  |  | $ | 21.29 |  |  |  |  |  |  |  |  |
Exercised |  |  | (144 | ) |  | $ | 12.12 |  |  |  |  |  |  |  |  |
Forfeited, canceled or expired |  |  | (102 | ) |  | $ | 17.45 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2010 |  |  | 4,026 |  |  | $ | 14.24 |  |  |  |  |  |  |  |  |
Granted |  |  | 1,250 |  |  | $ | 15.34 |  |  |  |  |  |  |  |  |
Exercised |  |  | (140 | ) |  | $ | 12.00 |  |  |  |  |  |  |  |  |
Forfeited, canceled or expired |  |  | (172 | ) |  | $ | 17.29 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2011 |  |  | 4,964 |  |  | $ | 14.47 |  |  |  |  |  |  |  |  |
Granted |  |  | — |  |  | $ | — |  |  |  |  |  |  |  |  |
Exercised |  |  | (611 | ) |  | $ | 13.16 |  |  |  |  |  |  |  |  |
Forfeited, canceled or expired |  |  | (124 | ) |  | $ | 17.63 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2012 |  |  | 4,229 |  |  | $ | 14.57 |  |  |  | 6.71 |  |  | $ | 37,637 |
Exercisable as of December 31, 2012 |  |  | 2,345 |  |  | $ | 13.44 |  |  |  | 6.22 |  |  | $ | 23,524 |
Available for issuance as of December 31, 2012 |  |  | 2,772 |  |  |  |  |  |  |  |  |  |  |  |  |
(1) | Aggregate intrinsic value represents the value of the University’s closing stock price on December 31, 2012 ($23.47) in excess of the exercise price multiplied by the number of options outstanding or exercisable.
As of December 31, 2012, there was approximately $11,280 of total unrecognized share-based compensation cost, net of estimated forfeitures, related to unvested stock options. These costs are expected to be recognized over a weighted average period of 1.6 years. The following table summarizes information related to stock options exercised for years ended December 31, 2012, 2011 and 2010:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Amounts related to options exercised: |  |  |  |  |  |  |  |  |  |  |  |
Intrinsic value realized by optionee |  | $ | 4,683 |  |  | $ | 403 |  |  | $ | 1,407 |
Actual tax benefit realized by the University for tax deductions |  | $ | 1,873 |  |  | $ | 161 |  |  | $ | 563 |
Cash received from stock option exercises during fiscal year 2012, 2011 and 2010 totaled approximately $8,049, $1,681 and $1,747, respectively. Share-based Compensation Share-based Compensation Expense Assumptions – Restricted Stock Awards Stock-based compensation expense related to restricted stock grants is expensed over the vesting period using the straight-line method for University employees and the University’s board of directors and is measured using the University’s stock price on the date of grant, net of estimated forfeitures. The restricted shares have voting rights. Share-based Compensation Expense Assumptions – Stock Options The University granted stock options in 2011 and 2010. No stock options were granted in 2012. Fair Value. The University uses the Black-Scholes-Merton option pricing model to estimate the fair value of the University’s options as of the grant dates using the following weighted average assumptions:
Year Ended December 31, |  | 2011 |  |  | 2010 |
Weighted average fair value |  | $ | 6.98 |  |  | $ | 10.74 |
Expected volatility |  |  | 41.85 | % |  |  | 47.50 | %
Expected life (years) |  |  | 6.50 |  |  |  | 6.50 |
Risk-free interest rate |  |  | 2.58 | % |  |  | 2.87 | %
Dividend yield |  |  | 0 | % |  |  | 0 | %
Expected Volatility. As the University’s stock had not been publicly traded prior to November 2008, the expected volatility assumption for the year ended December 31, 2010 reflects an average of volatilities of the University’s peer group of public education companies with a period equal to the expected life of the options. Beginning on January 1, 2011, the University believes that the use of Grand Canyon Education, Inc.’s historical stock price provides a more accurate estimate of expected volatility and, consequently, a better estimate of fair value of the University’s stock options. Therefore, the expected volatility assumption for the year ended December 31, 2011 is based upon the University’s historical stock price. This change in estimate did not have a material impact on the University’s operating income, net income or net income per common share. Expected Life (years). The University continues to use the simplified method to estimate the expected term of stock options under certain circumstances. The simplified method for estimating expected term is to use the mid-point between the vesting term and the contractual term of the share option. The University has analyzed the circumstances in which the use of the simplified method is allowed. The University has elected to use the simplified method for options granted in fiscal year 2011 and 2010 because the University does not have historical exercise data to estimate expected term due to the limited time period its shares have been publicly traded. Risk-Free Interest Rate. The risk-free interest rate assumption is based upon the U.S. constant maturity treasury rates as the risk-free rate interpolated between the years commensurate with the expected life of the options. Dividend Yield. The dividend yield assumption is zero since the University does not expect to declare or pay dividends in the foreseeable future. Forfeitures. Forfeitures are estimated at the time of grant based on historical retention of employees. If necessary, management estimates are adjusted at the end of each reporting period if actual forfeitures differ from those estimates. Expected Vesting Period. The University amortizes the share-based compensation expense, net of forfeitures, over the expected vesting period using the straight-line method. The table below outlines share-based compensation expense for the fiscal years ended December 31, 2012, 2011 and 2010 related to restricted stock and stock options granted:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Instructional costs and services |  | $ | 3,809 |  |  | $ | 2,935 |  |  | $ | 2,034 |
Selling and promotional |  |  | 393 |  |  |  | 297 |  |  |  | 233 |
General and administrative |  |  | 3,609 |  |  |  | 3,220 |  |  |  | 2,782 |
Share-based compensation expense included in operating expenses |  |  | 7,811 |  |  |  | 6,452 |  |  |  | 5,049 |
Tax effect of share-based compensation |  |  | (3,124 | ) |  |  | (2,581 | ) |  |  | (2,020 | )
Share-based compensation expense, net of tax |  | $ | 4,687 |  |  | $ | 3,871 |  |  | $ | 3,029 |
401(k) Plan The University has established a 401(k) Defined Contribution Benefit Plan (the “Plan”). The Plan provides eligible employees, upon date of hire, with an opportunity to make tax-deferred contributions into a long-term investment and savings program. All employees over the age of 21 are eligible to participate in the plan. The Plan allows eligible employees to contribute to the Plan subject to Internal Revenue Code restrictions and the Plan allows the University to make discretionary matching contributions. The University plans to make a matching contribution to the plan of approximately $1,500 for the year ended December 31, 2012. The University made discretionary matching contributions to the plan of $933 and $745 for the years ended December 31, 2011 and 2010, respectively.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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