6. Stockholders' Equity

Authorized stock

The Company has authorized 20,000,000 shares of common stock, par value $0.01, of which 13,316,822 and 12,006,075 shares were issued and outstanding as of December 31, 2010 and September 30, 2011, respectively. The Company also has authorized 8,000,000 shares of preferred stock, none of which has been issued or outstanding since 2004. Commencing in the fourth quarter of 2010, the Company increased the annual cash dividend from $3.00 to $4.00 per share, or from $0.75 to $1.00 per share quarterly.

Stock-based compensation

As required by the Stock Compensation Topic, ASC 718, the Company measures and recognizes compensation expense for all share-based payment awards, including employee stock options and employee stock purchases related to the Company's Employee Stock Purchase Plan, based on estimated fair values. Stock-based compensation expense recognized in the unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2010 and 2011, is based on awards ultimately expected to vest and, therefore, has been adjusted for estimated forfeitures. The Company is required to estimate forfeitures at the time of grant and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate used is based on historical experience.

Stock-based compensation plans

In April 2011, the Company's stockholders approved the Strayer Education, Inc. 2011 Equity Compensation Plan (the "Plan"), which increased the number of shares available for issuance as equity compensation by 300,000 shares. In addition, shares previously available for issuance under the Strayer Education, Inc. 1996 Stock Option Plan are available for issuance under the Plan, for a total of approximately 350,000 shares available for issuance as equity compensation under the Plan. The Plan provides for the granting of restricted stock, stock options intended to qualify as incentive stock options, options that do not qualify as incentive stock options, and other forms of equity compensation and performance-based awards to employees, officers and directors of the Company, or to a consultant or advisor to the Company, at the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of Directors. Options may be granted at option prices based at or above the fair market value of the shares at the date of grant. The maximum term of the awards granted under the Plan is ten years.

In February 2011, the Company's Board of Directors approved grants of 67,798 shares of restricted stock to officers, employees and certain other individuals pursuant to the Company's 1996 Stock Option Plan. These shares vest over a three year period. The Company's stock price closed at $132.23 on the date of these restricted stock grants.

In April 2011, the Company awarded a total of 7,070 shares of restricted stock to various non-employee members of the Company's Board of Directors, as part of the Company's annual director compensation program. These shares vest over a three year period. The Company's stock price closed at $118.80 on the date of these restricted stock grants.

The table below sets forth the restricted stock activity for the nine months ended September 30, 2011:


	Number of shares			Weighted- average grant price
Balance, December 31, 2010		341,440		$	204.89
Grants		74,868		$	130.96
Vested shares		(17,574	)	$	131.31
Forfeitures		(15,494	)	$	154.83

Balance, September 30, 2011		383,240		$	194.03

At September 30, 2011, total stock-based compensation cost which has not yet been recognized was $47.1 million, all for unvested restricted stock. This cost is expected to be recognized over the next 65 months on a weighted-average basis. Excluding the February 2009 grant of 183,680 shares to the Company's Chief Executive Officer, which are subject to performance-based criteria and vest on February 10, 2019, the remaining costs are expected to be recognized over the next 26 months on a weighted-average basis.

The table below sets forth the stock option activity for the nine months ended September 30, 2011 and other stock option information at September 30, 2011:


	Number of shares		Exercise price			Remaining contractual life (yrs.)		Intrinsic value⁽¹⁾ (in thousands)
Balance, December 31, 2010		100,000		$	107.28		2.1		$	4,494
Grants		—			—
Exercises		—			—
Forfeitures		—			—

Balance, September 30, 2011		100,000		$	107.28		1.4		$	—

Vested, September 30, 2011		100,000					1.4		$	—
Exercisable, September 30, 2011		100,000					1.4		$	—

(1)

The intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the respective trading day and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had the option holder exercised his options on the respective trading day. The amount of intrinsic value will change based on the fair market value of the Company's common stock.

The following table summarizes information regarding all share-based payment arrangements for the nine months ended September 30, 2010 and 2011 (in thousands):


	For the nine months ended September 30,
	2010		2011
Proceeds from stock options exercised	$	452	$	—
Excess tax benefits (shortfall) related to share-based payment arrangements	$	2,808	$	(721	)
Intrinsic value of stock options exercised ⁽¹⁾	$	1,184	$	—

(1)	Intrinsic value of stock options exercised is calculated by taking the difference between the Company's closing stock price on the date of exercise and the exercise price, multiplied by the number of options exercised for each option holder and then aggregated.

Valuation and Expense Information under Stock Compensation Topic ASC 718

The following table summarizes the stock-based compensation expense recorded for the three and nine months ended September 30, 2010 and 2011 by expense line item (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2010		2011		2010		2011
Instruction and educational support	$	575	$	904	$	1,753	$	2,728
Marketing		41		16		150		51
Admissions advisory		—		—		—		—
General and administration		2,271		2,550		7,081		7,019

Stock-based compensation expense included in operating expense		2,887		3,470		8,984		9,798
Tax benefit		1,140		1,371		3,548		3,870

Stock-based compensation expense, net of tax	$	1,747	$	2,099	$	5,436	$	5,928