What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 89 added, 54 removed, 322 unchanged (31% of the section changed)

3 unchanged sentences

(In thousands)

As of March 31, 2021 As of December 31, 2020

As of June 30, 2021 As of December 31, 2020

ASSETS (Unaudited)

4 unchanged sentences

Prepaid expenses 9,466 6,472

Income tax receivable 5,099 —

Total current assets 350,467 251,810

34 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Revenue $ 78,014 $ 82,127 $ 166,555 $ 156,743

10 unchanged sentences

Income tax expense 646 2,532 3,285 3,506

Equity investment loss ( 5 ) ( 1 )

Equity investment income (loss) ( 822 ) 1 ( 827 ) —

Net income $ 531 $ 6,689 $ 8,638 $ 9,109

17 unchanged sentences

Net income — — — 9,109 9,109

Balance as of March 31, 2020 14,781 $ 148 $ 190,423 $ 94,778 $ 285,349

Balance as of June 30, 2020 14,797 $ 148 $ 191,996 $ 101,467 $ 293,611

Additional Paid-in Capital Retained Earnings Total Stockholders’ Equity

6 unchanged sentences

Net income — — — 8,638 8,638

Balance as of March 31, 2021 18,671 $ 187 $ 281,170 $ 119,287 $ 400,644

Balance as of June 30, 2021 18,689 $ 187 $ 283,120 $ 119,818 $ 403,125

The accompanying notes are an integral part of these Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

24 unchanged sentences

Net cash provided by (used in) financing activities 83,397 ( 15,554 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 93,130 ( 5,901 )

Net increase in cash, cash equivalents, and restricted cash 89,267 13,298

Cash, cash equivalents, and restricted cash at beginning of period 227,686 202,740

11 unchanged sentences

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, while continuing to offer courses in a virtual setting for those that prefer remote course learning.

There can be no assurance that HCN will not need to again 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 United States Department of Education, or ED, to participate in student financial aid programs authorized under Title IV of the Higher Education Act of 1965, as amended, or Title IV programs.

17 unchanged sentences

In preparing financial statements in conformity with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

The Company evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, and various other assumptions that the Company believes are reasonable under the circumstances.

The Company evaluates these estimates and assumptions on an ongoing basis and bases its estimates on experience, current and expected future conditions, and various other assumptions that the Company believes are reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions, and the impact of such differences may be material to the Company’s Consolidated Financial Statements.

2 unchanged sentences

The Company is required to maintain and restrict these funds pursuant to the terms of the applicable institution’s program participation agreement with ED.

Restricted cash on the Company’s Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 was $ 1.0 million and $ 1.2 million, respectively.

Restricted cash on the Company’s Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 was $ 1.0 million and $ 1.2 million, respectively.

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

5 unchanged sentences

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

The Company evaluated its equity method and cost method investments for impairment as of March 31, 2021, including a review of any impacts related to the COVID-19 pandemic, and determined none of the investments were impaired.

The Company evaluated its equity method and cost method investments for impairment as of June 30, 2021, including a review of any impacts related to the COVID-19 pandemic, and concluded the fair value of a cost method investment was less than its carrying amount, resulting in a pretax non-cash impairment charge of approximately $ 0.8 million during the three months ended June 30, 2021.

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

There was no impairment charge during the three and six months ended June 30, 2020.

At June 30, 2021, the aggregate carrying amount of the Company’s investments accounted for under Financial Accounting Standards Board Accounting Standards Codification 321, Investments - Equity Securities, or FASB ASC 321, presented on its Consolidated Balance Sheets on a one-line basis as “Investments”, was approximately $ 8.5 million.

Goodwill and Indefinite-lived Intangible Assets

During the three months ended March 31, 2021 and 2020, the Company evaluated events and circumstances related to the valuation of goodwill through March 31, 2021 and 2020, respectively, to determine if there were indicators of impairment.

The Company evaluated events and circumstances related to the valuation of goodwill and intangibles through June 30, 2021 and 2020, respectively, to determine if there were indicators of impairment.

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.

These evaluations concluded there were no indicators of impairment during the period, and consequently, there was no impairment of goodwill or intangible assets during the three months ended March 31, 2021 and 2020.

These evaluations concluded there were no indicators of impairment during the periods, and consequently, there was no impairment of goodwill or intangible assets during the three and six months ended June 30, 2021 and 2020.

For additional information on goodwill and intangible assets, see the Company’s Consolidated Financial Statements and accompanying notes in its audited financial statements included in the Annual Report.

3 unchanged sentences

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, including assumptions with respect to expected stock price volatility and the risk-free interest rate.

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, including assumptions with respect to expected stock price volatility and the risk-free interest rate.

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.

3 unchanged sentences

Estimates 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.

Stock-based compensation expense for the three months ended March 31, 2021 and 2020 was as follows (in thousands):

Three Months Ended March 31,

Stock-based compensation expense for the three and six months ended June 30, 2021 and 2020 was as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Instructional costs and services $ 389 $ 402 $ 855 $ 880

11 unchanged sentences

Amounts accrued are subject to change in future interim periods if actual future financial results or operational performance are better or worse than expected.

The Company recognized an aggregate expense associated with the Company’s current year annual incentive-based compensation plans of approximately $ 1.2 million during the three month period ended March 31, 2021, compared to an aggregate expense of $ 1.3 million during the three month period ended March 31, 2020.

The Company recognized an aggregate expense associated with the Company’s current year annual incentive-based compensation plans of approximately $ 1.3 million and $ 2.5 million during the three and six month periods ended June 30, 2021, compared to an aggregate expense of $ 1.8 million and $ 3.1 million during the three and six month periods ended June 30, 2020.

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 net proceeds of approximately $ 86.2 million, after deducting underwriting discounts and commissions and other offering expenses.

1 unchanged sentence

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates, or ASUs, issued by the Financial Accounting Standards Board, or FASB.

The Company considers the applicability and impact of all Accounting Standards Updates, or ASUs, issued by FASB.

All ASUs issued subsequent to the filing of the Annual Report on March 9, 2021 were assessed and determined to be either inapplicable or not expected to have a material impact on the Company’s consolidated financial position and/or results of operations.

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 HLC, 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 the terms of the Commitment Letter, 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).

On January 26, 2021, the Company entered into a joinder agreement pursuant to which Macquarie assigned a portion of the commitments to Truist Bank and Truist Securities, Inc., or together, Truist.

Macquarie Capital and Truist will act as lead arrangers and bookrunners with respect to the Facilities.

In April 2021, Macquarie Capital informed the Company that it had successfully syndicated the Facilities and allocated expected commitments from lenders to be funded in connection with the closing of the Facilities, or the Closing, subject to the execution of final documentation.

The Facilities are expected to bear interest at a per annum rate equal to LIBOR (subject to a floor of 0.75 %) plus an applicable margin of 5.50 %.

In addition, the Company expects that it will pay to the lenders (i) holding commitments in respect of the Term Facility, and (ii) an upfront fee at Closing equal to 2.0 % of the stated principal amount of the Term Facility.

The terms of the Facilities are not final and are subject to entering into final documentation at Closing.

The Rasmussen Acquisition is expected to close in the third quarter of 2021, subject to the satisfaction or waiver of closing conditions.

Pursuant to the terms of the Commitment Letter, Macquarie Lender committed to arrange (i) a senior secured term loan in the aggregate principal amount of $ 175 million, or the Term Loan and (ii) a senior secured revolving loan facility in an aggregate commitment amount of $ 20 million (together with the Term Loan, the Facilities).

On January 26, 2021, the Company entered into a joinder agreement pursuant to which Macquarie assigned a portion of the commitments to Truist Bank and Truist Securities, Inc., or Truist Securities, and together, Truist.

Macquarie Capital and Truist Securities are lead arrangers and joint bookrunners with respect to the Facilities.

Borrowings under the Facilities are expected to bear interest at a per annum rate equal to LIBOR (subject to a floor of 0.75 %) plus an applicable margin of 5.50 %.

The Facilities are expected to be guaranteed by all existing and future domestic subsidiaries of the Company, subject to certain exceptions, or the Subsidiary Guarantors, and secured by a lien in substantially all of the assets of the Company and the Subsidiary Guarantors.

Disaggregation of Revenue

1 unchanged sentence

The table also includes a reconciliation of the disaggregated revenue with the reportable segments (in thousands):

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

APEI HCN Intersegment Consolidated

4 unchanged sentences

Total Revenue $ 66,893 $ 11,134 $ ( 13 ) $ 78,014

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

APEI HCN Intersegment Consolidated

4 unchanged sentences

Total Revenue $ 73,547 $ 8,602 $ ( 22 ) $ 82,127

Six Months Ended June 30, 2021

APEI HCN Intersegment Consolidated

Instructional services, net of grants and scholarships $ 143,306 $ 18,756 $ ( 26 ) $ 162,036

Graduation fees 645 — — 645

Textbook and other course materials — 3,245 — 3,245

Other fees 364 265 — 629

Total Revenue $ 144,315 $ 22,266 $ ( 26 ) $ 166,555

Six Months Ended June 30, 2020

APEI HCN Intersegment Consolidated

Instructional services, net of grants and scholarships $ 139,638 $ 13,659 $ ( 39 ) $ 153,258

Graduation fees 601 — — 601

Textbook and other course materials — 2,223 — 2,223

Other fees 402 259 — 661

Total Revenue $ 140,641 $ 16,141 $ ( 39 ) $ 156,743

The APEI Segment charges the HCN Segment for the value of courses taken by HCN Segment employees at APUS.

1 unchanged sentence

Contract Balances and Performance Obligations

The Company has no contract assets or deferred contract costs as of March 31, 2021 and December 31, 2020.

The Company has no contract assets or deferred contract costs as of June 30, 2021 and December 31, 2020.

The Company recognizes a contract liability, or deferred revenue, when a student begins an online course or term, in the case of APUS, or starts a term, in the case of HCN.

Deferred revenue at March 31, 2021 was $ 21.7 million and includes $ 9.0 million in future revenue that has not yet been earned for courses and terms that are in progress, as well as $ 12.7 million in consideration received in advance for future courses or terms, or student deposits.

Deferred revenue at June 30, 2021 was $ 21.6 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 $ 7.9 million in consideration received in advance for future courses or terms, or student deposits.

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.

3 unchanged sentences

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

The Company accounts for receivables in accordance with FASB Accounting Standards Codification 310, Receivables, or ASC 310.

The Company accounts for receivables in accordance with FASB ASC 310, Receivables .

The Company uses the portfolio approach, a practical expedient, to evaluate if a contract exists and to assess collectability at the time of contract inception based on historical experience.

6 unchanged sentences

HCN charges interest on payment plans when a student graduates or otherwise exits the program.

Interest income earned on open receivables during the three months ended March 31, 2021 and 2020 was approximately $ 3,000 and $ 4,000 , respectively.

For the three months ended March 31, 2021, there were no material adverse impacts to revenue, deferred revenue, or accounts receivable due to the COVID-19 pandemic.

Interest charged by HCN on payment plans was immaterial for the periods presented.

The Company has operating leases for office space and campus facilities.

1 unchanged sentence

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

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

The APEI Segment leases corporate office space in Maryland under an operating lease that expires in May 2022, and until May 2021, leased administrative office space in Virginia.

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

1 unchanged sentence

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.

Operating leases are included in the Operating lease assets, net, and Operating lease liabilities, current and long-term, on the Consolidated Balance Sheets.

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

3 unchanged sentences

There are no variable lease payments.

Lease expense for the three month periods ended March 31, 2021 and 2020 was $ 0.8 million and $ 0.7 million, respectively.

Lease expense for the three and six month periods ended June 30, 2021 was $ 0.8 million and $ 1.6 million, respectively, compared to $ 0.7 million and $ 1.5 million for the three and six month periods ended June 30, 2020, 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 each of the three month periods ended March 31, 2021 and 2020 was $ 0.7 million 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 March 31, 2021 (dollars in thousands):

Cash paid for amounts included in the present value of operating lease liabilities during the three and six month periods ended June 30, 2021 was $ 0.8 million and $ 1.5 million, respectively, and is included in operating cash flows.

Cash paid for amounts included in the present value of operating lease liabilities during the three and six month periods ended June 30, 2020 was $ 0.7 million and $ 1.4 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 June 30, 2021 (dollars in thousands):

Maturity of Lease Liabilities (Unaudited) Lease Payments

15 unchanged sentences

The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted net income per common share (in thousands).

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Basic weighted average shares outstanding 18,684 14,789 17,454 14,907

1 unchanged sentence

Diluted weighted average shares outstanding 18,840 14,948 17,654 15,026

The table below reflects a summary of securities that could potentially dilute basic net income per common share in future periods that were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Antidilutive securities:

9 unchanged sentences

A summary of financial information by reportable segment is as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

American Public Education Segment

1 unchanged sentence

Hondros College of Nursing Segment

11,134 8,602 22,266 16,141

Intersegment elimination ( 13 ) ( 22 ) ( 26 ) ( 39 )

4 unchanged sentences

Hondros College of Nursing Segment

181 170 329 314

Total Depreciation and amortization $ 2,524 $ 3,391 $ 5,175 $ 6,729

3 unchanged sentences

Hondros College of Nursing Segment

117 ( 35 ) 900 ( 921 )

Intersegment elimination ( 1 ) ( 1 ) ( 1 ) —

3 unchanged sentences

American Public Education Segment

$ 22 $ 177 $ 134 $ 867

Hondros College of Nursing Segment

4 unchanged sentences

Hondros College of Nursing Segment

39 ( 5 ) 244 ( 246 )

Total Income tax expense $ 646 $ 2,532 $ 3,285 $ 3,506

3 unchanged sentences

Hondros College of Nursing Segment

657 25 1,214 149

Total Capital expenditures $ 1,500 $ 1,024 $ 3,028 $ 2,893

2 unchanged sentences

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

As of March 31, 2021 As of December 31, 2020

As of June 30, 2021 As of December 31, 2020

American Public Education Segment

14 unchanged sentences

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 March 31, 2021, approximately 62 % of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

As of June 30, 2021, approximately 63 % of APUS students self-reported that they served in the military on active duty at the time of initial enrollment.

Active duty military students generally take fewer courses per year on average than non-military students.

A summary of APEI Segment revenue derived from students by primary funding source for the three month periods ended March 31, 2021 and 2020 is included in the table below (unaudited):

Three Months Ended March 31,

A summary of APEI Segment revenue derived from students by primary funding source for the three and six month periods ended June 30, 2021 and 2020 is included in the table below (unaudited):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

DoD tuition assistance programs 41 % 44 % 44 % 43 %

2 unchanged sentences

Cash and other sources 16 % 15 % 14 % 14 %

A summary of HCN Segment revenue derived from students by primary funding source for the three month periods ended March 31, 2021 and 2020 is included in the table below (unaudited):

Three Months Ended March 31,

A summary of HCN Segment revenue derived from students by primary funding source for the three and six month periods ended June 30, 2021 and 2020 is included in the table below (unaudited):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Title IV programs 81 % 83 % 81 % 82 %

1 unchanged sentence

VA education benefits 2 % 2 % 1 % 2 %

Subsequent Events

On August 5, 2021, in connection with an evaluation and review of costs and expenses, the Company initiated a plan to reduce costs.

The plan includes a reduction in force that resulted in the termination of 11 full-time faculty members at APUS, and 33 non-faculty employees across a variety of roles and departments at APEI and APUS, representing approximately 3.2 % of the APUS full-time faculty workforce, and 3.6 % of the APEI and APUS non-faculty workforce.

Substantially all of the affected employees have been notified of the reduction.

The Company expects to substantially complete this workforce reduction by August 9, 2021.

The Company will record expenses for termination benefits related to the workforce reduction in the third quarter of 2021 in accordance with FASB ASC 420, Exit or Disposal Cost Obligations .

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-Q

Item 1. Financial Statements