What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-09 compared with 2020-03-10 · 371 added, 264 removed, 722 unchanged (47% of the section changed)

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and Subsidiaries:

Report of Independent Registered Public Accounting Firm 2018 and 2019

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of American Public Education, Inc.

and subsidiaries (the "Company") as of December 31, 2018 and 2019, the related consolidated statements of income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2019, and the related notes.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2019 and 2020, the related consolidated statements of income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill – HCN Reporting Unit – Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

In connection with the Company’s November 1, 2013 acquisition of Hondros College of Nursing (HCN), the Company recorded $38.6 million of goodwill, representing the excess of the purchase price over the amount assigned to the new assets acquired and the fair value assigned to identified intangible assets.

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

Management performs its annual impairment analysis for goodwill on its elected assessment date of October 31, or more frequently, if certain events or circumstances indicate that goodwill might be impaired.

In 2020, Management performed its annual assessment as of October 31, 2020.

The Company concluded that the fair value of the HCN reporting unit exceeded its carrying value by $13.7 million, or 37.1%.

Given the significant estimates and assumptions made by management to estimate the fair value of the HCN reporting unit, and the sensitivity of the estimated fair value to changes in those estimates and assumptions, performing audit procedures to

evaluate the reasonableness of management's estimates and assumptions utilized in its impairment analyses, particularly the revenue growth rates and the selection of discount rates, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the revenue growth rates and the selection of discount rates and valuation multiples for the HCN reporting unit included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of HCN, such as controls related to management’s revenue growth rates and the selection of the discount rates and valuation multiples.

• We evaluated the reasonableness of management’s growth rates by comparing management’s rates with:

◦ historical results;

◦ prior forecasts;

◦ internal communications to the Company’s management and the board of directors;

◦ forecasted information included in the Company’s press releases as well as in analyst and industry reports of the Company and companies in its peer group.

• We considered the impact of changes in the regulatory environment on management’s forecasts.

We also considered the impact of the COVID-19 Global Pandemic and inquired of the effects of the pandemic on the Company’s enrollments and forecasts.

• We evaluated the impact of changes in management’s forecasts from the October 31, 2020 annual measurement date to December 31, 2020.

• With the assistance of our fair value specialists, we evaluated the valuation methodology and discount rates used, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate selected by management.

/s/ Deloitte & Touche LLP

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We have served as the Company's auditor since 2018.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of American Public Education, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of income, stockholders' equity, and cash flows for the year ended December 31, 2017 of American Public Education, Inc.

and Subsidiaries (the Company), and the related notes to the consolidated financial statements and schedule (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ RSM US LLP

Richmond, Virginia

February 27, 2018

We served as the Company's auditor from 2003 to 2018

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Balance Sheets

As of December 31,

(In thousands, except per share amounts)

(In thousands)

Current assets:

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Accounts receivable, net of allowance of $ 6,174 in 2019 and $ 5,983 in 2020.

11,325 17,652

Prepaid expenses 7,087 6,472

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Operating lease assets, net 11,658 8,743

Investments 10,502 10,495

Goodwill 26,563 26,563

Other assets, net 4,770 4,973

Total assets $ 354,897 $ 371,018

Liabilities and Stockholders’ Equity

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Deferred revenue and student deposits 17,426 22,104

Income tax payable — 178

Operating lease liabilities, current 2,283 2,392

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The accompanying notes are an integral part of these consolidated statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Income

Year Ended December 31,

2018 2019 2020

(In thousands, except per share amounts)

Revenue $ 297,687 $ 286,270 $ 321,785

Costs and expenses:

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Equity investment loss ( 515 ) ( 1,464 ) ( 7 )

Net income $ 25,639 $ 10,013 $ 18,822

Net income per common share:

Basic $ 1.56 $ 0.62 $ 1.27

Diluted $ 1.54 $ 0.62 $ 1.25

Weighted average number of shares outstanding:

Basic 16,404 16,094 14,876

Diluted 16,634 16,255 15,047

The accompanying notes are an integral part of these consolidated statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Stockholders’ Equity

(In thousands, except shares)

Additional Paid-In Capital

Retained Earnings

Total Stockholders’ Equity

Preferred Stock

(In thousands)

Additional Paid-In Capital Retained Earnings Total Stockholders’ Equity

Preferred Stock Common Stock

Shares Amount Shares Amount

Balance as of December 31, 2017 — $ — 16,268 $ 163 $ 180,674 $ 108,569 $ 289,406

Impact of adoption of ASC 606

— — — — — ( 278 ) ( 278 )

Issuance of common stock under employee benefit plans — — 223 2 ( 2 ) — —

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Stock-based compensation — — — — 8,322 — 8,322

Net income — — — — — 25,639 25,639

Balance as of December 31, 2018 — — 16,425 164 187,172 133,930 321,266

Impact of adoption of ASC 606

Issuance of common stock under employee benefit plans — — 252 3 ( 3 ) — —

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Stock-based compensation — — — — 5,960 — 5,960

Repurchased and retired shares of common stock — — ( 1,416 ) ( 14 ) — ( 37,982 ) ( 37,996 )

Net income — — — — — 10,013 10,013

Balance as of December 31, 2019 — — 15,178 152 190,620 105,961 296,733

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Repurchased and retired shares of common stock — — ( 548 ) ( 5 ) — ( 13,603 ) ( 13,608 )

Net income — — — — — 18,822 18,822

Balance as of December 31, 2020 — $ — 14,809 $ 148 $ 195,597 $ 111,180 $ 306,925

The accompanying notes are an integral part of these consolidated statements.

AMERICAN PUBLIC EDUCATION, INC.

Consolidated Statements of Cash Flows

Year Ended December 31,

2018 2019 2020

(In thousands)

Operating activities

Net income $ 25,639 $ 10,013 $ 18,822

Adjustments to reconcile net income to net cash provided by operating activities:

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Impairment of goodwill — 7,336 —

Other 302 145 24

Changes in operating assets and liabilities:

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Operating lease assets, net — 120 ( 16 )

Other assets 71 550 ( 165 )

Accounts payable 266 ( 5,564 ) ( 86 )

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Proceeds from the sale of real property — — 767

Equity investments

Net cash used in investing activities ( 9,430 ) ( 7,255 ) ( 4,159 )

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Cash paid for repurchase of common/restricted stock ( 1,823 ) ( 40,506 ) ( 15,705 )

Cash received from issuance of common stock

Net cash used in financing activities ( 1,823 ) ( 40,506 ) ( 15,705 )

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American Public Education, Inc., or APEI, which together with its subsidiaries is referred to as the “Company,” is a provider of online and campus-based postsecondary education to approximately 92,500 students through two subsidiary institutions:

American Public University System, Inc., or APUS, provides online postsecondary education directed primarily at the needs of the military, military-affiliated, public service and service-minded communities through American Military University, or AMU, and American Public University, or APU.

• American Public University System, Inc., or APUS, which provides online postsecondary education directed primarily at the needs of the military, military-affiliated, public service and service-minded communities through American Military University, or AMU, and American Public University, or APU.

APUS is institutionally accredited by the Higher Learning Commission.

National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, provides nursing education to students at five campuses in Ohio, and, beginning in the second quarter of 2020, at a campus in Indianapolis, Indiana, to serve the needs of the nursing and healthcare communities.

• National Education Seminars, Inc., which is referred to herein as Hondros College of Nursing, or HCN, which provides nursing education to students enrolled at five campuses in Ohio, and, beginning in April 2020, to students enrolled at a campus in Indianapolis, Indiana, to serve the needs of the nursing and healthcare communities.

In April 2021, HCN will begin offering classes at a new campus in Akron, Ohio.

HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES.

In March 2020, in response to the novel coronavirus COVID-19 global pandemic, HCN shifted to a blended model with online delivery of its courses and on campus delivery of certain labs.

HCN later fully reopened its campuses, using smaller in person classes with screening, social distancing, and masking requirements.

There can be no assurance that HCN will not need to further limit campus interactions or close its campuses in response to the COVID-19 pandemic or as a result of local regulations.

The Company’s institutions are licensed or otherwise authorized, or are in the process of obtaining such licenses or authorizations, to offer postsecondary education programs by state authorities to the extent the institutions believe such licenses or authorizations are required, and are certified by the U.S.

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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.

Certain prior year amounts have been reclassified for comparative purposes to conform to the 2019 presentation.

Principles of consolidation.

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Restricted cash.

Cash and cash equivalents includes funds held for students for unbilled educational services that were received from Title IV programs.

As a trustee of these Title IV program funds, the Company is required to maintain and restrict these funds pursuant to the terms of the program participation agreement with the U.S.

Department of Education.

Cash and cash equivalents include funds held for students for unbilled educational services that were received from Title IV programs.

As a trustee of these Title IV program funds, the Company is required to maintain and restrict

these funds pursuant to the terms of the program participation agreement with ED.

Restricted cash on the Company’s Consolidated Balance Sheets as of December 31, 2019 and 2020 was $ 1.3 million and $ 1.2 million, respectively.

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These other payment options include payments by sponsors, financial aid, alternative loans, or tuition assistance programs that remit payments directly to the subsidiary.

HCN also offers extended payment plan options.

HCN also offers an extended payment plan option.

When a student remits payment after a course or term has begun, accounts receivable is reduced.

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Therefore, billed amounts represent charges that have been prepared and sent to students or the applicable third-party payor according to the terms agreed upon in advance.

DoD tuition assistance programs are billed by branch of service on a course-by-course basis when a student starts a course, whereas Title IV programs are billed based on the courses included in a student’s term.

TA is billed by branch of service on a course-by-course basis when a student starts a course, whereas Title IV programs are billed based on the courses included in a student’s term.

Billed accounts receivable are considered past due if the invoice has been outstanding for more than 30 days.

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HCN charges interest on payment plans when a student leaves the payment plan program upon graduation or exits the program.

The interest earned in 2019 was approximately $15,000 .

Property and equipment.

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The Company also capitalizes certain costs for academic program development, and these costs are amortized over an estimated life not to exceed three years .

In February 2016 FASB issued Accounting Standards Update, or ASU, No.

2016-02, Leases (Topic 842) .

This standard requires entities to recognize most operating leases on their balance sheets as right-of-use assets, or ROU assets, with a corresponding lease liability, in addition to disclosing certain key information about leasing arrangements.

The Company adopted the standard effective January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented.

The Company accounts for lease arrangements in accordance with FASB ASC 842, Leases .

The Company determines if there is a lease at inception.

Operating lease assets are right-of-use, or ROU assets, which represent the right to use an underlying asset for the lease term.

Operating lease liabilities represent the obligation to make lease payments arising from the lease.

Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term on the Consolidated Balance Sheets as of December 31, 2019 and 2020.

These assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

When the lease does not provide an implicit interest rate, the Company uses an incremental borrowing rate based on information available at lease commencement to determine the present value of the lease payments.

The ROU asset includes all lease payments and excludes lease incentives.

The Company adopted the following practical expedients and elected the following accounting policies related to this standard:

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• short-term lease accounting policy election allowing lessees to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less;

Not separate lease and non-lease components for office space and campus leases.

The adoption of this standard resulted in the recognition of operating lease ROU assets and corresponding lease liabilities of approximately $12.1 million on the Consolidated Balance Sheet as of January 1, 2019.

There was no impact to the Company’s net income or liquidity as a result of the adoption of this ASU.

Disclosures related to the amount, timing, and uncertainty of cash flows arising from leases are included in “Note 7.

Leases” below.

• not to separate lease and non-lease components for office space and campus leases.

The Company accounts for its investments in less than majority owned companies in accordance with FASB ASC 323, Investments - Equity Method and Joint Ventures and FASB ASC 321, Investments - Equity Securities.

The Company applies the equity method to investments when it has the ability to exercise significant influence, but does not control

the operating and financial policies of the company.

The Company applies ASC 323, Investments - Equity Method and Joint Ventures to investments w hen it has the ability to exercise significant influence but does not control the operating and financial policies of the company.

This is generally represented by equity ownership of at least 20 percent but not more than 50 percent.

Investments accounted for under the equity method are initially recorded at cost and subsequently adjusted by the Company’s share of equity in income or losses after the date of acquisition.

The pro-rata share of the operating results of the investee is reported in the Consolidated Statements of Income as “Equity investment loss.” Investments that do not meet the equity method requirements are accounted for under ASC 321, Investments - Equity Securities, with changes in the fair value of the investment reported in the Consolidated Statements of Income as “Equity investment loss.”

The Company periodically evaluates equity method investments for indicators of other-than-temporary impairments.

Factors the Company considers when evaluating for other-than-temporary impairments include the duration and severity of the impairment, the reasons for the decline in value, and the potential recovery period.

The pro-rata share of the operating results of the investee is reported in the Consolidated Statements of Income as equity investment loss.

Investments that do not meet the equity method requirements are accounted for under ASC 321, Investments - Equity Securities, with changes in the fair value of the investment reported in the Consolidated Statements of Income as equity investment loss.

The Company periodically evaluates its equity method investment for indicators of other-than-temporary impairments.

For an investee with impairment indicators, the Company measures fair value on the basis of discounted cash flows or other appropriate valuation methods.

If it is probable that the Company will not recover the carrying amount of the investment, the impairment is considered other-than-temporary and recorded in equity earnings, and the equity investment balance is reduced to its fair value accordingly.

Each reporting period the Company evaluates its cost method investments for observable prices changes.

Factors the Company may consider when evaluating an observable price may include significant changes in the regulatory, economic or technological environment, changes in the general market condition, bona fide offers to purchase or sell similar investments, and other criteria.

If it is probable that the Company will not recover the carrying amount of the investment, the impairment is considered other-than-temporary and recorded in equity investment loss, and the equity investment balance is reduced to its fair value accordingly.

In each reporting period, the Company evaluates its cost method investments for observable prices changes.

Management must exercise significant judgment in evaluating the potential impairment of its equity investments.

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Goodwill is not amortized.

The Company accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other, and in 2018 adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

The Company accounts for goodwill and indefinite-lived intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other, and in 2018 adopted Accounting Standards Update, or ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

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The Company also recorded $ 3.7 million of indefinite-lived intangible assets as part of the HCN acquisition.

During the year ended December 31, 2019, the Company used an independent valuation firm to complete interim assessments of goodwill after qualitative analysis indicated that goodwill might be impaired.

The valuations performed during the first and third quarters of 2019, determined that the fair value was less than the carrying value.

As a result, the Company recorded pretax, non-cash impairment charges of $7.3 million during the year ended December 31, 2019.

Indefinite-lived intangible assets are tested at least annually for impairment by comparing the fair value of the asset to the carrying value.

APEI utilizes the services of an independent valuation firm to estimate fair value of goodwill and indefinite-lived intangibles.

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If the fair value is less than the carrying value, the asset is reduced to fair value.

The 2018 and 2019 annual testing, and 2019 interim testing, concluded the indefinite-lived assets were not impaired.

The valuations performed during the first and third quarters of 2019, determined that the fair value was less than the carrying value.

As a result, the Company recorded pretax, non-cash impairment charges of $ 7.3 million at HCN during the year ended December 31, 2019.

The Company evaluated events and circumstances related to the valuation of goodwill through the year ended December 31, 2020 and determined there were no indicators of impairment at HCN.

This evaluation included consideration of enrollment trends and financial performance, as well as industry and market conditions, and the impact of the COVID-19 pandemic.

The Company completed its annual assessment of goodwill as of October 31, 2020 and concluded that HCN’s fair value was more than the carrying value.

This annual assessment concluded that the fair value of HCN exceeded the carrying value by approximately $ 13.7 million, or 37.1 %.

Indefinite-lived intangible assets are tested at least annually for impairment by comparing the fair value of the asset to the carrying value.

The 2019 and 2020 interim and annual testing concluded that the indefinite-lived assets were not impaired.

For additional details regarding goodwill and indefinite-lived intangible assets refer to “Note 7.

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Deferred revenue and student deposits at December 31, 2019 and 2020 was $ 17.4 million and $ 22.1 million, respectively.

Deferred revenue includes payments that have been received from students for courses that are still in process and student deposits represent cash received from students prior to the commencement of a course and are refundable to the student in the event the student withdrawals before the start of the course.

Deferred revenue includes payments that have been received from students for courses or terms that are still in process and student deposits represent cash received from students prior to the commencement of a course or term and are refundable to the student in the event the student withdrawals before the start of the course or term.

Student deposits at December 31, 2019 and 2020 were $ 7.8 million and $ 8.4 million, respectively.

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Under ASC 606, revenue is recognized when evidence of a contract exists, delivery has occurred or as instructional services are delivered, the price is determinable, and collectability is reasonably assured.

Revenue from fees is recognized as information or services are delivered to customers, assuming all other revenue recognition criteria are met.

Revenue from fees is recognized as information or services are delivered to students, assuming all other revenue recognition criteria are met.

For additional information regarding the Company’s adoption of ASC 606 and revenue recognition refer to “Note 4.

Revenue” below in these Consolidated Financial Statements.

The Company provides scholarships and technology fee grants to certain students to assist them financially and promote their registration.

The Company provides scholarships and grants and technology fee grants to certain students to assist them financially and promote their registration.

Scholarship assistance and technology fee grants of $ 26.7 million, $ 26.1 million, and $ 45.6 million were provided for the years ended December 31, 2018, 2019 and 2020, respectively, and are included as a reduction to revenue in the accompanying Consolidated Statements of Income.

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Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment of such changes.

As a result of the U.S.

Tax Cuts and Jobs Act, or Tax Act, the Company revalued its net deferred tax liability and recorded a $3.7 million reduction in income tax expense for the year ended December 31, 2017.

Under ASC 740, the Company is required to determine whether uncertain tax positions should be recognized within the Company’s financial statements.

The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense.

Uncertain tax positions are recognized when a tax position, based solely on its technical merits, is determined more likely than not to not be sustained upon examination.

Upon determination, uncertain tax positions are measured to determine the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

An uncertain tax position is reversed if it no longer meets the more likely than not threshold of being sustained.

There were no material uncertain tax positions as of December 31, 2018, 2019 or 2020.

Interest and penalties associated with uncertain income tax positions would be classified as income tax expense.

The Company has not recorded any material interest or penalties during any of the years presented.

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The Company accounts for stock-based compensation in accordance with FASB ASC 718, Stock Compensation , which requires companies to expense share-based compensation based on fair value, and adopted ASU 2016-09, Compensation-Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting in January 2017.

Stock-based payments may include:

incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, cash-based awards, other stock-based awards, including unrestricted shares, or any combination of the foregoing.

Stock-based compensation cost is recognized as expense generally over a three -year vesting period using the straight-line method for 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.

Improvements to Employee Share-Based Payment Accounting in

January 2017.

Stock-based payments may include incentive stock options or non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance shares, performance units, cash-based awards, other stock-based awards, including unrestricted shares, or any combination of the foregoing.

Stock-based compensation cost is recognized as expense generally over a three-year vesting period using the straight-line method for employees and the graded-vesting method for members of the Board of Directors.

It is measured using the Company’s closing stock price on the date of the grant.

An accelerated one-year period is used to recognize stock-based compensation cost for employees who have reached certain service and retirement eligibility criteria on the date of grant.

The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses certain assumptions, which have been noted in “Note 10.

Stockholders’ Equity” in these Consolidated Financial Statements.

The fair value of each option award is estimated at the date of grant using a Black-Scholes option-pricing model that uses certain assumptions.

The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of APEI’s common stock.

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Judgment is required in estimating the percentage of share-based awards that are expected to vest, and in the case of performance stock units, or PSUs, the level of performance that will be achieved and the number of shares that will be earned.

If actual results differ significantly from these estimates, stock-based compensation expense could be higher and have a material impact on the

Company’s consolidated financial statements.

The Company estimates forfeitures of share-based awards at the time of grant and revise such estimates in subsequent periods if actual forfeitures differ from original estimates.

The Company 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 forfeiture assumption is ultimately adjusted to the actual forfeiture rate.

For additional information regarding stock-based compensation, refer to “Note 10.

Stockholders’ Equity” in these Consolidated Financial Statements.

If actual results differ significantly from these estimates, stock-based compensation expense could be higher and have a material impact on the Company’s consolidated financial statements.

Estimates of fair value are subjective and are not intended to predict actual future events, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made under ASC 718 .

For additional information regarding stock-based compensation, refer to “Note 11.

Stockholders’ Equity” in these Consolidated Financial Statements.

Income per common share.

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ASUs issued but not listed below were assessed and determined to be either not applicable or expected to have minimal impact on its consolidated financial position and/or results of operations.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) .

This standard requires entities that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases in addition to disclosing certain key information about leasing arrangements.

Entities may elect not to recognize lease assets and liabilities for most leases with terms of 12 months or less.

ASU 2016-02 required lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.

In July 2018, the FASB issued ASU No.

2018-11, which allows companies to apply the requirements of ASU 2016-02 retrospectively, either in all prior periods presented, or through a cumulative adjustment in the year of adoption.

This standard is effective for fiscal years, and the interim periods within those fiscal years, beginning after December 15, 2018.

Early adoption was permitted.

The Company adopted this standard effective January 1, 2019 using a cumulative effect adjustment transition method and recognized an increase in assets and liabilities due to the recording of the required right-of-use-asset and corresponding liability for all lease obligations that were previously classified as operating leases.

The increase in assets and liabilities was approximately $12.1 million .

There was no impact to the Company’s net income or liquidity as a result of the adoption of this ASU.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses, which is included in ASC Topic 326, Measurement of Credit Losses on Financial Instruments with certain amendments made to the standard in November 2018 through ASU No.

In June 2016, FASB, issued ASU No.

2016-13, Financial Instruments - Credit Losses, which is included in ASC Topic 326, Measurement of Credit Losses on Financial Instruments with certain amendments made to the standard in November 2018

through ASU No.

2018-9, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.

The new guidance revises the accounting requirements related to the measurement of credit losses and will require entities to measure all expected credit losses for financial assets based on historical experience, current conditions, and reasonable and

supportable forecasts about collectability.

The new guidance revises the accounting requirements related to the measurement of credit losses and requires entities to measure all expected credit losses for financial assets based on historical experience, current conditions, and reasonable and supportable forecasts about collectability.

Assets must be presented in the financial statements at the net amount expected to be collected.

The guidance will be effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption was permitted with fiscal years beginning after December 15, 2018.

The Company adopted this standard effective January 1, 2020 and does not expect the adoption of this ASU to have a material impact on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No.

The guidance is effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption was permitted.

The Company adopted this standard effective January 1, 2020 using the modified retrospective approach.

The adoption of this standard did not have a material impact on its Consolidated Financial Statements.

In August 2018, FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract , which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

The amendments in this ASU provide clarifications which align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software or software licenses.

The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments.

The guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software or software licenses.

The accounting for the service element of a hosting arrangement that is a service contract is not affected by this amendment.

The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption was permitted.

The Company adopted this standard effective January 1, 2020 using the prospective approach, and will evaluate future implementation costs incurred after January 1, 2020 under the new standard.

The Company adopted this standard effective January 1, 2020 using the prospective approach.

The adoption of this standard did not have a material impact on its Consolidated Financial Statements.

Acquisition Activity

On October 28, 2020, the Company entered into a definitive agreement to acquire Rasmussen University, a nursing- and health sciences-focused institution serving over 18,000 students at its 24 campuses across six states and online, which the Company refers to as the Rasmussen Acquisition.

Pursuant to the terms of a Membership Purchase Agreement, or the Rasmussen Agreement, the Company agreed to purchase from FAH Education, LLC, all of the units of membership interests in Rasmussen LLC, Rasmussen University’s parent company, for $ 300 million in cash and $ 29 million in shares of a new series of non-voting preferred stock of the Company to be issued at the closing of the Rasmussen Acquisition (or, at the Company’s election, up to an additional $ 29 million in cash in lieu thereof), subject to customary adjustments, including for net working capital, cash and debt of the acquired companies.

The Rasmussen Acquisition is expected to close in the third quarter of 2021, subject to the satisfaction or waiver of closing conditions that include, among others, regulatory review by ED, approval by the Higher Learning Commission, and approval by or notices to other regulatory and accrediting bodies.

In connection with entering into the Rasmussen Agreement, on October 28, 2020, the Company entered into a senior secured credit facilities commitment letter or the Commitment Letter with Macquarie Capital (USA) Inc., or Macquarie Capital, and Macquarie Capital Funding LLC, or Macquarie Lender, pursuant to which Macquarie Lender committed to provide (i) a senior secured term loan facility in the aggregate principal amount of $ 175 million, or the Term Facility and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $ 20 million (together with the Term Facility, the Facilities).

Macquarie Capital will act as lead arranger and bookrunner with respect to the Facilities.

The Company currently expects to pay up to $ 175 million of the cash consideration for the Rasmussen Acquisition with proceeds from the Facilities.

On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective approach.

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APUS graduation fee revenue represents a one-time, non-refundable $ 100 fee per degree, charged to students upon submission of a program graduation application.

The fee covers administrative costs associated with completing a review of the student’s academic and financial standing prior to graduation.

The fee covers administrative costs associated with completing

a review of the student’s academic and financial standing prior to graduation.

The Company recognizes revenue once graduation review services are completed.

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Generally, other fees revenue is recognized when the fee is charged to the student, which coincides with the completion of the specific performance obligation to the student.

APUS provides a tuition grant to support students who are U.S.

Military active-duty service members, National Guard members, reservists, military spouses and dependents, and, until January 2020, veterans, as well as a grant to cover the technology fee for students using Department of Defense, or DoD, tuition assistance programs.

APUS and HCN also provide scholarships to certain students to assist them financially with their educational goals.

APUS provides an APUS funded tuition grant to support students who are U.S.

APUS and HCN also provide grants and scholarships to certain students to assist them financially with their educational goals.

The statement of retained earnings at January 1, 2018 was adjusted by $ 278,000 to reflect the after tax impact of the adoption of ASC 606, related to the recognition of graduation fee revenue at APUS.

There were no adjustments to any other revenue type as a result of the adoption of ASC 606.

The impact of adoption on the Company’s Consolidated Statement of Income of the twelve months ended December 31, 2018 and 2019 was not material.

For the year ended December 31, 2020, there were no material adverse impacts to revenue, deferred revenue, or accounts receivable due to the COVID-19 pandemic.

Disaggregation of Revenue

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The table also includes a reconciliation of the disaggregated revenue with the reportable segments:

Twelve Months Ended December 31, 2018

Year Ended December 31, 2018

(In thousands)

APEI HCN Intersegment Consolidated

Instructional services, net of grants and scholarships $ 258,253 $ 32,468 $ — $ 290,721

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Textbook and other course materials — 4,678 — 4,678

Other fees 740 479 — 1,219

Total Revenue $ 260,062 $ 37,625 $ — $ 297,687

Twelve Months Ended December 31, 2019

Year Ended December 31, 2019

(In thousands)

APEI HCN Intersegment Consolidated

Instructional services, net of grants and scholarships $ 254,961 $ 25,369 $ ( 108 ) $ 280,222

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Textbook and other course materials — 3,650 — 3,650

Other fees 800 460 — 1,260

Total Revenue $ 256,899 $ 29,479 $ ( 108 ) $ 286,270

Year Ended December 31, 2020

(In thousands)

APEI HCN Intersegment Consolidated

Instructional services, net of grants and scholarships $ 283,656 $ 30,346 $ ( 72 ) $ 313,930

Graduation fees 1,336 — — 1,336

Textbook and other course materials — 5,197 — 5,197

Other fees 774 548 — 1,322

Total Revenue $ 285,766 $ 36,091 $ ( 72 ) $ 321,785

Effective January 1, 2019, the APEI Segment began charging the HCN Segment for the value of courses taken by HCN Segment employees at APUS.

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Deferred revenue at December 31, 2020 was $ 22.1 million and includes $ 13.7 million in future revenue that has not yet been earned for courses and terms that are in progress as well as $ 8.4 million in student deposits.

The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less.

The Company has elected, as a practical expedient, not to disclose additional information about unsatisfied performance obligations for contracts with students that have an expected duration of one year or less.

When the Company begins providing the performance obligations, a contract receivable is created, resulting in accounts receivable on the Company’s Consolidated Balance Sheets.

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HCN charges interest on payment plans when a student leaves the payment plan program upon graduation or exit of the program.

The interest earned in 2019 was approximately $15,000 .

Interest earned for the years ended December 31, 2019, and 2020, was approximately $ 15,000 and $ 17,000 , respectively.

There was no interest earned for the year ended December 31, 2018.

Refund Policies

The Company provides a stated period of time during which students may withdraw from a course for APUS, or a term for HCN, without further financial obligation resulting in a refund liability.

The refund policy for each company is as follows:

The refund policy for each subsidiary is as follows:

American Public University System

APUS’s tuition revenue varies from period to period based on the number of students enrolled, the number of net course registrations, the volume of undergraduate versus graduate registrations, and student payor source.

Students may remit tuition payments through the online registration process at any time or they may elect various payment options, including payments by sponsors, alternative loans, financial aid, or the DoD tuition assistance program, which remits payments directly to APUS.

If one of the various other payment options is confirmed as secured, the student is allowed to start the course.

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8-Week Course- Tuition Refund Schedule

Withdrawal Date

Tuition Refund Percentage

Withdrawal Date Tuition Refund Percentage

Before or During Week 1 100 %

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During Weeks 3 through 4 50 %

During Weeks 5 through 8

During Weeks 5 through 8 No Refund

16-Week Course- Tuition Refund Schedule

Withdrawal Date

Tuition Refund Percentage

Withdrawal Date Tuition Refund Percentage

Before or During Week 1 100 %

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During Weeks 5 through 8 50 %

During Weeks 9 through 16

During Weeks 9 through 16 No Refund

Students affiliated with certain organizations may have an alternate refund policy.

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Students may remit tuition payments at any time, or they may elect various payment options that can delay receipt of payment up until the term starts or longer.

These other payment options include payments by sponsors, financial aid, alternative loans, and payment plan options.

Beginning July 1, 2018, HCN began offering its students extended payment plan options, and with enrollments beginning in January 2020, HCN will add an additional extended payment program.

The extended payment plan options are designed to assist students with educational costs consisting of tuition, textbooks, and fees, and are only available after all other student financial assistance has been applied to those costs.

Payment plans require monthly payments while the student is enrolled in a program and extend for a period up to six months after the last day of attendance or graduation.

These other payment options include payments by sponsors, financial aid, and alternative loans.

Beginning July 1, 2018, HCN began offering its students an extended payment plan option designed to assist students with educational costs consisting of tuition, textbooks, and fees.

The extended payment plan option is only available after all other student financial assistance has been applied to those costs.

The payment plan requires monthly payments while the student is enrolled in a program and extends for a period up to six months after the last day of attendance or graduation.

To the extent interest is applied, it is generally fixed and does not accrue until the student departs the program or graduates.

The extended payment plan options do not impose any origination fees.

The extended payment plan option does not impose any origination fees.

Borrowers are advised about the terms of the loans and counseled to use all federal funding options.

In addition, beginning January 1, 2020,

HCN will begin offering an institutional grant to students demonstrating financial need to cover the difference between the total cost of tuition and fees less the amount of all eligible financial aid resources.

In addition, beginning January 1, 2020, HCN began offering an institutional grant to students demonstrating financial need to cover the difference between the total cost of tuition and fees less the amount of all eligible financial aid resources.

The grant is designed to limit a student’s monthly payment to $ 200 through an award of up to $ 200 per month or $ 600 per term after consideration of financial aid, employer tuition reimbursement, and other financial resources.

HCN awarded approximately $ 0.2 million of institutional grants during the year ended December 31, 2020.

Generally, financial aid is awarded prior to the start of the term and requests for authorization of disbursement begin in the second week of the term.

Tuition revenue that has not yet been earned by HCN is presented as deferred revenue in the accompanying Consolidated Balance Sheets.

HCN’s refund policy complies with the rules of the Ohio State Board of Career Colleges and Schools and is applicable to each term.

HCN’s refund policy for Ohio campuses complies with the rules of the Ohio State Board of Career Colleges and Schools and is applicable to each term.

For a course with an on-campus or other in-person component, the date of withdrawal is determined by a student’s last attended day of clinical offering, laboratory session, or lecture.

For an online course, the date of withdrawal is determined by a student’s last submitted assignment in the course.

HCN uses the following refund policy:

HCN uses the following refund policies:

HCN’s refund policy for students at its Ohio campuses is as follows:

Quarterly Term

Withdrawal Date

Tuition Refund Percentage

Withdrawal Date Tuition Refund Percentage

Before first full calendar week of the quarter 100 %

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During third full calendar week of the quarter 25 %

During fourth full week of the quarter

During fourth full week of the quarter No Refund

HCN’s refund policy for students at its Indianapolis campus is as follows:

Withdrawal Date Tuition Refund Percentage

Before first calendar week of quarter 100 %

During first full calendar week of the quarter 90 %

During third full calendar week of the quarter 75 %

During sixth full calendar week of the quarter 50 %

During ninth full calendar week of the quarter 25 %

After the ninth week of the quarter No Refund

If a student withdraws during the term, HCN calculates the portion of tuition that is non-refundable based on the tuition refund policy and recognizes it as revenue in the period the withdrawal occurs.

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Property and Equipment

Property and equipment at December 31, 2018 and 2019 consisted of the following:

Property and equipment consisted of the following:

As of December 31,

Life 2019 2020

(in thousands)

Building and building improvements

15 - 39 years

Leasehold improvements

up to 15 years

Office equipment

Computer equipment

Furniture and fixtures

Other capital assets

Software development

Program development

Land — $ 9,244 $ 9,019

Building and building improvements 15 - 39 years

54,592 53,309

Leasehold improvements up to 15 years

Office equipment 5 years

Computer equipment 3 years

22,090 20,227

Furniture and fixtures 7 years

Other capital assets 5 years

Software development 5 years

87,774 89,320

Program development 3 years

13,103 13,370

198,413 195,998

Accumulated depreciation and amortization 119,918 127,564

$ 78,495 $ 68,434

The Company disposed of long-lived assets resulting in a loss of $ 0.9 million, $ 0.6 million, and $ 0.9 million during the years ended December 31, 2018, 2019, and 2020, respectively.

The loss was primarily related to assets no longer in use.

The disposals and losses were primarily related to assets no longer in use.

The losses on long-lived assets are included as loss on disposals of long-lived assets in these Consolidated Financial Statements.

For the year ended December 31, 2020, the Company’s APEI Segment sold certain excess real property located in Charles Town, West Virginia, for a net sales price of $ 0.8 million, resulting in a loss on disposals of long-lived assets of $ 0.4 million.

The loss was included in loss on disposals of long-lived assets in these Consolidated Financial Statements.

During the years ended December 31, 2018, 2019, and 2020, the Company recorded depreciation expense of $ 16.9 million, $ 15.3 million and $ 13.0 million, respectively.

In addition, the Company recorded amortization expense related to other assets of $0.6 million , $0.6 million , and $0.3 million during the years ended December 31, 2017 , 2018 and 2019 , respectively.

In addition, the Company recorded amortization expense related to other assets of $ 0.6 million and $ 0.3 million, during the years ended December 31, 2018 and 2019, respectively.

There was no amortization expense during the year ended December 31, 2020 due to assets being fully amortized.

On September 30, 2012, the Company made a $ 6.8 million investment in preferred stock, treated as in-substance common stock, of NWHW Holdings, Inc., or NWHW Holdings, a holding company that operates an information technology training company, New Horizons Worldwide, Inc., or New Horizons, representing approximately 20 % of the fully diluted equity of NWHW Holdings.

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Under ASC 321, for each reporting period, the Company completes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

There were no indicators of impairment for the year ended December 31, 2019 .

Earnings or losses that were previously recorded remain as part of the carrying amount of the investment.

As of December 31, 2018 and 2019 , the carrying value of the investment was approximately $6.7 million and $5.2 million , respectively.

The carrying value of the investment was approximately $ 5.2 million, as of December 31, 2019 and 2020, respectively.

On February 20, 2013, the Company made a $ 4.0 million investment in preferred stock of Fidelis Education, Inc., or Fidelis Education, representing approximately 22 % of its fully diluted equity.

On February 1, 2016, the Company made an additional $ 950,000 investment in preferred stock increasing its investment in Fidelis Education to approximately 23 % of its fully diluted equity.

Fidelis Education offers a learning relationship management platform that has the goal of improving education advising and career mentoring services offered to students as they pursue college degrees.

Fidelis Education offers a learning relationship management platform that improves education advising and

career mentoring services offered to students as they pursue college degrees.

In connection with the investment, the Company is entitled to certain rights, including the right to representation on the Board of Directors of Fidelis Education.

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Therefore, the Company recorded the investment at cost and recognizes its share of earnings or losses in the investee in the periods for which they are reported with a corresponding adjustment in the carrying amount of the investment.

During the fourth quarter of 2017, the Company determined that the fair value of its investment in Fidelis Education was less

than its carrying value and that the impairment was other-than-temporary.

As a result, an approximately $2.2 million non-cash impairment charge was recorded for the year ended December 31, 2017.

This impairment charge is included in equity investment loss in the Consolidated Statements of Income.

As of December 31, 2018 and 2019 , the carrying value of the investment was approximately $1.2 million and $1.1 million , respectively.

Under ASC 323, for each reporting period, the Company completes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

Earnings or losses that were previously recorded remain as part of the carrying amount of the investment.

The carrying value of the investment is approximately $ 1.1 million, as of December 31, 2019 and 2020.

On April 2, 2014, the Company made a $ 1.5 million investment in preferred stock of Second Avenue Software, Inc., or Second Avenue Software, representing approximately 26 % of its fully diluted equity.

Second Avenue Software is a game-based education software company that develops software on a proprietary and “work-for-hire” basis.

The Company initially accounted for its investment in Second Avenue under ASC 323, Investments - Equity Method and Joint Ventures .

The Company initially accounted for its investment in Second Avenue Software under ASC 323, Investments - Equity Method and Joint Ventures .

Therefore, the Company recorded the investment at cost and recognized its share of earnings or losses in the investee in the periods for which they were reported with a corresponding adjustment in the carrying amount of the investment.

During the fourth quarter of 2017 and 2018, the Company determined that the fair value of its investment in Second Avenue Software was less than its carrying value and that the impairment was other-than-temporary.

As a result, the Company recorded approximately $0.2 million and $0.1 million pretax non-cash impairment charges for the years ended December 31, 2017 and 2018 , respectively.

These impairment charges are included in equity investment loss in the Consolidated Statements of Income.

During the first quarter of 2019, the Company determined that it no longer qualified to account for its investment in Second Avenue Software under ASC 323 because the Company is no longer able to exercise significant influence over operating and financial policies of Second Avenue Software;

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Under ASC 321, for each reporting period, the Company completes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

There were no indicators of impairment for the year ended December 31, 2019 .

Earnings or losses that were previously recorded remain as part of the carrying amount of the investment.

The carrying value of the investment is approximately $ 0.8 million as of December 31, 2019 and 2020.

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Under ASC 321, for each reporting period, the Company completes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

During the year ended December 31, 2018 , the Company determined that impairment indicators existed and utilized an independent valuation firm to assess the fair value of the investment.

The assessment concluded that the fair value of its investment was less than the carrying amount resulting in a pretax non-cash impairment charge of approximately $0.5 million .

This impairment charge is included in equity investment loss in the Consolidated Statements of Income.

There was no impairment for the year ended December 31, 2019 .

The carrying value of the investment was approximately $ 3.3 million as of December 31, 2019 and 2020.

The Company evaluated its equity method investment for impairment as of December 31, 2019 and determined the investment was not impaired.

During the years ended December 31, 2017 , and 2018 , the Company recorded impairment charges of approximately $2.4 million , and $0.1 million on its equity method investments, respectively.

The Company evaluated its cost method investments for impairment as of December 31, 2019 and determined none of the investments were impaired.

During the years ended December 31, 2017 and 2018 the Company recorded impairment charges of approximately $0.3 million and $0.5 million on its cost method investments, respectively.

The aggregate carrying amount of the Company’s investments accounted for under ASC 321, Investments - Equity Securities , presented on its Consolidated Balance Sheet on a one-line basis as “Investments”, was approximately $3.3 million and $9.4 million as of December 31, 2018 and 2019 , respectively.

The Company evaluated its equity method investment for impairment as of December 31, 2019 and 2020, including a review of any impacts related to the COVID-19 pandemic, and determined the investment was no t impaired.

During the year ended December 31, 2018, the Company recorded an impairment charge of approximately $ 0.1 million on its equity method investment.

The Company evaluated its cost method investments for impairment as of December 31, 2019 and 2020, including a review of any impacts related to the COVID-19 pandemic, and determined no ne of the investments were impaired.

During the year ended December 31, 2018, the Company recorded impairment charges of approximately $ 0.5 million on its cost method investments.

The aggregate carrying amount of the Company’s investments accounted for under ASC 321, Investments - Equity Securities , presented on its Consolidated Balance Sheets on a one-line basis as “Investments”, was approximately $ 9.4 million as of December 31, 2019 and 2020.

Goodwill and Intangible Assets

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Simplifying the Test for Goodwill Impairment .

The Company annually assesses goodwill for impairment on October 31 st , or more frequently if events and circumstances indicate that goodwill might be impaired.

Goodwill impairment testing consists of an

optional qualitative assessment as well as a quantitative test.

The Company annually assesses goodwill for impairment on October 31 st , or more frequently if events and circumstances, including a review of any impacts related to the COVID-19 pandemic, indicate that goodwill might be impaired.

Goodwill impairment testing consists of an optional qualitative assessment as well as a quantitative test.

The quantitative test compares the fair value of the reporting unit to its carrying value.

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At the acquisition date, the useful life assigned to each type of intangible asset with a definite useful life was as follows:

Student contracts and relationships

Non-compete agreements

At December 31, 2019 , all identified intangible assets with a useful life were fully amortized.

Student contracts and relationships 6 years

Curricula 3 years

Non-compete agreements 5 years

As of December 31, 2019 and 2020, all identified intangible assets with a useful life were fully amortized.

During the year ended December 31, 2019, as a result of circumstances that included HCN’s continued underperformance against revised 2019 internal targets and overall 2019 financial performance, the Company completed interim goodwill impairment tests during the first and third quarters.

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There was no impairment of the intangible assets.

As a result, the Company recorded a pretax, non-cash charge of $7.3 million to reduce the carrying value of its goodwill in the HCN Segment during 2019.

As a result, the Company recorded a pretax, non-cash charges of $ 7.3 million to reduce the carrying value of its goodwill in the HCN Segment during 2019.

There was no impairment of goodwill or the intangible assets during the year ended December 31, 2020.

The Company engaged an independent valuation firm to assist with the valuation and determination of the fair value of HCN for both assessments.

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Values derived under the four valuation methods were then weighted to estimate HCN’s enterprise value.

The goodwill impairment charges recorded in the quarters ended March 31, 2019 and September 30, 2019 eliminated the difference between the fair value of goodwill and the carrying value of goodwill.

As such, future changes, including even minor changes in revenue, operating income, market multiples, discount rates, and other inputs to the valuation process may result in future impairment charges and those charges could be material.

The goodwill impairment charges recorded in 2019 eliminated the difference between the fair value of goodwill and the carrying value of goodwill.

As of October 31, 2019 and 2020, the Company completed its annual assessment of goodwill and concluded that HCN’s fair value was more than the carrying value;

consequently, there was no impairment.

The Company’s October 31, 2019 annual assessment concluded that the fair value of HCN exceeded the carrying value by approximately 4% , or $1.5 million .

Changes in the carrying amount of goodwill by reportable segment during the year ended December 31, 2019 are as follows (in thousands):

Total Goodwill

The Company’s October 31, 2020 annual assessment concluded that the fair value of HCN exceeded the carrying value by approximately $ 13.7 million, or 37.1 %.

Changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2019 and 2020 are as follows (in thousands):

APEI Segment HCN Segment Total Goodwill

Goodwill as of December 31, 2018

$ — $ 33,899 $ 33,899

Impairment — ( 7,336 ) ( 7,336 )

Goodwill as of December 31, 2019

There were no changes in the carrying amount of goodwill by reportable segment during the years ended December 31, 2017 and 2018 .

Other intangible assets, included in Other Assets on the Consolidated Balance Sheets in these Consolidated Financial Statements, consist of the following as of December 31, 2018 (in thousands):

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Finite-lived intangible assets

Non-compete agreements

Student contracts and relationships

Total finite-lived intangible assets

Indefinite-lived intangible assets

Accreditation, licensing and Title IV

Affiliation agreements

Total indefinite-lived intangible assets

Total intangible assets

Other intangible assets consist of the following as of December 31, 2019 (in thousands):

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

$ — $ 26,563 $ 26,563

Impairment — — —

Goodwill as of December 31, 2020

$ — $ 26,563 $ 26,563

Intangible assets, included in Other Assets on the Consolidated Balance Sheets in these Consolidated Financial Statements, consist of the following as of December 31, 2019 and 2020 (in thousands):

Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Finite-lived intangible assets

$ 405 $ 405 $ —

Non-compete agreements

Student contracts and relationships

3,870 3,870 —

Total finite-lived intangible assets

4,361 4,361 —

Indefinite-lived intangible assets

1,998 — 1,998

Accreditation, licensing and Title IV

1,686 — 1,686

Affiliation agreements

Total indefinite-lived intangible assets

3,721 — 3,721

Total intangible assets

Identified intangible assets are amortized in a manner that reflects the estimated economic benefit of the intangible assets.

$ 8,082 $ 4,361 $ 3,721

Finite-lived intangible assets were amortized in a manner that reflects the estimated economic benefit of the intangible assets.

Curricula and non-compete agreements were amortized on a straight-line basis.

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Determining the fair value of HCN requires judgment and the use of significant estimates and assumptions, including fluctuations in enrollments, revenue growth rates, EBITDA margins, discount rates, and future market conditions, among others.

Given the current competitive and regulatory environment, and the uncertainties regarding the related impact on HCN’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill impairment tests will prove to be accurate predictions of the future.

Given the current competitive and regulatory environment, the impact of COVID-19, and the uncertainties regarding the related impact on HCN’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim and annual goodwill impairment tests will prove to be accurate predictions of the future.

If the Company’s assumptions are not realized, the Company may record additional goodwill impairment charges in future periods.

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These options are included in the lease term when it is reasonably certain that the option will be exercised.

In February 2016, FASB issued ASU No.

2016-02, Leases (Topic 842) .

The adoption of this standard resulted in the recognition of operating lease ROU assets and corresponding lease liabilities of approximately $ 12.1 million on the Consolidated Balance Sheet as of January 1, 2019.

There was no impact to the Company’s net income or liquidity as a result of the adoption of this ASU.

Operating lease assets are ROU assets, which represent the right to use an underlying asset for the lease term.

Operating lease liabilities represent the obligation to make lease payments arising from the lease.

Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term on the Consolidated Balance Sheet as of December 31, 2019 .

Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term on the Consolidated Balance Sheets as of December 31, 2019 and 2020.

These assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

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There are no variable lease payments.

Lease expense for the year ended December 31, 2019 was approximately $2.6 million .

Lease expense for the years ended December 31, 2019 and 2020 was approximately $ 2.6 million and $ 2.9 million, respectively.

These costs are primarily related to long-term operating leases, but also include amounts for short-term leases with terms greater than 30 days that are not material.

Cash paid for amounts included in the present value of operating lease liabilities during the years ended December 31, 2019 and 2020 was $ 2.8 million and $ 2.9 million, respectively, and is included in operating cash flows.

The following tables present information about the amount and timing of cash flows arising from the Company’s operating leases as of December 31, 2020 (dollars in thousands):

Maturity of Lease Liabilities

Lease Payments

Maturity of Lease Liabilities Lease Payments

2026 and beyond 1,742

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Weighted average discount rate 5.1 %

The APEI Segment leases corporate and administrative office space in Maryland and Virginia under operating leases that expire through June 2023 .

Lease expense related to the APEI Segment’s operating leases was $0.7 million , $0.6 million and $0.5 million for the years ended December 31, 2017 , 2018 and 2019 , respectively.

HCN operates five campuses, which are located in the suburban areas of Cincinnati, Cleveland, Columbus, Dayton, and Toledo, Ohio, a new campus planned in Indianapolis, Indiana is expected to open in the second quarter of 2020, and one administrative office in suburban Columbus under operating leases that expire through June 2029 .

Lease expense related to the HCN Segment’s operating leases was $2.7 million , $2.8 million , and $2.1 million for the years ended December 31, 2017 , 2018 and 2019 , respectively.

A majority of the leases provide for the payment of taxes, maintenance, insurance and certain other operating expenses applicable to the leased premises.

The components of income tax expense for the years ended December 31, 2017 , 2018 and 2019 were as follows (in thousands):

The APEI Segment leases corporate and administrative office space in Maryland and Virginia under operating leases that expire through May 2022.

Lease expense related to the APEI Segment’s operating leases was $ 0.5 million in each of the years ended December 31, 2019 and 2020, respectively.

HCN leases administrative office space in suburban Columbus, Ohio, and leases six campuses located in the suburban areas of Cincinnati, Cleveland, Columbus, Dayton, and Toledo, Ohio, and a campus in Indianapolis, Indiana, under operating leases that expire through June 2029.

Lease expenses related to the HCN Segment’s operating leases were $ 2.1 million, and $ 2.4 million for the years ended December 31, 2019 and 2020, respectively.

A majority of the leases require the payment of taxes, maintenance, insurance and certain other operating expenses applicable to the leased premises.

In December 2020 HCN entered into a lease agreement for a new campus location in Akron, Ohio.

The lease term begins in April 2021 for an 87 month period expiring in June 2028, with four additional optional five year renewal terms.

The total value of the minimum rental payments for the initial term of the lease is approximately $ 2.5 million.

The components of income tax expense were as follows (in thousands):

Year Ended December 31,

2018 2019 2020

Current income tax expense:

Federal $ 8,034 $ 5,803 $ 5,685

State 2,170 1,425 2,146

10,204 7,228 7,831

Deferred tax expense:

Federal ( 776 ) ( 1,766 ) ( 608 )

State ( 141 ) ( 275 ) ( 203 )

( 917 ) ( 2,041 ) ( 811 )

Income Tax Expense $ 9,287 $ 5,187 $ 7,020

The tax effects of principal temporary differences are as follows (in thousands):

As of December 31,

Deferred tax assets

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Accrued vacation and severance 660 695

Deferred rent

Investment 304 564

Other 232 596

Stock option compensation expense 1 63

Total deferred tax assets

Total gross deferred tax assets 6,869 7,165

Valuation allowance — ( 536 )

Total net deferred tax assets 6,869 6,629

Deferred tax liabilities

6 unchanged sentences

Deferred tax liabilities, net $ ( 3,391 ) $ ( 2,580 )

Income tax expense differs from the amount of tax determined by applying the United States Federal income tax rates to pretax income and loss due to the application of state apportionment laws, permanent tax differences, and the impact of the change in the federal statutory rate as follows (in thousands):

Year Ended December 31,

2018 2019 2020

Amount % Amount % Amount %

Tax expense at statutory rate $ 7,320 21.00 % $ 3,192 21.00 % $ 5,427 21.00 %

1 unchanged sentence

Permanent differences 433 1.24 % 244 1.61 % 491 1.90 %

Change in statutory rate

Equity-based compensation benefits ( 126 ) ( 0.36 ) % 371 2.44 % ( 305 ) ( 1.18 ) %

1 unchanged sentence

Uncertain tax position 154 0.44 % 93 0.61 % 49 0.19 %

Valuation allowance on capital loss

On December 22, 2017 the Tax Act was enacted by the U.S.

Among other provisions, the Tax Act reduced the federal corporate tax rate to 21% from the existing maximum rate of 35%, effective January 1, 2018.

The Company recorded a tax benefit of $3.7 million related to the revaluation of its net deferred tax liabilities for the year ended December 31, 2017.

Permanent differences in the table above are mainly attributable to executive and stock compensation, minority investment earnings and/or losses including other-than-temporary impairment charges, nondeductible meals and entertainment expenses, and non-deductible employer contributions to the American Public Education, Inc.

Employee Stock Purchase Plan, or ESPP.

Valuation allowance — — % 213 1.40 % 287 1.11 %

Other ( 69 ) ( 0.19 ) % ( 123 ) ( 0.80 ) % ( 18 ) ( 0.07 ) %

$ 9,287 26.64 % $ 5,187 34.13 % $ 7,020 27.17 %

Permanent differences in the table above are mainly attributable to executive and stock compensation, minority investment losses including other-than-temporary impairment charges, nondeductible meals and entertainment expenses, and non-deductible employer contributions to the American Public Education, Inc.

Employee Stock Purchase Plan.

There were no material uncertain tax positions as of December 31, 2018, 2019, or 2020.

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On June 13, 2014, the Company’s stockholders approved an amendment to the ESPP to increase the number of shares of the Company’s common stock available for issuance under the plan by 100,000 shares, extend the term of the ESPP to March 7, 2024, and make other administrative changes.

On May 15, 2020, the Company’s stockholders further amended the ESPP to increase the number of shares of the Company’s common stock available for issuance under the plan by an additional 100,000 shares and extend the term of the ESPP to May 15, 2030.

Shares purchased in the open market for issuance to employees pursuant to the plan for the years ended December 31, 2018, 2019, and 2020 were as follows:

Purchase Date

Purchase Price

Compensation Expense

Purchase Date Shares Common Stock

Fair Value Purchase Price Compensation Expense

March 31, 2018 1,931 $ 42.15 $ 35.83 $ 12,209

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The 2017 Incentive Plan allows the Company to grant up to 1,675,000 shares, as well as shares of the Company’s common stock that were available for issuance under the 2011 Incentive Plan as of the Effective Date.

In addition, the number of shares of common stock available under the 2017 Incentive Plan will be increased from time to time by the number of shares subject to outstanding awards granted under the 2011 Incentive Plan that terminate by expiration, forfeiture, cancellation or otherwise without issuance of such shares following the Effective Date.

In addition, the number of shares of common stock available under the 2017 Incentive Plan was increased from time to time by the number of shares subject to outstanding awards granted under the 2011 Incentive Plan that terminate by expiration, forfeiture, cancellation or otherwise without issuance of such shares following the Effective Date.

On May 15, 2020, the Company’s stockholders approved an amendment to the 2017 Incentive Plan to increase the number of shares available for issuance thereunder by 1,425,000 and to extend the term of the 2017 Plan to May 15, 2030, as well as to clarify limitations on repricing.

Grants under the 2017 Incentive Plan generally vest over a period of three years and the Company recognizes compensation expense over that period.

The 2017 Incentive Plan includes a provision that allows individuals who have reached certain service and retirement eligibility criteria on the date of grant an accelerated service period of one year .

The Company recognizes compensation expense for these individuals over the accelerated period.

As of December 31, 2020, all shares subject to outstanding awards are under the 2017 Incentive Plan.

Restricted Stock and Restricted Stock Unit Awards

The fair value of APEI’s restricted stock and restricted stock unit awards is calculated based on the closing price of APEI’s stock on the date of grant.

The fair value of the Company’s restricted stock and restricted stock unit awards is calculated based on the closing price of the Company’s stock on the date of grant.

The estimated fair value of these awards is recognized as stock-based compensation expense and 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.

APEI recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant, and multiplying the corresponding number of shares earned based upon

such achievement by the closing price of APEI’s stock on the date of grant.

The Company recognizes the estimated fair value of performance-based restricted stock units by assuming the satisfaction of any performance-based objectives at the “target” level, which is the most probable outcome determined for accounting purposes at the time of grant and multiplying the corresponding number of shares earned based upon such achievement by the closing price of the Company’s stock on the date of grant.

To the extent performance goals are not met, compensation cost is not ultimately recognized against the goals and, to the extent previously recognized, compensation cost is reversed.

1 unchanged sentence

The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2018:

of Shares Weighted

Average Grant

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The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2019:

of Shares Weighted

Average Grant

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The table below sets forth the restricted stock and restricted stock unit activity for the year ended December 31, 2020:

of Shares Weighted

Average Grant

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Non vested, December 31, 2020 526,800 $ 26.43

There were no shares of restricted stock or restricted stock units excluded in the computation of diluted net income per share for the year ended December 31, 2017 .

There were 35,688 , 37,738 , and 48,434 shares of restricted stock or restricted stock units excluded in the computation of diluted net income per common share for the years ended December 31, 2018, 2019, and 2020, respectively.

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In addition, the Company determines the risk-free interest rate by selecting the U.S.

Treasury constant maturity for the same maturity as the estimated life of the option , quoted on an investment basis in effect at the time of

grant for that business day.

Treasury constant maturity for the same maturity as the estimated life of the option , 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.

Prior to 2012, the Company issued a mix of stock options and restricted stock, but since 2011 the Company did no t issue any stock options until 2019 when options were issued to the Company’s new Chief Executive Officer.

Prior to 2012, the Company issued a mix of stock options and restricted stock, but ceased issuing options until 2019.

Options currently outstanding vest ratably over a period of three years and expire in ten years from the date of grant.

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2017 and the changes during the periods then ended is as follows:

The table below sets forth stock option activity for the year ended December 31, 2018:

of Options Weighted

Average Exercise

Price Weighted

Life (years) Aggregate

(in thousands)

5 unchanged sentences

Exercisable, December 31, 2018 — $ — $ —

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2018 and the changes during the periods then ended is as follows:

The table below sets forth stock option activity for the year ended December 31, 2019:

of Options Weighted

Average Exercise

Price Weighted

Life (years) Aggregate

(in thousands)

5 unchanged sentences

Exercisable, December 31, 2019 — $ — $ —

A summary of the status of the Company’s Stock Incentive Plans as of December 31, 2019 and the changes during the periods then ended is as follows:

The table below sets forth stock option activity for the year ended December 31, 2020:

of Options Weighted

Average Exercise

Price Weighted

Life (years) Aggregate

(in thousands)

7 unchanged sentences

Year Ended December 31,

2018 2019 2020

Expected volatility — % 47.37 % 48.74 %

3 unchanged sentences

Weighted-average fair value of options granted during the year $ — $ 13.91 $ 18.99

The following table summarizes information regarding stock option exercises:

Year Ended December 31,

(In thousands)

Proceeds from stock options exercised

Intrinsic value of stock options exercised

Tax benefit from exercises

There were 123,267 anti-dilutive stock options excluded from the calculation of diluted net income per common share for the year ended December 31, 2017 .

There were no anti-dilutive stock options excluded from the calculation of diluted net income per common share for the year ended December 31, 2018.

There were 43,134 anti-dilutive stock options excluded from the calculation of diluted net income per share for the year ended December 31, 2019 .

For the years ended December 31, 2019, and 2020, there were 43,134 , and 60,504 anti-dilutive stock options excluded from the calculation of diluted net income per share, respectively.

Stock-Based Compensation Expense

As of December 31, 2019 , there were 484,400 and 62,540 shares subject to outstanding awards under the 2017 Incentive Plan and the 2011 Incentive Plan, respectively.

For the years ended December 31, 2018, 2019, and 2020, the Company recognized stock-based compensation expense as follows:

Year Ended December 31,

2018 2019 2020

(In thousands)

4 unchanged sentences

The Company recognized income tax benefits of $ 1.9 million, $ 2.0 million, and $ 1.9 million from vested restricted stock and restricted stock units for the years ended December 31, 2018, 2019, and 2020, respectively.

During the years ended December 31, 2017 and 2018 , the Company did no t repurchase shares of the Company’s common stock, par value $0.01 per share, other than shares deemed to have been repurchased to satisfy employee minimum tax withholding requirements in connection with the vesting of restricted stock grants.

During the year ended December 31, 2018, the Company did no t repurchase shares of the Company’s common stock, par value $ 0.01 per share, other than shares deemed to have been repurchased to satisfy employee minimum tax withholding requirements in connection with the vesting of restricted stock grants.

During the year ended December 31, 2019, the Company repurchased 1,416,304 shares of the Company’s common stock, par value $ 0.01 per share.

The chart and footnotes below provide the 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)

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3)

12 unchanged sentences

December 1, 2019 – December 31, 2019 110,000 27.23 110,000 352,480 22,004,700

Total 1,416,304 $ 26.83 1,416,304 352,480 $ 22,004,700

During the year ended December 31, 2020, the Company repurchased 547,563 shares of the Company’s common stock, par value $ 0.01 per share.

The chart and footnotes below provide the 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 (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) (3)

January 1, 2020 — $ — — — $ 22,004,700

January 1, 2020 – January 31, 2020 198,300 27.10 198,300 284,723 16,630,770

February 1, 2020 – February 29, 2020 179,263 24.51 179,263 284,723 12,237,034

March 1, 2020 – March 31, 2020 170,000 22.59 170,000 284,723 8,396,734

April 1, 2020 – April 30, 2020 — — — 284,723 8,396,734

May 1, 2020 – May 31, 2020 — — — 299,843 8,396,734

June 1, 2020 – June 30, 2020 — — — 312,816 8,396,734

July 1, 2020 – July 31, 2020 — — — 317,924 8,396,734

August 1, 2020 – August 31, 2020 — — — 331,841 8,396,734

September 1, 2020 – September 30, 2020 — — — 331,841 8,396,734

October 1, 2020 – October 31, 2020 — — — 331,841 8,396,734

November 1, 2020 – November 30, 2020 — — — 331,841 8,396,734

December 1, 2020 – December 31, 2020 — — — 331,841 8,396,734

Total 547,563 $ 24.85 547,563 331,841 $ 8,396,734

(1) On December 9, 2011, our Board of Directors approved a stock repurchase program for our common stock, under which we could annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plans.

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The stock repurchase program does not obligate us to repurchase any shares, may be suspended or discontinued at any time, and is funded using our available cash.

On May 2, 2019, the Company’s Board of Directors authorized the repurchase of up to $35.0 million of the Company’s common stock, and on December 5, 2019, the Board approved an additional authorization of up to $25.0 million of shares.

(2) On May 2, 2019, the Company’s Board of Directors authorized the repurchase of up to $ 35.0 million of the Company’s shares of common stock, and on December 5, 2019, the Board approved an additional authorization of up to $ 25.0 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 in privately negotiated transactions.

5 unchanged sentences

The authorization under this program is in addition to the Company’s repurchase program under which we may annually purchase up to the cumulative number of shares issued or deemed issued in that year under our equity incentive and stock purchase plan.

During the year-ended December 31, 2019 , the Company was deemed to have repurchased 83,214 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.

(3) During the years ended December 31, 2018, 2019, and 2020, the Company was deemed to have repurchased 66,088 , 83,214 , and 78,847 shares of common stock forfeited by employees to satisfy minimum tax-withholding requirements in connection with the vesting of restricted stock grants.

These repurchases were not part of the stock repurchase programs authorized by our Board of Directors as described in footnotes 1 and 2 of this table.

6 unchanged sentences

APUS students utilize various payment sources and programs to finance their education expenses, including funds from:

Department of Defense, or DoD, tuition assistance programs;

federal student aid from Title IV programs;

and education benefit programs administered by the U.S.

Department of Veteran’s Affairs, or VA, education benefit programs;

as well as cash and other sources.

Reductions in or changes to DoD tuition assistance, VA education benefits, Title IV programs and other payments sources could have a significant impact on the Company’s operations.

Department of Defense, or DoD, tuition assistance programs, or TA, education benefit programs administered by the U.S.

Department of Veteran’s Affairs, or VA, and federal student aid from Title IV programs, as well as cash and other sources.

Reductions in or changes to TA, VA education benefits, Title IV programs and other payment sources could have a significant impact on the Company’s operations.

As of December 31, 2020 approximately 61 % of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

2 unchanged sentences

Year Ended December 31,

2018 2019 2020

DoD tuition assistance programs 37 % 39 % 43 %

Title IV programs

VA education benefits 23 % 23 % 22 %

Title IV programs 26 % 25 % 21 %

Cash and other sources 14 % 13 % 14 %

1 unchanged sentence

Year Ended December 31,

2018 2019 2020

Title IV programs 82 % 80 % 82 %

10 unchanged sentences

Year Ended December 31,

2018 2019 2020

American Public Education Segment

$ 260,062 $ 256,899 $ 285,766

Hondros College of Nursing Segment

37,625 29,479 36,091

Intersegment elimination — ( 108 ) ( 72 )

2 unchanged sentences

American Public Education Segment

$ 16,175 $ 14,659 $ 12,364

Hondros College of Nursing Segment

1,326 937 620

Total Depreciation and Amortization $ 17,501 $ 15,596 $ 12,984

Income from operations before interest income and income taxes

Income (loss) from operations before interest income and income taxes

American Public Education Segment

$ 28,561 $ 23,522 $ 24,034

Hondros College of Nursing Segment

3,965 ( 10,768 ) 722

Intersegment elimination — 2 1

2 unchanged sentences

American Public Education Segment

$ 2,867 $ 3,866 $ 1,075

Hondros College of Nursing Segment

2 unchanged sentences

American Public Education Segment

$ 8,267 $ 7,754 $ 6,827

Hondros College of Nursing Segment

1,020 ( 2,567 ) 193

Total Income Tax Expense $ 9,287 $ 5,187 $ 7,020

1 unchanged sentence

American Public Education Segment

$ 8,793 $ 6,479 $ 4,724

Hondros College of Nursing Segment

Total Capital Expenditures $ 9,430 $ 7,255 $ 4,926

Effective January 1, 2019, the APEI Segment began charging the HCN Segment for the value of courses taken by HCN Segment employees at American Public University System.

Intersegment elimination represents the elimination of this intersegment revenue in consolidation.

Effective January 1, 2019, the APEI Segment began charging the HCN Segment for the value of courses taken by HCN Segment employees at APUS.

The intersegment elimination represents the elimination of this intersegment revenue in consolidation.

A summary of the Company’s consolidated assets by reportable segment is as follows (in thousands):

1 unchanged sentence

American Public Education Segment

$ 305,896 $ 322,544

Hondros College of Nursing Segment

49,001 48,474

Total Assets $ 354,897 $ 371,018

Subsequent Events

The Company has reviewed its business activities and has no subsequent events to report.

On March 1, 2021, we completed an underwritten public offering of 3,680,000 shares of our common stock at a price to the public of $ 25.00 per share for estimate aggregate net proceeds of $ 86.4 million, after deducting underwriting discounts and commissions and other estimated offering expenses.

Quarterly Financial Summary (unaudited)

3 unchanged sentences

The following tables set forth selected unaudited quarterly financial information for each of the Company’s last eight quarters:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

(in thousands, except per share data)

Revenue $ 73,441 $ 70,560 $ 67,888 $ 74,381

Income (loss) from operations before income taxes 2,435 6,813 ( 1,894 ) 9,310

1 unchanged sentence

Net income (loss) per common share:

Basic $ 0.06 $ 0.30 $ ( 0.10 ) $ 0.37

Diluted $ 0.06 $ 0.30 $ ( 0.10 ) $ 0.37

Revenue $ 74,616 $ 82,127 $ 79,133 $ 85,909

Income from operations before income taxes 3,395 9,220 3,429 9,805

Net income 2,420 6,689 2,642 7,071

Net income per common share:

Basic $ 0.16 $ 0.45 $ 0.18 $ 0.48

Diluted $ 0.16 $ 0.45 $ 0.18 $ 0.47

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data