13. Share-Based Compensation Plans

Incentive Plans

Prior to June 2017, the Company 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 Company approved, and at the Company’s 2017 annual meeting of stockholders held on June 14, 2017, the Company’s stockholders adopted a 2017 Equity Incentive Plan (the “2017 Plan”) under which a maximum of 3 million shares may be granted. As of December 31, 2018, 1,910 shares were available for grants under the 2017 Plan. All grants of equity incentives made after June 2017 have been made from the 2017 Plan.

Restricted Stock

During fiscal year 2018, 2017, and 2016, the Company granted 160, 188, and 264 shares of common stock, 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, 2018, 2017 and 2016, the Company withheld 151, 151, and 114 shares of common stock in lieu of taxes at a cost of $15,152, $9,790, and $4,695, on the restricted stock vesting dates, respectively. During 2018, 2017 and 2016, following the annual stockholders meeting, the Company granted 3, 4 and 11 shares of common stock to the non-employee members of the Company’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. In conjunction with the Transaction, the Compensation Committee of the Company’s Board of Directors decided to modify the vesting condition for certain restricted stock awards for approximately 100 Transferred Employees who transferred employment from GCE to GCU, with the acceleration being contingent upon the closing of the Transaction on July 1, 2018. Refer to Note 2 for further discussion on the Transaction. As a result, the incremental share-based compensation expense from the modification on 82 restricted stock awards for the accelerated vesting date was $7,880 and is included in the university related expenses in the consolidated income statement. Additionally, the Company transferred cash to GCU totaling $9,568 to fund a deferred compensation plan in an amount equal to the value of the 86 shares forfeited by the Transferred Employees at the closing of the Transaction. This amount is included in the loss on transaction in the consolidated income statement.

A summary of the activity related to restricted stock granted under the Company’s Incentive Plan is as follows:


		Weighted Average
	Total	Grant Date
	Shares	Fair Value per Share
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
Granted	163	$	92.34
Vested	(384)	$	65.57
Forfeited, canceled or expired	(95)	$	71.60

Outstanding as of December 31, 2018	460	$	63.28

As of December 31, 2018, there was approximately $20,376 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 2.03 years.

Stock Options

No options were granted in 2018, 2017 and 2016. Prior to 2012, the Company 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 Company’s Incentive Plan is as follows:


	Summary of Stock Options Outstanding
		Weighted		Weighted
		Average		Average
		Exercise		Remaining	Aggregate
	Total	Price per		Contractual	Intrinsic
	Shares	Share		Term (Years)	Value ($)(1)
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
Granted	—	$	—
Exercised	(250)	$	18.47
Forfeited, canceled or expired	—	$	—

Outstanding as of December 31, 2018	444	$	16.66	1.95	$	35,222
Exercisable as of December 31, 2018	444	$	16.66	1.95	$	35,222

(1)

Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2018 ($96.14) 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 Company measures and recognizes compensation expense for share-based payment awards made to employees and directors. The fair value of the Company’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 Company employees and the Company’s board of directors. Starting January 1, 2017 with the adoption of the share-based compensation accounting standard, the Company 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, 2018, 2017 and 2016 related to restricted stock and stock options granted:


	2018		2017		2016
Technical and academic services	$	1,585	$	1,555	$	1,498
Counseling support and services		4,926		4,700		4,711
Marketing and communication		48		26		20
General and administrative		3,355		3,402		3,430
University related expenses		9,594		3,005		2,617
Share-based compensation expense included in operating expenses		19,508		12,688		12,276
Tax effect of share-based compensation		(4,877)		(5,075)		(4,910)
Share-based compensation expense, net of tax	$	14,631	$	7,613	$	7,366

401(k) Plan

The Company 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 Company to make discretionary matching contributions. The Company plans to make a matching contribution to the Plan of approximately $1,625 for the year ended December 31, 2018. The Company made discretionary matching contributions to the Plan of $2,837 and $1,920 for the years ended December 31, 2017 and 2016, respectively.