What changed in this filing

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Item 1. Financial Statements

2020-07-09 compared with 2020-04-09 · 245 added, 172 removed, 603 unchanged (41% of the section changed)

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CONSOLIDATED STATEMENTS OF INCOME – Unaudited

Three Months Ended Six Months Ended

February 29, February 28, February 29, February 28,

Three Months Ended Nine Months Ended

(In thousands, except per share data)

2020 2019 2020 2019

May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019

Revenue $ 374,083 $ 364,533 $ 1,110,521 $ 1,071,068

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Interest expense, net ( 2,211 ) ( 4,377 ) ( 8,003 ) ( 13,046 )

Other expense, net ( 487 ) ( 128 ) ( 1,801 ) ( 265 )

Other (expense) income, net ( 289 ) 521 ( 2,090 ) 255

Income before income taxes 119,140 113,384 330,990 313,676

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

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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – Unaudited

Three Months Ended Six Months Ended

February 29, February 28, February 29, February 28,

Three Months Ended Nine Months Ended

(In thousands)

2020 2019 2020 2019

May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019

$ 101,216 $ 92,265 $ 283,859 $ 261,263

Other comprehensive (loss) income, net of tax

Other comprehensive (loss), net of tax

Net unrealized (loss) gain on cash flow hedges* ( 3,948 ) ( 160 ) ( 2,105 ) 1,405

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( 4,633 ) ( 11,326 ) 1,589 ( 15,804 )

Other comprehensive (loss) income ( 1,773 ) 5,553 8,065 ( 2,913 )

Other comprehensive (loss) ( 8,581 ) ( 11,486 ) ( 516 ) ( 14,399 )

Comprehensive income

$ 92,635 $ 80,779 $ 283,343 $ 246,864

* For the three and six months ended February 29, 2020, the unrealized (loss) gain on cash flow hedges were net of a tax benefit of $ 73 thousand and a tax expense of $ 641 thousand, respectively.

For the three and six months ended February 28, 2019, the unrealized gain on cash flow hedges was net of a tax expense of $ 179 thousand and $ 767 thousand, respectively.

* For the three and nine months ended May 31, 2020, the net unrealized loss on cash flow hedges were net of a tax benefit of $ 1,337 thousand and $ 696 thousand, respectively.

For the three and nine months ended May 31, 2019, the net unrealized loss and gain on cash flow hedges were net of a tax benefit of $ 65 thousand and a tax expense of $ 702 thousand, respectively.

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

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FactSet Research Systems Inc.

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(In thousands, except share data)

2020 August 31,

May 31, 2020 August 31, 2019

Cash and cash equivalents

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22,606 25,813

Accounts receivable, net of reserves of $ 7,939 at February 29, 2020 and $ 10,511 at August 31, 2019

Accounts receivable, net of reserves of $ 7,357 at May 31, 2020 and $ 10,511 at August 31, 2019

151,398 146,309

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Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 40,452,351 and 40,104,192 shares issued, 37,849,247 and 38,117,840 shares outstanding at February 29, 2020 and August 31, 2019, respectively

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 40,556,920 and 40,104,192 shares issued, 37,907,127 and 38,117,840 shares outstanding at May 31, 2020 and August 31, 2019, respectively

Additional paid-in capital

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Treasury stock, at cost:

2,603,104 and 1,986,352 shares at February 29, 2020 and August 31, 2019, respectively

2,649,793 and 1,986,352 shares at May 31, 2020 and August 31, 2019, respectively

( 606,405 ) ( 433,799 )

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

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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS – Unaudited

Six Months Ended

February 29, February 28,

(in thousands) 2020 2019

Nine Months Ended

(in thousands) May 31, 2020 May 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

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CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions ( 51,899 ) ( 21,482 )

Purchases of property, equipment, leasehold improvements and intangible assets, net of proceeds from dispositions ( 62,909 ) ( 32,906 )

Purchases of investments ( 2,736 ) ( 8,180 )

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Proceeds from employee stock plans 65,323 78,926

Repayment of debt — ( 575,000 )

Proceeds from debt — 575,000

Other financing, net ( 1,592 ) ( 901 )

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

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FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY- Unaudited

For the three months ended February 29, 2020

For the Three Months Ended May 31, 2020

(in thousands, except share data) Common Stock Additional

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Shares Par Value Shares Amount

Balance as of November 30, 2019 40,239,308 $ 402 $ 835,968 2,335,130 $ ( 519,678 ) $ 439,891 $ ( 64,706 ) $ 691,877

Balance as of February 29, 2020 40,452,351 $ 405 $ 875,488 2,603,104 $ ( 593,980 ) $ 501,326 $ ( 66,479 ) $ 716,760

Net income 101,216 101,216

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Dividends declared ( 29,188 ) ( 29,188 )

Balance as of February 29, 2020 40,452,351 $ 405 $ 875,488 2,603,104 $ ( 593,980 ) $ 501,326 $ ( 66,479 ) $ 716,760

For the six months ended February 29, 2020

Balance as of May 31, 2020 40,556,920 $ 406 $ 900,663 2,649,793 $ ( 606,405 ) $ 573,354 $ ( 75,060 ) $ 792,958

For the Nine Months Ended May 31, 2020

(in thousands, except share data) Common Stock Additional

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Dividends declared ( 83,730 ) ( 83,730 )

Balance as of February 29, 2020 40,452,351 $ 405 $ 875,488 2,603,104 $ ( 593,980 ) $ 501,326 $ ( 66,479 ) $ 716,760

For the three months ended February 28, 2019

Balance as of May 31, 2020 40,556,920 $ 406 $ 900,663 2,649,793 $ ( 606,405 ) $ 573,354 $ ( 75,060 ) $ 792,958

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For the Three Months Ended May 31, 2019

(in thousands, except share data) Common Stock Additional

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Shares Par Value Shares Amount

Balance as of November 30, 2018 39,447,491 $ 394 $ 694,078 1,366,613 $ ( 278,146 ) $ 184,071 $ ( 59,188 ) $ 541,209

Balance as of February 28, 2019 39,690,225 $ 397 $ 732,538 1,590,060 $ ( 324,167 ) $ 244,388 $ ( 53,635 ) $ 599,521

Net income 92,265 92,265

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Dividends declared ( 27,506 ) ( 27,506 )

Balance as of February 28, 2019 39,690,225 $ 397 $ 732,538 1,590,060 $ ( 324,167 ) $ 244,388 $ ( 53,635 ) $ 599,521

For the six months ended February 28, 2019

Balance as of May 31, 2019 39,982,823 $ 400 $ 781,705 1,765,060 $ ( 371,722 ) $ 309,147 $ ( 65,121 ) $ 654,409

For the Nine Months Ended May 31, 2019

(in thousands, except share data) Common Stock Additional

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Cumulative effect of adoption of accounting standards* 1,304 717 2,021

Balance as of February 28, 2019 39,690,225 $ 397 $ 732,538 1,590,060 $ ( 324,167 ) $ 244,388 $ ( 53,635 ) $ 599,521

Balance as of May 31, 2019 39,982,823 $ 400 $ 781,705 1,765,060 $ ( 371,722 ) $ 309,147 $ ( 65,121 ) $ 654,409

* Includes the cumulative effect of adoption of accounting standards primarily due to both the adoption of the new revenue recognition standard (ASC 606) resulting in a cumulative increase to retained earnings related to certain fulfillment costs and the accounting standard update related to the U.S.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FactSet Research Systems Inc.

February 29, 2020

ORGANIZATION AND NATURE OF BUSINESS

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For over 40 years, global financial professionals have utilized the Company's content and multi-asset class solutions across each stage of the investment process.

FactSet's goal is to provide a seamless user experience spanning idea generation, research, portfolio construction, trade execution, performance measurement, risk management, reporting, and portfolio analysis, in which the Company serves the front, middle, and back offices to drive productivity and improved performance.

FactSet's flexible, open data and technology solutions can be implemented both across the investment portfolio lifecycle or as standalone components serving different workflows in the organization.

FactSet is focused on growing the business throughout each of its three segments, the Americas, EMEA (formerly known as Europe), and Asia Pacific.

FactSet's goal is to provide a seamless user experience spanning idea generation, research, portfolio construction and analysis, trade execution, performance measurement, risk management, and reporting, in which the Company serves the front, middle, and back offices to drive productivity and improved performance.

FactSet's flexible, open data and technology solutions can be implemented both across the investment portfolio lifecycle or as standalone components serving different workflows in an organization.

FactSet is focused on growing the business through three segments:

the Americas, EMEA (formerly known as Europe), and Asia Pacific.

The Company primarily delivers insight and information through the workflow solutions of Research, Analytics and Trading, Content and Technology Solutions ("CTS") and Wealth.

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The Company combines dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data feeds, an open marketplace and digital portals and application programming interfaces (APIs).

The Company’s revenue is primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, and research management.

The Company’s revenue is primarily derived from subscriptions to products and services such as workstations, portfolio analytics, enterprise data, and research management.

BASIS OF PRESENTATION

FactSet conducts business globally and is managed on a geographic basis.

FactSet conducts business globally and i s managed on a geographic basis.

The accompany ing unaudited consolidated financial statements and notes of FactSet and its wholly-owned subsidiaries included in this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all information and footnotes required by GAAP for annual financial statements.

The accompanying consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany activity and balances have been eliminated.

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Certain notes and other information have been condensed or omitted in this Quarterly Report on Form 10-Q, therefore the information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019, filed with the Securities and Exchange Commission ("SEC") on October 30, 2019.

The Company has evaluated subsequent events through the date that the financial statements were issued.

The Company has evaluated subsequent events through the date the financial statements were issued.

Reclassification

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The Company reclassified certain capitalized software from Property, equipment and leasehold improvements, net to Intangible assets, net in the prior year comparative figures in the Consolidated Balance Sheets to conform to the current year's presentation.

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A novel strain of coronavirus, now known as COVID-19 (“COVID-19”), was first reported in December 2019, and it has since extensively impacted the global health and economic environment, with the World Health Organization characterizing COVID-19 as a pandemic on March 11, 2020.

FactSet is closely monitoring pandemic-related developments and has taken, and continues to take, numerous steps to address them.

Since the situation surrounding the COVID-19 pandemic remains fluid, FactSet is actively managing its response and has assessed potential impacts to its financial position and operating results for the three and nine months ended May 31, 2020.

The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict.

RECENT ACCOUNTING PRONOUNCEMENTS

As of February 29, 2020, the Company implemented all applicable new accounting standards and updates issued by the Financial Accounting Standards Board ("FASB") that were in effect.

There were no new standards or updates adopted during the first six months of fiscal 2020 that had a material impact on the consolidated financial statements other than the new lease accounting standard discussed below.

As of May 31, 2020, the Company implemented all applicable new accounting standards and updates issued by the Financial Accounting Standards Board ("FASB") that were in effect.

There were no new standards or updates adopted during the first nine months of fiscal 2020 that had a material impact on the consolidated financial statements other than the new lease accounting standard discussed below.

R efer to Note 15 Leases for additional information.

New Accounting Standards or Updates Recently Adopted

In February 2016, the FASB issued an accounting standard update related to accounting for leases.

In February 2016, the FASB issued an accounting standard update related to accounting for leases, ASC 842, Leases.

The update requires the recognition of lease right-of use (“ROU”) assets and liabilities on the balance sheet and the disclosure of qualitative and quantitative information about leasing arrangements .

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The adoption of this standard had no impact on the Company's consolidated financial statements.

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Recent Accounting Standards or Updates Not Yet Effective

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The Company is currently evaluating the potential impact of adopting the guidance on its consolidated financial statements.

No other new accounting pronouncements issued or effective as of February 29, 2020 have had or are expected to have a material impact on the Company’s consolidated financial statements.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

In March 2020, the FASB issued an accounting standard to provide optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by the anticipated transition from the LIBOR rate.

As a result of the reference rate reform initiative, certain widely used reference rates such as the LIBOR rate are expected to be discontinued.

The guidance is designed to simplify how entities account for contracts, such as receivables, debt, leases, derivative instruments and hedging, that are modified to replace the LIBOR rate or other benchmark interest rates with new rates.

The guidance is effective upon issuance and may be applied through December 31, 2022.

The Company is currently evaluating the impact of this accounting standard, but it is not expected to have a material impact on the Company’s consolidated financial statements.

No other new accounting pronouncements issued or effective as of May 31, 2020, have had or are expected to have a material impact on the Company’s consolidated financial statements.

REVENUE RECOGNITION

The Company derives most of its revenue by providing client access to its hosted proprietary data and analytics platform which can include various combinations of products and services available over the contractual term.

The hosted platform is a subscription-based service that consists primarily of providing access to products and services including workstations, analytics, enterprise data, and research management.

The hosted platform is a subscription-based service that consists primarily of providing access to products and services including workstations, portfolio analytics, enterprise data, and research management.

The Company determined that the subscription-based service represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client.

The Company determined the nature of the promise to the client is to provide daily access to one overall data and analytics platform.

The Company also determined the nature of the promise to the client is to provide daily access to one overall data and analytics platform.

This platform provides integrated financial information, analytical applications and industry-leading service for the investment community.

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The Company records revenue for its contracts using the over-time revenue recognition model as a client is invoiced or performance is satisfied.

FactSet does not consider payment terms a performance obligation for customers with contractual terms that are one year or less and has elected the practical expedient.

FactSet does not consider payment terms as a performance obligation for clients with contractual terms that are one year or less and the Company has elected the practical expedient.

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Contracts with clients can include certain fulfillment costs, comprised of up-front costs to allow for the delivery of services and products, which are recoverable.

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The following table presents this disaggregation of revenue by geography:

Three Months Ended Six Months Ended

February 29, February 28, February 29, February 28,

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands)

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Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

There were no Level 3 assets or liabilities held by the Company as of February 29, 2020 or August 31, 2019.

There were no Level 3 assets or liabilities held by the Company as of May 31, 2020 or August 31, 2019.

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(a) Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables shows by level within the fair value hierarchy the Company’s assets and liabilities that are measured at fair value on a recurring basis at February 29, 2020 and August 31, 2019.

The following tables show, by level within the fair value hierarchy, the Company’s assets and liabilities that are measured at fair value on a recurring basis at May 31, 2020 and August 31, 2019.

The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

Fair Value Measurements at February 29, 2020

Fair Value Measurements at May 31, 2020

(in thousands)

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These certificates of deposit have original maturities greater than three months but less than one year and, as such, are classified as Investments (short-term) within the Consolidated Balance Sheets.

The Company utilizes the income approach to measure fair value for its der ivative instruments (foreign exchange forward contracts).

The income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads, and are classified as Level 2 assets.

The Company utilizes the income approach to measure fair value for its foreign exchange forward contracts.

T he income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads, and are classified as Level 2 assets.

To estimate fair value for the interest rate swap agreement, the Company utilizes a present value of future cash flows, leveraging a model-derived valuation that uses Level 2 observable inputs such as interest rate yield curves.

Refer to Note 6 Derivative Instruments for more information on the Company's derivative instruments designed as cash flow hedges.

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(b) Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

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The Company reviews goodwill and intangible assets for impairment annually, during the fourth quarter of each fiscal year, or as circumstances indicate the possibility for impairment.

The Company monitors the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate its carrying amount may not be recoverable.

During the six months ended February 29, 2020, no fair value adjustments or material fair value measurements were required for the Company’s non-financial assets or liabilities.

The Company monitors the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

During the nine months ended May 31, 2020, no fair value adjustments or material fair value measurements were required for the Company’s non-financial assets or liabilities.

As of February 29, 2020, and August 31, 2019, the fair value of the Company’s Long-term debt was $ 575.0 million, which approximated its carrying amount given the application of a floating interest rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid.

As of May 31, 2020, and August 31, 2019, the fair value of the Company’s Long-term debt was $ 575.0 million, which approximated its carrying amount given the application of a floating interest rate equal to the LIBOR rate plus a spread using a debt leverage pricing grid.

As the interest rate is a variable rate, adjusted based on market conditions, it approximates the current market-rate for similar instruments available to companies with comparable credit quality and maturity, and therefore, the long-term debt is categorized as Level 2 in the fair value hierarchy.

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Cash Flow Hedges

Foreign Currency Forward Contracts

FactSet conducts business outside the U.S.

in several currencies including British Pound Sterling, Euro, Indian Rupee, and Philippine Peso.

in se veral currencies including British Pound Sterling, Euro, Indian Rupee, and Philippine Peso.

As such, the Company is exposed to movements in foreign currency exchange rates compared to the U.S.

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The changes in fair value for these foreign currency forward contracts are initially reported as a component of accumulated other comprehensive loss ("AOCL") and subsequently reclassified into operating expenses when the hedge is settled.

There was no discontinuance of cash flow hedges during the first six months of fiscal 2020 or 2019, and as such, no corresponding gains or losses related to changes in the value of the Company’s contracts were reclassified into earnings prior to settlement.

As of February 29, 2020, FactSet maintained foreign currency forward contracts to hedge a portion of its British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures.

There was no discontinuance of cash flow hedges during the first nine months of fiscal 2020 or 2019, and as such, no corresponding gains or losses related to changes in the value of the Company’s contracts were reclassified into earnings prior to settlement.

As of May 31, 2020, FactSet maintained foreign currency forward contracts to hedge a portion of its British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures.

FactSet entered into a series of forward contracts to mitigate its currency exposure ranging from 50 % to 75 % over their respective hedged periods.

The current foreign currency forward contracts are set to mature at various points between the fourth quarter of fiscal 2020 through the first quarter of fiscal 2021.

As of May 31, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S.

dollars was ₱ 466.8 billion and Rs 830.6 billion, respectively.

The gross notional value of foreign currency forward contracts to purchase U.S.

dollars with Euros and British Pound Sterling was € 11.4 million and £ 9.5 million, respectively.

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Interest Rate Swap Agreement

On March 5, 2020, FactSet entered into an interest rate swap agreement with a notional amount of $ 287.5 million to hedge the variable interest rate obligation on a portion of its outstanding debt under its 2019 Revolving Credit Facility (as defined in Note 14 Debt).

As of May 31, 2020, FactSet has borrowed $ 575.0 million of the available $ 750.0 million under the 2019 Revolving Credit Facility, which bears interest on the outstanding principal amount at a rate equal to a contractual one month LIBOR rate plus a spread using a debt leverage pricing grid, which was 0.875 % as of May 31, 2020 .

The variable interest rate on FactSet’s long-term debt can expose the Company to interest rate volatility arising from changes in the LIBOR rate.

Under the terms of the interest rate swap agreement, FactSet will pay interest at a fixed rate of 0.7995 % and receive variable interest payments based on the same one-month LIBOR rate utilized to calculate the interest expense from the 2019 Revolving Credit Facility.

The interest rate swap agreement matures on March 28, 2024.

Refer to Note 14 Debt, for further discussion on the 2019 Revolving Credit Facility.

As the terms for the interest rate swap agreement align with the 2019 Revolving Credit Facility, the Company does not expect any hedge ineffectiveness.

The Company has designated and accounted for this instrument as a cash flow hedge with the unrealized gains or losses on the interest rate swap agreement recorded in AOCL in the Consolidated Balance Sheets.

The following is a summary of the gross notional values of the derivative instruments:

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Gross Notional Value

February 29, 2020 August 31, 2019

May 31, 2020 August 31, 2019

Foreign currency forward contracts $ 45,242 $ 113,700

As of February 29, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S.

dollars was ₱ 842.6 billion and Rs 1,434.3 billion, respectively.

The gross notional value of foreign currency forward contracts to purchase U.S.

dollars with Euros and British Pound Sterling was € 20.5 million and £ 16.5 million, respectively.

Interest rate swap agreement 287,500 —

Total cash flow hedges $ 332,742 $ 113,700

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Fair Value of Derivative Instruments

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Derivatives designated as hedging instruments Derivative Assets Derivative Liabilities

February 29, 2020 August 31, 2019 February 29, 2020 August 31, 2019

May 31, 2020 August 31, 2019 May 31, 2020 August 31, 2019

Balance Sheet Classification Fair Value Fair Value Balance Sheet Classification Fair Value Fair Value

Foreign currency forward contracts Prepaid expenses and other current assets $ 418 $ 520 Accounts payable and accrued expenses $ 1,010 $ 3,575

All derivatives were designated as hedging instruments as of February 29, 2020 and August 31, 2019.

Interest rate swap agreement Prepaid expenses and other current assets — — Accounts payable and accrued expenses 1,786 —

Other non-current liabilities 3,478 —

Total cash flow hedges $ 418 $ 520 $ 6,274 $ 3,575

All derivatives were designated as hedging instruments as of May 31, 2020 and August 31, 2019.

Derivatives in Cash Flow Hedging Relationships

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended February 29, 2020 and February 28, 2019 , respectively:

(in thousands) (Loss) Gain Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into Income Loss Reclassified from AOCL into Income

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended May 31, 2020 and May 31, 2019 , respectively:

(in thousands) Loss Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into Income Loss Reclassified from AOCL into Income

Derivatives in Cash Flow Hedging Relationships 2020 2019 2020 2019

Foreign currency forward contracts $ ( 1,040 ) $ ( 822 ) SG&A $ ( 1,019 ) $ ( 597 )

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the six months ended February 29, 2020 and February 28, 2019, respectively:

(in thousands) Gain Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into Income Loss Reclassified from AOCL into Income

Interest rate swap agreement ( 5,264 ) — Interest expense, net — —

Total cash flow hedges $ ( 6,304 ) $ ( 822 ) $ ( 1,019 ) $ ( 597 )

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the nine months ended May 31, 2020 and May 31, 2019, respectively:

(in thousands) (Loss) Gain Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into Income Loss Reclassified from AOCL into Income

Derivatives in Cash Flow Hedging Relationships 2020 2019 2020 2019

Foreign currency forward contracts $ 362 $ 1,442 SG&A $ ( 2,101 ) $ ( 1,381 )

As of February 29, 2020 , the Company assessed that these cash flow hedges were effective.

All components of each derivative’s gain or loss were recorded in the Consolidated Statement of Income in Selling, general, and administrative ("SG&A").

As of February 29, 2020, the Company estimates that $ 0.6 million of net derivative losses related to its cash flow hedges included in AOCL will be reclassified into earnings within the next 12 months.

Interest rate swap agreement ( 5,264 ) — Interest expense, net — —

Total cash flow hedges $ ( 4,902 ) $ 1,442 $ ( 2,101 ) $ ( 1,381 )

As of May 31, 2020 , the Company assessed that these cash flow hedges were effective.

Foreign currency forward contract gains and losses are recorded in the Consolidated Statement of Income in Selling, general, and administrative ("SG&A").

The gain or loss from the interest rate swap agreement is recorded in the Consoli dated Statement of Income in Interest expense, net.

As of May 31, 2020, the Company estimates that net pre-tax derivative losses of $ 2.4 million included in AOCL will be reclassified into earnings within the next 12 months.

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Offsetting of Derivative Instruments

FactSet’s master netting and other similar arrangements with its respective counterparties allow for net settlement under certain conditions.

As of February 29, 2020, and August 31, 2019, there were no material amounts recorded net on the Consolidated Balance Sheets.

As of May 31, 2020, and August 31, 2019, there were no material amounts recorded net on the Consolidated Balance Sheets.

OTHER COMPREHENSIVE (LOSS) INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of other comprehensive (loss) income for the three months ended February 29, 2020 and February 28, 2019 are as follows:

February 29, 2020 February 28, 2019

The components of other comprehensive loss for the three months ended May 31, 2020 and May 31, 2019 are as follows:

May 31, 2020 May 31, 2019

(in thousands)

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$ ( 4,633 ) $ ( 4,633 ) $ ( 11,326 ) $ ( 11,326 )

Net unrealized (loss) gain on cash flow hedges recognized in AOCL

( 281 ) ( 208 ) 706 527

Other comprehensive (loss) income $ ( 1,846 ) $ ( 1,773 ) $ 5,732 $ 5,553

The components of other comprehensive income for the six months ended February 29, 2020 and February 28, 2019 are as follows:

February 29, 2020 February 28, 2019

Net unrealized loss on cash flow hedges recognized in AOCL ( 5,285 ) ( 3,948 ) ( 225 ) ( 160 )

Other comprehensive loss $ ( 9,918 ) $ ( 8,581 ) $ ( 11,551 ) $ ( 11,486 )

The components of other comprehensive loss for the nine months ended May 31, 2020 and May 31, 2019 are as follows:

May 31, 2020 May 31, 2019

(in thousands) Pre-tax Net of tax Pre-tax Net of tax

Foreign currency translation adjustments $ 1,589 $ 1,589 $ ( 15,804 ) $ ( 15,804 )

Net unrealized gain on cash flow hedges recognized in AOCL 2,484 1,843 2,332 1,565

Other comprehensive income (loss) $ 8,706 $ 8,065 $ ( 2,146 ) $ ( 2,913 )

Net unrealized (loss) gain on cash flow hedges recognized in AOCL ( 2,801 ) ( 2,105 ) 2,107 1,405

Other comprehensive loss $ ( 1,212 ) $ ( 516 ) $ ( 13,697 ) $ ( 14,399 )

The components of AOCL are as follows:

(in thousands)

February 29, 2020 August 31, 2019

May 31, 2020 August 31, 2019

Accumulated unrealized losses on cash flow hedges, net of tax

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the Americas, EMEA and Asia Pacific.

The primary workflow solutions within the Americas, EMEA and Asia Pacific segments are Research, Analytics and Trading, Content and Technology Solutions and Wealth.

The primary workflow solutions within the Americas, EMEA and Asia Pacific segments are Research, Analytics and Trading, CTS and Wealth.

These workflow solutions provide global financial and economic information to investment managers, investment banks and other financial services professionals.

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Each segment records compensation expense (including stock-based compensation), amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, office and other direct expenses.

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Expenditures associated with the Company’s data centers, third-party data costs and corporate headquarters charges are recorded by the Americas segment and are not allocated to the other segments.

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(in thousands)

For the three months ended February 29, 2020

For the three months ended May 31, 2020

Americas EMEA Asia Pacific Total

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(in thousands)

For the three months ended February 28, 2019

For the three months ended May 31, 2019

Americas EMEA Asia Pacific Total

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(in thousands)

For the six months ended February 29, 2020

For the nine months ended May 31, 2020

Americas EMEA Asia Pacific Total

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(in thousands)

For the six months ended February 28, 2019

For the nine months ended May 31, 2019

Americas EMEA Asia Pacific Total

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(in thousands)

Segment Assets February 29, 2020 August 31, 2019

Segment Assets May 31, 2020 August 31, 2019

Americas $ 1,106,646 $ 851,014

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Total assets $ 1,947,705 $ 1,560,130

Changes in the carrying amount of goodwill by segment for the six months ended February 29, 2020 are as follows:

Changes in the carrying amount of goodwill by segment for the nine months ended May 31, 2020 are as follows:

(in thousands)

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— 2,803 ( 48 ) 2,755

Balance at February 29, 2020 $ 386,195 $ 301,423 $ 3,019 $ 690,637

Balance at May 31, 2020 $ 386,195 $ 299,262 $ 3,027 $ 688,484

Table of Content s

Goodwill is not amortized as it is estimated to have an indefinite life.

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COMMON STOCK AND EARNINGS PER SHARE

On February 18, 2020, FactSet’s Board of Directors approved a regular quarterly dividend of $ 0.72 per share.

The cash dividend of $ 27.1 million was paid on March 19, 2020 to common stockholders of record at the close of business on February 28, 2020.

On May 5, 2020, FactSet’s Board of Directors approved a 7 % increase in the regular quarterly dividend from $ 0.72 to $ 0.77 per share.

The cash dividend of $ 29.0 million was paid on June 18, 2020 to common stockholders of record at the close of business on May 29, 2020.

Shares of common stock outstanding were as follows:

Six Months Ended

February 29, February 28,

Nine Months Ended

May 31, May 31,

(in thousands) 2020 2019

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Repurchase of common stock under the share repurchase program ( 657 ) ( 665 )

Balance at February 29, 2020 and February 28 2019, respectively 37,849 38,100

(1) For the six months ended February 29, 2020 and February 28, 2019, the Company repurchased 6,252 and 27,852 shares, or $ 1.6 million and $ 6.1 million of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock and exercise of stock options .

Balance at May 31, 2020 and May 31, 2019, respectively 37,907 38,218

(1) For the nine months ended May 31, 2020 and May 31, 2019, the Company repurchased 6,305 and 27.852 shares, or $ 1.6 million and $ 6.2 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock and exercise of stock options .

Table of Content s

A reconciliation of the weighted average shares outstanding used in the basic and diluted earnings per share ("EPS") computations is as follows:

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(Denominator) Per Share

For the three months ended February 29, 2020

For the three months ended May 31, 2020

Income available to common stockholders $ 101,216 37,885 $ 2.67

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Income available to common stockholders plus assumed conversions $ 101,216 38,481 $ 2.63

For the three months ended February 28, 2019

For the three months ended May 31, 2019

Income available to common stockholders $ 92,265 38,223 $ 2.41

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Income available to common stockholders plus assumed conversions $ 92,265 38,993 $ 2.37

For the six months ended February 29, 2020

For the nine months ended May 31, 2020

Income available to common stockholders $ 283,859 37,912 $ 7.49

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Income available to common stockholders plus assumed conversions $ 283,859 38,548 $ 7.36

For the six months ended February 28, 2019

For the nine months ended May 31, 2019

Income available to common stockholders $ 261,263 38,128 $ 6.85

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Dilutive potential common shares consist of stock options and unvested performance-based awards.

There were 18,065 stock options excluded from the calculation of diluted EPS for the six months ended February 29, 2020, because their inclusion would have been anti-dilutive.

For the six months ended February 28, 2019, the number of stock options excluded from calculation of diluted EPS was 447,709 .

There were 38,987 stock options excluded from the calculation of diluted EPS for the nine months ended May 31, 2020, because their inclusion would have been anti-dilutive.

For the nine months ended May 31, 2019, the number of stock options excluded from calculation of diluted EPS was 1,810 .

Performance-based awards are omitted from the calculation of diluted EPS until it is determined that the performance criteria has been met at the end of the reporting period.

For the six months ended February 29, 2020, there were 36,501 performance-based awards excluded from the calculation of diluted EPS respectively.

For the six months ended February 28, 2019, there were 206,417 performance-based awards excluded from the calculation of diluted EPS.

For the nine months ended May 31, 2020, there were 36,888 performance-based awards excluded from the calculation of diluted EPS.

For the nine months ended May 31, 2019, there were 206,417 performance-based awards excluded from the calculation of diluted EPS.

STOCKHOLDERS’ EQUITY

Share Repurchase Program

Repurchases are made from time to time in the open market and privately negotiated transactions, subject to market conditions.

For the three months ended February 29, 2020 and February 28, 2019, the Company repurchased 267,500 shares for $ 74.2 million and 214,945 shares for $ 44.1 million, respectively.

For the six months ended February 29, 2020 and February 28, 2019, the Company repurchased 610,500 shares for $ 158.6 million and 489,945 shares for $ 104.6 million, respectively.

As of February 29, 2020, $ 80.0 million remained authorized for future share repurchases.

Repurchases of shares of common stock are made from time to time in the open market and privately negotiated transactions, subject to market conditions.

For the three months ended May 31, 2020 and May 31, 2019, the Company repurchased 46,636 shares for $ 12.4 million and 175,000 shares for $ 47.6 million, respectively.

For the nine months ended May 31, 2020 and May 31, 2019, the Company repurchased 657,136 shares for $ 171.0 million and 664,945 shares for $ 152.1 million, respectively.

Table of Content s

On March 24, 2020, the Board of Directors of FactSet approved a $ 220.0 million increase to the existing share repurchase program.

Subsequent to this expansion, a total of $ 287.6 million remained authorized for future share repurchases as of May 31, 2020.

There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchase program.

It is expected that share repurchases will be paid using existing and future cash generated by operations.

On March 24, 2020, the Board of Directors of FactSet approved a $ 220.0 million increase to the existing share repurchase program.

Subsequent to this expansion, a total of $ 300.0 million is available for future share repurchases.

Restricted Stock

Restricted stock awards entitle the holders to receive shares of common stock as the awards vest over time.

During the first six months of fiscal 2020, previously granted restricted stock of 16,476 shares vested and were included in common stock outstanding as of February 29, 2020 (recorded net of 6,209 shares repurchased from employees at a cost of $ 1.6 million to cover their cost of taxes upon vesting of the restricted stock).

During the comparable period a year ago, 75,530 shares of previously granted restricted stock vested and were included in common stock outstanding as of February 28, 2019 (recorded net of 27,852 shares repurchased from employees at a cost of $ 6.1 million to cover their cost of taxes upon vesting of the restricted stock).

The Company’s Board of Directors declared t he following dividends for the first six months of fiscal 2020 and 2019 respectively:

During the first nine months of fiscal 2020, 16,657 shares of previously granted restricted stock vested and were included in common stock outstanding as of May 31, 2020 (recorded net of 6,230 shares repurchased from employees at a cost of $ 1.6 million to cover their cost of taxes upon vesting of the restricted stock).

During the comparable period a year ago, 75,530 shares of previously granted restricted stock vested and were included in common stock outstanding as of May 31, 2019 (recorded net of 27,852 shares repurchased from employees at a cost of $ 6.2 million to cover their cost of taxes upon vesting of the restricted stock).

The Company’s Board of Directors declared t he following dividends for the first nine months of fiscal 2020 and 2019 respectively:

Year Ended Dividends per

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Second Quarter $ 0.72 February 28, 2020 $ 27,251 March 19, 2020

Third Quarter $ 0.77 May 29, 2020 $ 29,188 June 18, 2020

First Quarter $ 0.64 November 30, 2018 $ 24,372 December 18, 2018

Second Quarter $ 0.64 February 28, 2019 $ 24,385 March 19, 2019

Third Quarter $ 0.72 May 31, 2019 $ 27,506 June 18, 2019

Future cash dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Company and are subject to final determination by the Company’s Board of Directors.

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Employee Stock Option Awards

During the six months ended February 29, 2020, FactSet granted 417,417 stock options with a weighted average exercise price of $ 255.95 to existing employees of the Company.

The majority of the stock options granted during the first six months of fiscal 2020 related to the annual employee grant on November 1, 2019 under the FactSet Research Systems Inc.

During the nine months ended May 31, 2020 , FactSet granted 422,346 stock options with a weighted average exercise price of $ 256.05 to existing employees of the Company.

The majority of the stock options granted during the first nine months of fiscal 2020 related to the annual employee grant on November 1, 2019 under the FactSet Research Systems Inc.

Stock Option and Award Plan, as Amended and Restated (the "LTIP").

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These stock option awards vest 20 % annually on the anniversary date of the grant and are fully vested after five years , expiring ten years from the date of grant.

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The estimated fair value of employee stock options granted on November 1, 2019 was determined with the following assumptions:

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The Non-Employee Directors' Stock Option and Award Plan, as Amended and Restated (the "Director Plan"), provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet.

As of February 29, 2020, shares available for future grant under the Director Plan was 247,876 .

As of May 31, 2020, shares available for future grant under the Director Plan were 247,876 .

The expiration date of the Director Plan is December 19, 2027.

On January 15, 2020, FactSet granted 16,080 stock options to the Company's non-employee directors, using the Black-Scholes option-pricing model with the following assumptions:

On January 15, 2020, FactSet granted 16,080 stock options to the Company's non-employee directors.

These stock options cliff vest on the third anniversary of the date of grant and expire seven years from the date of grant.

The Company used the Black-Scholes option-pricing model with the following assumptions:

January 15, 2020 Grant Details

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Restricted Stock Units

During the first six months of fiscal 2020, FactSet granted 30,379 non-performance based restricted stock units ("RSUs") and 36,501 performance-based restricted stock units ("PRSUs").

During the first nine months of fiscal 2020, FactSet granted 30,766 non-performance based restricted stock units ("RSUs") and 36,909 performance-based restricted stock units ("PRSUs").

The majority of the RSUs and PRSUs granted were related to the annual employee grant on November 1, 2019.

FactSet granted 29,817 RSUs and 36,501 PRSUs with a weighted average grant date fair value of $ 245.48 under the LTIP plan.

FactSet granted 29,817 RSUs and 36,501 PRSUs with a weighted average grant date fair value of $ 245.48 under the LTIP.

The RSUs and PRSUs granted to employees entitle the holders to shares of common stock as the units vest over time or the performance period, but not to dividends declared on the underlying shares while the restricted stock is unvested.

The grant date fair value of restricted stock units is measured by reducing the grant date price of FactSet's common stock by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate.

The RSUs vest 20 % annually on the anniversary date of grant and are fully vested after five years and PRSUs cliff vest three years from the anniversary date of grant based on the achievement of certain performance metrics.

The RSUs vest 20 % annually on the anniversary date of grant and are fully vested after five years and the PRSUs cliff vest on the third anniversary of the grant date, subject to the achievement of certain performance metrics.

Employee Stock Purchase Plan

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Employee purchases may not exceed 10 % of their gross compensation and there is a $ 25,000 contribution limit per employee during an offering period.

During the three months ended February 29, 2020, employees purchased 11,493 shares at a weighted average price of $ 221.12 compared to 12,624 shares at a weighted average price of $ 199.36 for the three months ended February 28, 2019.

During the six months ended February 29, 2020, employees purchased 22,652 shares at a weighted average price of $ 220.91 compared to 25,719 shares at a weighted average price of $ 198.33 for the six months ended February 28, 2019.

At February 29, 2020, the ESPP had 197,758 shares reserved for future issuance.

Dividends paid on shares held in the ESPP are used to purchase additional ESPP shares at the market price on the dividend payment date.

Table of Content s

During the three months ended May 31, 2020, employees purchased 11,084 shares at a weighted average price of $ 238.81 compared to 13,350 shares at a weighted average price of $ 201.54 for the three months ended May 31, 2019.

During the nine months ended May 31, 2020, employees purchased 33,735 shares at a weighted average price of $ 226.79 compared to 39,069 shares at a weighted average price of $ 199.43 for the nine months ended May 31, 2019.

At May 31, 2020, the ESPP had 186,675 shares reserved for future issuance.

Stock-based Compensation

The Company recognized total stock-based compensation expense of $ 8.2 million and $ 7.7 million during the three months ended February 29, 2020 and February 28, 2019, respectively.

During the six months ended February 29, 2020 and February 28, 2019, the Company recognized total stock-based compensation expense of $ 18.0 million and $ 16.1 million, respectively.

As of February 29, 2020, $ 98.5 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 3.3 years.

Stock-based compensation expense related to the ESPP was $ 0.5 million for both the three months ended February 29, 2020 and February 28, 2019.

Stock-based compensation expense related to the ESPP was $ 1.0 million for both the six months ended February 29, 2020 and February 28, 2019.

There was no stock-based compensation capitalized for the three and six months ended February 29, 2020 or February 28, 2019.

As of February 29, 2020, FactSet had 5.6 million share-based awards available for grant under the LTIP and 0.2 million share-based awards available for grant under the Director Plan.

The Company recognized total stock-based compensation expense of $ 10.3 million and $ 8.0 million during the three months ended May 31, 2020 and May 31, 2019, respectively.

During the nine months ended May 31, 2020 and May 31, 2019, the Company recognized total stock-based compensation expense of $ 28.4 million and $ 24.1 million, respectively.

As of May 31, 2020, $ 89.1 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 3.1 years.

Stock-based compensation expense related to the ESPP was $ 0.6 million for both the three months ended May 31, 2020 and May 31, 2019.

Stock-based compensation expense related to the ESPP was $ 1.6 million for both the nine months ended May 31, 2020 and May 31, 2019.

As of May 31, 2020, FactSet had 5.6 million share-based awards available for grant under the LTIP and 0.2 million share-based awards available for grant under the Director Plan.

Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates.

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The provision for income taxes is as follows:

Three Months Ended Six Months Ended

February 29, February 28, February 29, February 28,

Three Months Ended May 31, Nine Months Ended May 31,

(in thousands) 2020 2019 2020 2019

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FactSet’s effective tax rate is lower than the applicable U.S.

corporate income tax rate for the three and six months ended February 29, 2020 due to R&D tax benefits, foreign derived intangible income deduction ("FDII"), and excess tax benefits associated with share-based payments.

For the three months ended February 29, 2020, the provision for income taxes was $ 14.4 million, a decrease of 26.6 % from the same period a year ago.

The provision decreased due primarily to a higher windfall tax benefit from stock-based compensation of $ 4.7 million for the three months ended February 29, 2020 compared to the prior year period, a $ 2.4 million income tax expense from the settlement with a tax authority recognized during the three months ended February 28, 2019, partially offset by a $ 1.1 million benefit from the revision of the one-time transition tax on accumulated earnings and profits of foreign subsidiaries permitted by the TCJA recognized during the three months ended February 28, 2019.

For the six months ended February 29, 2020, the provision for income taxes was $ 29.2 million, a decrease of 6.7 % from the same period a year ago.

The provision decreased mainly due to higher net tax benefits, partially offset by higher operating income for the six months ended February 29, 2020 compared to the prior year period.

The net increase in tax benefits of $ 10.6 million for the six months ended February 29, 2020, compared to $ 6.6 million for the prior year period, was primarily driven by an income tax expense from the settlement with a tax authority recorded during the six months ended February 28, 2019, coupled with benefits recognized during the six months ended February 29, 2020 from finalizing prior years' tax returns, remeasurement of a foreign net deferred tax position due to changes in the jurisdiction's tax rate and higher windfall tax benefits from stock-based compensation.

The reduction in the provision was partially offset by the benefit from the revision of the one-time transition tax on accumulated earnings and profits of foreign subsidiaries permitted by the TCJA recognized during the six months ended February 28, 2019.

corporate income tax rate for the three and nine months ended May 31, 2020 due to research and development ("R&D") tax benefits, foreign derived intangible income ("FDII") deduction, and excess tax benefits associated with share-based payments.

For the three months ended May 31, 2020, the provision for income taxes was $ 17.9 million, compared to $ 21.1 million from the same period a year ago.

The provision decreased due mainly to a lower effective tax rate as of May 31, 2020 compared to the same period a year ago, primarily driven by higher R&D tax credits and a higher FDII deduction, coupled with the effect of applying the lower effective tax rate to the first half of fiscal 2020.

The three months ended May 31, 2019 included a $ 5.8 million income tax expense from finalizing the prior year’s tax returns with no similar event for the three months ended May 31, 2020.

The decrease to the provision was partially offset by increased income tax expense from higher operating income for the three months ended May 31, 2020 compared to the prior year period and $ 3.3 million in higher windfall tax benefits from stock-based compensation recognized during the three months ended May 31, 2019 compared to the three months ended May 31, 2020.

Table of Content s

For the nine months ended May 31, 2020, the provision for income taxes was $ 47.1 million, compared to $ 52.4 million from the same period a year ago.

The nine months ended May 31, 2019 included a$ 5.8 million tax expense from finalizing the prior year’s tax returns with no similar event for the nine months ended May 31, 2020.

The decrease to the provision was partially offset by increased income tax expense from higher operating income for the nine months ended May 31, 2020 compared to the prior year period.

The decrease to the provision was also offset by $ 3.3 million in higher windfall tax benefits from stock-based compensation recognized during the nine months ended May 31, 2019 compared to the nine months ended May 31, 2020 and an income tax benefit from the revision of the one-time transition tax permitted by the TCJA recognized during the nine months ended May 31, 2019.

FactSet finalized the accounting for the tax effects of the TCJA with respect to the one-time transition tax;

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FactSet’s debt obligations consisted of the following:

(in thousands) February 29, 2020 August 31, 2019

(in thousands) May 31, 2020 August 31, 2019

2019 Revolving Credit Facility (maturity date of March 29, 2024) $ 575,000 $ 575,000

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The 2019 Credit Agreement also allows FactSet, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount up to $ 500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $ 25.0 million.

As of February 29, 2020, FactSet has borrowed $ 575.0 million of the available $ 750.0 million provided by the 2019 Revolving Credit Facility, resulting in $ 175.0 million available to be withdrawn.

FactSet is required to pay a commitment fee using a pricing grid currently at 0.10 % based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount.

All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheets at February 29, 2020 and August 31, 2019.

As of May 31, 2020, FactSet has borrowed $ 575.0 million of the available $ 750.0 million provided by the 2019 Revolving Credit Facility, resulting in $ 175.0 million available to be withdrawn.

FactSet is required to pay a commitment fee using a pricing grid, which was 0.10 % as of May 31, 2020.

This fee is based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount.

All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheets at May 31, 2020 and August 31, 2019.

The principal balance is payable in full on the maturity date.

The fair value of the Company's long-term debt was $ 575.0 million as of February 29, 2020, which the Company believes approximates the carrying amount as the terms and interest rate approximate market rates given its floating interest rate basis.

Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid, currently at 0.875 %.

For the three months ended February 29, 2020 and February 28, 2019 the Company recorded interest expense of $ 3.8 million and $ 5.1 million, respectively, on its outstanding debt amounts.

For the six months ended February 29, 2020 and February 28, 2019 the Company recorded interest expense of $ 8.0 million and $ 9.9 million, respectively, on its outstanding debt amounts.

The weighted average interest rate on amounts outstanding under the Company's credit facilities was 2.76 % and 3.35 % for the year to date ended February 29, 2020 and August 31, 2019, respectively.

The fair value of the Company's long-term debt was $ 575.0 million as of May 31, 2020 and bears interest on the outstanding principal amount at a rate equal to the LIBOR rate plus a spread using a debt leverage pricing grid, which was 0.875 % as of May 31, 2020.

FactSet believes the carrying value of the debt approximates fair value as the interest rate is a floating rate equal to the LIBOR rate plus a spread, which is representative of market rates for similar instruments.

The variable interest rate on FactSet’s long-term debt can expose the Company to interest rate volatility due to changes in the LIBOR rate.

To mitigate this exposure, on March 5, 2020, FactSet entered into an interest rate swap agreement with a notional amount of $ 287.5 million to hedge the variable interest rate obligation on a portion of its outstanding balance under the 2019 Revolving Credit Facility.

The interest rate swap agreement matures on March 28, 2024.

For the three months ended May 31, 2020 and May 31, 2019, the Company recorded interest expense of $ 2.9 million and $ 5.2 million, respectively, on its outstanding debt amounts.

For the nine months ended May 31, 2020 and May 31, 2019, the Company recorded interest expense of $ 10.9 million and $ 15.1 million, respectively, on its outstanding debt amounts.

Including the effects of the interest rate swap agreement, the weighted average interest rate on amounts outstanding under the Company's credit facilities was 2.47 % for the nine months ended May 31, 2020.

The weighted average interest rate for the fiscal year ended 2019 was 3.35 %.

Interest on the loan outstanding is payable quarterly, in arrears, and on the maturity date.

Table of Content s

As the terms for the interest rate swap agreement align with the 2019 Revolving Credit Facility, the Company does not expect any hedge ineffectiveness.

The Company has designated and accounted for this instrument as cash flow hedge with the unrealized gains or losses on the interest rate swap agreement recorded in AOCL in the Consolidated Balance Sheets.

During fiscal 2019, FactSet incurred approximately $ 0.9 million in debt issuance costs related to the 2019 Credit Agreement.

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In addition, the 2019 Credit Agreement requires that FactSet maintains a consolidated net leverage ratio, as measured by total net funded debt/EBITDA (as defined in the 2019 Credit Agreement) below a specified level as of the end of each fiscal quarter.

The Company was in compliance with all the covenants and requirements within the 2019 Credit Agreement as of February 29, 2020.

The Company was in compliance with all the covenants and requirements within the 2019 Credit Agreement as of May 31, 2020.

In February 2016, the FASB issued an accounting standard update related to accounting for leases.

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The Company has also elected to apply the short-term lease exception to not recognize lease liabilities and ROU assets for leases with a term of 12 months or less.

FactSet will recognize these lease payments on a straight-line basis over the lease term in O ccupancy expense (a component of SG&A expense) .

FactSet will recognize these lease payments on a straight-line basis over the lease term in O ccupancy costs (a component of SG&A expense) .

The adoption of the lease standard primarily related to the Company’s real estate operating leases.

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The Company also recognized ROU assets (initially measured as the lease liabilities, adjusted for deferred rent and lease incentives) of $ 217.0 million as of November 30, 2019 , included in Lease right-of-use assets, net on the Consolidated Balance Sheet.

As of February 29, 2020, the ROU assets balance was $ 235.9 million and the Lease liabilities balance was $ 285.1 million, classified in the same Consolidated Balance Sheet accounts used upon adoption.

As of May 31, 2020, the ROU assets balance was $ 254.4 million and the Lease liabilities balance was $ 305.2 million, classified in the same Consolidated Balance Sheet accounts used upon adoption.

Lease liabilities are measured as the present value of the future minimum lease payments over the lease term using FactSet’s incremental borrowing rate ("IBR") within the geography where the leased asset is located, as there is no rate implicit in the Company’s operating lease arrangements.

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The IBR is subsequently reassessed upon a modification to the lease arrangement.

As of February 29, 2020 , the Company’s leases have remaining terms of less than one year to just over 15 years.

As of May 31, 2020 , the Company’s leases have remaining terms of less than one year to just over 15 years.

The ROU assets and lease liabilities recognized did not include any renewal or termination options that were not yet reasonably certain to be exercised.

FactSet’s operating lease net expense for the three and six months ended February 29, 2020 was $ 9.8 million and $ 20.4 million, respectively.

Charges related to FactSet's operating leases that are variable, and therefore not included in the measurement of the lease liabilities for the three and six months ended February 29, 2020 were $ 4.4 million and $ 9.5 million, respectively.

The following table reconciles FactSet’s future undiscounted cash flows related to the Company’s operating leases and the reconciliation to the operating lease liability as of February 29, 2020 :

FactSet’s net operating lease expense for the three and nine months ended May 31, 2020 was $ 11.9 million and $ 32.3 million, respectively.

Charges related to FactSet's operating leases that are variable, and therefore not included in the measurement of the lease liabilities for the three and nine months ended May 31, 2020 were $ 4.0 million and $ 13.5 million, respectively.

The following table reconciles FactSet’s future undiscounted cash flows related to the Company’s operating leases and the reconciliation to the operating lease liability as of May 31, 2020 :

(in thousands)

Minimum Lease

Years ended August 31,

Remainder of 2020 $ 18,618

Fiscal Years Ended August 31,

2020 (remaining three months) $ 9,684

Thereafter 216,710

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FactSet previously entered into a real estate lease in the Philippines, which was planned to commence in phases, providing FactSet with access to the underlying leased rental space during fiscal 2020.

The rental space that FactSet has not taken possession of as of February 29, 2020 is not included in the table above nor included in the lease ROU assets and liabilities as of February 29, 2020.

The lease is for approximately 10 years and the undiscounted future rent payments for those leases that have not commenced as of February 29, 2020 is approximately $ 45 million.

The following table presents other information related to the operating leases recorded on the Consolidated Balance Sheets as of February 29, 2020 :

The rental space that FactSet has not taken possession of as of May 31, 2020 is not included in the table above nor included in the lease ROU assets and liabilities as of May 31, 2020.

The overall lease term is approximately 10 years and the undiscounted future rent payments for the lease that has not commenced as of May 31, 2020 is approximately $ 18 million.

The following table summarizes the Company's lease term and discount rate assumptions related to the operating leases recorded on the Consolidated Balance Sheets as of May 31, 2020 :

As of May 31, 2020

Weighted average remaining lease term (in years)

Weighted average discount rate (IBR)

Cash paid for amounts included in the measurement of lease liabilities (in millions)

The following table summarizes supplemental cash flow information related to the Company's operating leases:

(in thousands)

Nine Months Ended May 31, 2020

Cash paid for amounts included in the measurement of operating lease liabilities $ 29.9

Operating lease ROU assets obtained in exchange for operating lease liabilities $ 48.5

COMMITMENTS AND CONTINGENCIES

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As of August 31, 2019, the Company had total purchase commitments with suppliers of $ 69.9 million.

There were no material changes in the Company’s purchase commitments during the six months ended February 29, 2020.

There were no material changes in the Company’s purchase commitments during the nine months ended May 31, 2020.

Letters of Credit

Approximately $ 2.9 million of standby letters of credit have been issued during the ordinary course of business in connection with the Company’s current leased office space as of February 29, 2020.

Approximately $ 2.9 million of standby letters of credit have been issued during the ordinary course of business in connection with the Company’s current leased office space as of May 31, 2020.

These standby letters of credit utilize the same covenants included in the 2019 Credit Agreement.

Refer to Note 14 Debt for more information on these covenants.

Table of Content s

Contingencies

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The outcome of all the matters against the Company is subject to future resolution, including the uncertainties of litigation.

Based on information available at February 29, 2020, FactSet’s management believes that the ultimate outcome of these unresolved matters against the Company, individually or in the aggregate, will not have a material adverse effect on the Company's consolidated financial position, its results of operations or its cash flows.

Based on information available at May 31, 2020, FactSet’s management believes that the ultimate outcome of these unresolved matters against the Company, individually or in the aggregate, will not have a material adverse effect on the Company's consolidated financial position, its results of operations or its cash flows.

Sales Tax Matters

In August 2019, FactSet received a Notice of Intent to Assess (the "Notice") additional sales taxes, interest and underpayment penalties from the Commonwealth of Massachusetts Department of Revenue relating to prior tax periods.

The Notice follows FactSet's previously disclosed response to a letter from the Commonwealth requesting additional sales information.

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The Company filed an appeal to the Notice and intends to contest any such assessment, if assessed, and continues to cooperate with the Commonwealth's inquiry.

Due to the uncertainty surrounding the assessment process, the Company is unable to reasonably estimate the ultimate outcome of this matter and, as such, has not recorded a liability as of February 29, 2020.

FactSet believes that it will ultimately prevail if the Company is presented with a formal assessment;

10 unchanged sentences

Depos its held with banks may exceed the amount of insurance provided on such deposits.

These deposits may be redeemed upon demand and are maintained with financial institutions, with reputable credit, and therefore, bear minimal credit risk.

These deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and bear minimal credit risk.

The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.

Table of Content s

Accounts Receivable

4 unchanged sentences

No single client represented 3 % or more of FactSet’s total revenue in any period presented.

At February 29, 2020, the Company’s largest individual client accounted for approximately 3 % of total annual subscriptions, and subscriptions from the ten largest clients did not surpass 14 % of total annual subscriptions, consistent with the level at August 31, 2019.

As of February 29, 2020, the receivable reserve was $ 7.9 million compared to $ 10.5 million as of August 31, 2019.

At May 31, 2020, the Company’s largest individual client accounted for just above 2.5 % of total annual subscriptions, and subscriptions from FactSet's ten largest clients did not surpass 15 % of total annual subscriptions, consistent with the level at August 31, 2019.

As of May 31, 2020, the receivable reserve was $ 7.4 million compared to $ 10.5 million as of August 31, 2019.

Derivative Instruments

8 unchanged sentences

Data Content Providers

Certain data sets that FactSet relies on have a limited number of suppliers, although the Company makes every effort to assure that, where reasonable, alternative sources are available.

FactSet relies on certain data sets where there are a limited number of suppliers.

The Company makes every effort to assure that, where reasonable, alternative sources are available.

FactSet is not dependent on any one third-party data supplier in order to meet the needs of its clients.

FactSet combines the data from these commercial databases into its own dedicated single online service, which the client accesses to perform their analysis.

No single vendor or data supplier represented more than 10% of FactSet's total data costs for the six months ended February 29, 2020 or February 28, 2019.

FactSet combines the data from these commercial databases into its own dedicated single online service, which its clients access to perform their analysis.

No single vendor or data supplier represented more than 10% of FactSet's total data costs for the nine months ended May 31, 2020 or May 31, 2019.

Table of Content s

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