13. Share-Based Compensation Plans

Incentive Plans

Prior to June 2017, the University made grants of restricted stock and stock options under its 2008 Equity Incentive Plan (the “2008 Plan”). In January 2017, the Board of Directors of the University approved, and at the University’s 2017 annual meeting of stockholders held on June 14, 2017, the University’s stockholders adopted a 2017 Equity Incentive Plan (the “2017 Plan”) under which a maximum of 3 million shares may be granted. All future grants of equity incentives will be made from the 2017 Plan.

Restricted Stock

During fiscal year 2017, 2016, and 2015, the University granted 188, 264, and 315 shares of common stock under the 2008 Plan, respectively, 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 statutory tax withholding required to be paid when the restricted stock vests. During the years ended December 31, 2017, 2016 and 2015, the University withheld 151, 114, and 94 shares of common stock in lieu of taxes at a cost of $9,790, $4,695, and $4,283, on the restricted stock vesting dates, respectively. In June 2017, following the annual stockholders meeting, the University granted 4 shares of common stock under the 2017 Plan to the non-employee members of the University’s board of directors. In 2016 and 2015, the University granted 11 and 9 shares of common stock under the 2008 Plan, respectively, to certain of the non-employee members of the University’s board of directors. The restricted shares granted to these directors have voting rights and vest on the earlier of (a) the one year anniversary of the date of grant or (b) immediately prior to the following year’s annual stockholders’ meeting.

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, 2014		1,033		$	28.75
Granted		324		$	45.66
Vested		(274	)	$	27.18
Forfeited, canceled or expired		(27	)	$	30.27

Outstanding as of December 31, 2015		1,056		$	34.30

Granted		275		$	44.46
Vested		(329	)	$	30.56
Forfeited, canceled or expired		(9	)	$	37.94

Outstanding as of December 31, 2016		993		$	38.32

Granted		192		$	70.44
Vested		(375	)	$	32.46
Forfeited, canceled or expired		(34	)	$	44.51

Outstanding as of December 31, 2017		776		$	49.16

As of December 31, 2017, there was approximately $27,221 of total unrecognized share-based compensation cost related to unvested restricted stock awards. These costs are expected to be recognized over a weighted average period of 2.0 years.

Stock Options

No options were granted in 2017, 2016 and 2015. Prior to 2012, 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 to employees. These time vested options vest ratably over a period of five years 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, 2014		2,452		$	14.83
Granted		—		$	—
Exercised		(218	)	$	15.97
Forfeited, canceled or expired		(14	)	$	16.08

Outstanding as of December 31, 2015		2,220		$	14.71

Granted		—		$	—
Exercised		(946	)	$	13.97
Forfeited, canceled or expired		(2	)	$	19.23

Outstanding as of December 31, 2016		1,272		$	15.26

Granted		—		$	—
Exercised		(576	)	$	12.79
Forfeited, canceled or expired		(2	)	$	16.35

Outstanding as of December 31, 2017		694		$	17.31		2.71	$	50,114

Exercisable as of December 31, 2017		694		$	17.31		2.71	$	50,114

(1)	Aggregate intrinsic value represents the value of the University’s closing stock price on December 29, 2017 ($89.53) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

Share-based Compensation

Share-based Compensation Expense Assumptions – Restricted Stock Awards

The University measures and recognizes compensation expense for share-based payment awards made to employees and directors. The fair value of the University’s restricted stock awards is based on the market price of its common stock on the date of grant. 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. Starting January 1, 2017 with the adoption of the share-based compensation accounting standard, the University made an accounting policy election to account for forfeitures as they occur, prior to 2017 these forfeitures were estimated and reported net of the expense. The restricted shares have voting rights.

The table below outlines share-based compensation expense for the fiscal years ended December 31, 2017, 2016 and 2015 related to restricted stock and stock options granted:


	2017			2016			2015
Instructional costs and services	$	7,874		$	7,398		$	6,779
Admissions advisory and related		198			232			192
Marketing and promotional		169			125			130
General and administrative		4,447			4,521			4,156

Share-based compensation expense included in operating expenses		12,688			12,276			11,257
Tax effect of share-based compensation		(5,075	)		(4,910	)		(4,503	)

Share-based compensation expense, net of tax	$	7,613		$	7,366		$	6,754

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 $2,837 for the year ended December 31, 2017. The University made discretionary matching contributions to the Plan of $1,920 and $1,769 for the years ended December 31, 2016 and 2015, respectively.