What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-10-29 compared with 2019-10-30 · 913 added, 953 removed, 506 unchanged (79% of the section changed)

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Index to Consolidated Financial Statements

Consolidated Financial Statements:

Management’s Statement of Responsibility for Financial Statements

Management’s Report on Internal Control over Financial Reporting

Management’s Statement of Responsibility for Financial Statements

Management’s Report on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

Consolidated Statements of Income for the years ended August 31, 2020 , 2019 and 2018

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Consolidated Statements of Cash Flows for the years ended August 31, 2020, 2019 and 2018

Consolidated Statements of Changes in Stockholders’

Equity for the years ended August 31, 2019, 2018 and 2017

Consolidated Statements of Changes in Stockholders’ Equity for the years ended August 31, 2020, 2019, and 2018

Notes to the Consolidated Financial Statements

Financial Statement Schedule:

Schedule II –

Valuation and Qualifying Accounts

Management’s Statement of Responsibility for Financial Statements

FactSet’s consolidated financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s estimates and judgments.

Schedule II – Valuation and Qualifying Accounts

Management’s Statement of Responsibility for Financial Statements

FactSet’s Consolidated Financial Statements are prepared by management, which is responsible for their fairness, integrity and objectivity.

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s estimates and judgments.

All financial information in this Report on Form 10-K has been presented on a basis consistent with the information included in the accompanying financial statements.

FactSet’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of the New York Stock Exchange, the NASDAQ Stock Market and the corporate governance requirements of the Sarbanes-Oxley Act of 2002.

Management, with oversight by the Company’s Board of Directors, has established and maintains a strong ethical climate so that its affairs are conducted to the highest standards of personal and corporate conduct.

FactSet maintains accounting systems, including internal accounting controls, designed to provide reasonable assurance of the reliability of financial records and the protection of assets.

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The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources, and the leadership and commitment of top management.

In compliance with the Sarbanes-Oxley Act of 2002, FactSet assessed its internal control over financial reporting as of August 31, 2019 and issued a report (see below).

The Audit Committee of the Board of Directors, which consists solely of independent non-employee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements.

The Audit Committee periodically meets with management and the independent accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities, including management’s assessment of internal control over financial reporting.

The independent registered public accounting firm has full and free access to the Audit Committee and has met with the committee, with and without management present.

Management’s Report on Internal Control over Financial Reporting

In compliance with the Sarbanes-Oxley Act of 2002, FactSet assessed its internal control over financial reporting as of August 31, 2020 and issued a report (see below).

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for FactSet.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management (with the participation of the Chief Executive Officer and Chief Financial Officer) conducted an evaluation of the effectiveness of FactSet’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that FactSet’s internal control over financial reporting was effective as of August 31, 2019.

Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness of FactSet’s internal control over financial reporting and has issued a report on FactSet’s internal control over financial reporting, which is included in their report on the subsequent page.

Chief Executive Officer

Executive Vice President and Chief Financial Officer

October 30, 2019

Based on this evaluation, management concluded that FactSet’s internal control over financial reporting was effective as of August 31, 2020.

PHILIP SNOW /s/ HELEN L.

Philip Snow Helen L.

Chief Executive Officer Executive Vice President and Chief Financial Officer

October 29, 2020 October 29, 2020

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of FactSet Research Systems Inc.

To the Board of Directors and Stockholders of FactSet Research Systems Inc.

Opinion on Internal Control over Financial Reporting

We have audited FactSet Research System Inc.’s (the Company) internal control over financial reporting as of August 31, 2019, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited FactSet Research System Inc.’s (the Company) internal control over financial reporting as of August 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2020, based on the COSO criteria.

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Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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We have audited the accompanying consolidated balance sheets of FactSet Research Systems Inc.

(the Company) as of August 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, stockholders’

equity and cash flows for each of the three years in the period ended August 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 8 (collectively referred to as the “consolidated financial statements”).

(the Company) as of August 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended August 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 8.

(collectively referred to as the “Consolidated Financial Statements”).

In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company at August 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2019, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 30, 2019 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 29, 2020 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update (ASU) No.

As discussed in Note 3 , Summary of Significant Accounting Policies , to the Consolidated Financial Statements, the Company changed its method of accounting for leases in 2020 due to the adoption of ASU No.

2016-02, Leases (Topic 842).

Basis for Opinion

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

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

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

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

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

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Measurement of income tax provision

Description of the Matter

As discussed in Note 3 and 17 of the consolidated financial statements, the Company serves international markets and is subject to income taxes in the U.S.

and numerous foreign jurisdictions, which affect the Company’s provision for income taxes.

The tax provision is an estimate based on management’s understanding of current enacted tax laws and tax rates of each tax jurisdiction and the use of subjective allocation methodologies to allocate taxable income to tax jurisdictions based upon the structure of the Company’s operations and customer arrangements.

Description of the Matter As discussed in Note 3 , Summary of Significant Accounting Policies , and 10, Income Taxes , of the Consolidated Financial Statements, the Company serves international markets and is subject to income taxes in the U.S.

and numerous foreign jurisdictions, which affect the Company’s provision for income taxes.

For the year-ended August 31, 2020, the Company recognized a consolidated provision for income taxes of $54.2 million with $31.9 million related to its U.S.

operations and $22.3 million related to its non-U.S.

Management’s calculation of the provision for income taxes was significant to our audit because the provision for income taxes involved subjective estimation and complex audit judgement related to the evaluation of tax laws, including the methods used to allocate taxable income, and the amounts and disclosures are material to the financial statements.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over management’s calculation of its provision for income taxes.

For example, we tested controls over management’s evaluation of the allocation methodologies and management’s review of the assumptions and data utilized in determining the allocation of income to applicable tax jurisdictions.

Among other audit procedures performed, we evaluated the reasonableness of management’s allocation methodologies by analyzing the methodology based on the Company’s structure, operations and current tax law.

We recalculated income tax expense using management’s methodology and agreed the data used in the calculations to the Company’s underlying books and records.

We involved our tax professionals to evaluate the application of tax law to management’s allocation methodologies and tax positions.

This included assessing the Company’s correspondence with the relevant tax authorities and evaluating third-party reports and advice obtained by the Company.

We also performed a sensitivity analysis to evaluate the effect from changes in management’s allocation methodologies and assumptions.

We have evaluated the Company’s income tax disclosures included in Note 17 of the consolidated financial statements in relation to these matters.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over management’s calculation of its provision for income taxes.

We recalculated income tax expense using management’s methodology and agreed the data used in the calculations to the Company’s underlying books and records.

We involved our tax professionals to evaluate the application of tax law to management’s allocation methodologies and tax positions.

This included assessing the Company’s correspondence with the relevant tax authorities and evaluating third-party reports and advice obtained by the Company.

We also performed a sensitivity analysis to evaluate the effect from changes in management’s allocation methodologies and assumptions.

We have evaluated the Company’s income tax disclosures included in Note 10, Income Taxes , of the Consolidated Financial Statements in relation to these matters.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

October 29, 2020

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Consolidated Statements of Income

Years ended August 31,

(in thousands, except per share data)  

(in thousands, except per share data) Years ended August 31,

2020 2019 2018

Revenue $ 1,494,111 $ 1,435,351 $ 1,350,145

Operating expenses

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Other expenses

(Loss) on sale of business

Interest expense, net of interest income

Interest expense, net ( 9,829 ) ( 16,624 ) ( 16,286 )

Other (expense) income, net ( 2,697 ) 554 1,920

Total other expense ( 12,526 ) ( 16,070 ) ( 14,366 )

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Provision for income taxes 54,196 69,175 84,753

Net income $ 372,938 $ 352,790 $ 267,085

Basic earnings per common share $ 9.83 $ 9.25 $ 6.90

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Consolidated Statements of Comprehensive Income

Years ended August 31,

(in thousands)  

Other comprehensive (loss) income, net of tax

(in thousands) Years ended August 31,

2020 2019 2018

Net income $ 372,938 $ 352,790 $ 267,085

Other comprehensive income, net of tax:

Net unrealized gain (loss) on cash flow hedges (1)

674 504 ( 7,288 )

Foreign currency translation adjustments 34,577 ( 24,325 ) ( 9,431 )

Other comprehensive (loss) income

Other comprehensive income (loss) 35,251 ( 23,821 ) ( 16,719 )

Comprehensive income $ 408,189 $ 328,969 $ 250,366

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Consolidated Balance Sheets

(in thousands, except share data)  

(in thousands, except share data) August 31,

Cash and cash equivalents $ 585,605 $ 359,799

Investments 19,572 25,813

Accounts receivable, net of reserves of $ 7,987 at August 31, 2020 and $ 10,511 at August 31, 2019

155,011 146,309

Prepaid taxes 38,067 15,033

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Property, equipment and leasehold improvements, net 133,102 119,384

Goodwill 709,703 685,729

Intangible assets, net 121,095 124,448

Deferred taxes — 7,571

Lease right-of-use assets, net 248,929 —

Other assets 28,629 39,186

TOTAL ASSETS $ 2,083,388 $ 1,560,130

Accounts payable and accrued expenses $ 82,094 $ 79,620

Current lease liabilities 29,056 —

Accrued compensation 81,873 64,202

Deferred fees 53,987 47,656

Taxes payable

Dividends payable 29,283 27,445

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Taxes payable 27,739 26,292

Deferred rent and other non-current liabilities

Long-term lease liabilities 272,269 —

Other non-current liabilities 7,326 42,006

TOTAL LIABILITIES $ 1,187,013 $ 887,874

Commitments and contingencies (See Note 13)

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

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

Common stock, $.01 par value, 150,000,000 shares authorized, 40,104,192 and 39,264,849 shares issued, 38,117,840 and 38,192,586 shares outstanding at August 31, 2019 and 2018, respectively

Common stock, $ 0.01 par value, 150,000,000 shares authorized, 40,767,708 and 40,104,192 shares issued, 38,030,252 and 38,117,840 shares outstanding at August 31, 2020 and

2019, respectively

Additional paid-in capital 939,067 806,973

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2,737,456 and 1,986,352 shares at August 31, 2020 and 2019, respectively

( 636,956 ) ( 433,799 )

Retained earnings 633,149 373,225

Accumulated other comprehensive loss ( 39,293 ) ( 74,544 )

TOTAL STOCKHOLDERS’

TOTAL LIABILITIES AND STOCKHOLDERS’

TOTAL STOCKHOLDERS’ EQUITY $ 896,375 $ 672,256

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,083,388 $ 1,560,130

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

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Consolidated Statements of Cash Flows

Years ended August 31,

(in thousands)  

(in thousands) Years ended August 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 372,938 $ 352,790 $ 267,085

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

Depreciation and amortization 57,614 60,463 57,285

Amortization of lease right-of-use assets 43,185 — —

Stock-based compensation expense 36,579 32,400 31,516

Deferred income taxes 10,626 ( 2,278 ) ( 1,910 )

Impairment charge 16,500 — —

Loss on sale of assets 172 196 140

Tax benefits from share-based payment arrangements

Changes in assets and liabilities, net of effects of acquisitions

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Taxes payable, net of prepaid taxes ( 24,224 ) ( 19,238 ) 27,659

Lease liabilities, net ( 33,340 ) — —

Other, net ( 46 ) ( 3,827 ) ( 11,537 )

Net cash provided by operating activities 505,840 427,136 385,668

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisition of businesses and investments, net of cash and cash equivalents acquired

Purchases of property, equipment, leasehold improvements and intangible assets ( 77,642 ) ( 59,370 ) ( 33,520 )

Purchases of investments ( 2,736 ) ( 11,135 ) ( 12,470 )

Proceeds from maturity or sale of investments 6,746 14,405 12,459

Purchases of property, equipment and leasehold improvements

Acquisition of businesses and investments, net of cash and cash equivalents acquired — — ( 15,000 )

Net cash used in investing activities ( 73,632 ) ( 56,100 ) ( 48,531 )

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend payments

Repurchase of common stock ( 199,625 ) ( 220,372 ) ( 303,955 )

Dividend payments ( 110,439 ) ( 100,052 ) ( 89,408 )

Repayment of debt — ( 575,000 ) —

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Effect of exchange rate changes on cash and cash equivalents 11,673 ( 5,586 ) ( 3,208 )

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents 225,806 151,176 13,892

Cash and cash equivalents at beginning of period 359,799 208,623 194,731

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FactSet Research Systems Inc.

Consolidated Statements of Changes in Stockholders’

Treasury Stock

(in thousands, except share data)  

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data) Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Stockholders’

Shares Par Value Shares Amount

Balance as of September 1, 2017 51,845,132 $ 518 $ 741,748 12,822,100 $ ( 1,606,678 ) $ 1,458,823 $ ( 34,720 ) $ 559,691

Other comprehensive income

Net income 267,085 267,085

Other comprehensive loss ( 16,719 ) ( 16,719 )

Common stock issued for employee stock plans 685,807 8 80,983 80,991

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Repurchases of common stock 1,534,782 ( 302,441 ) ( 302,441 )

Stock-based compensation expense

Tax benefits from share-based payment arrangements

Accelerated share repurchase

Stock-based compensation 31,517 31,517

Dividends declared ( 92,710 ) ( 92,710 )

Retirement of Treasury Shares ( 13,292,689 ) $ ( 133 ) ( 186,717 ) ( 13,292,689 ) 1,697,205 ( 1,510,355 ) —

Balance as of August 31, 2018 39,264,849 $ 393 $ 667,531 1,072,263 $ ( 213,428 ) $ 122,843 $ ( 51,439 ) $ 525,900

Net income 352,790 352,790

Other comprehensive loss ( 23,821 ) ( 23,821 )

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Repurchases of common stock 882,445 ( 213,130 ) ( 213,130 )

Stock-based compensation expense

Stock-based compensation 32,400 32,400

Dividends declared ( 103,710 ) ( 103,710 )

Retirement of treasury shares

Cumulative effect of adoption of accounting standards* 1,302 716 2,018

Balance as of August 31, 2019 40,104,192 $ 401 $ 806,973 1,986,352 $ ( 433,799 ) $ 373,225 $ ( 74,544 ) $ 672,256

Other comprehensive loss

Net income 372,938 372,938

Other comprehensive income 35,251 35,251

Common stock issued for employee stock plans 630,520 7 95,515 75 ( 21 ) 95,501

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Repurchases of common stock 739,084 ( 199,625 ) ( 199,625 )

Stock-based compensation expense

Stock-based compensation 36,579 36,579

Dividends declared ( 113,014 ) ( 113,014 )

Cumulative effect of adoption of accounting standards*

Balance as of August 31, 2020 40,767,708 $ 408 $ 939,067 2,737,456 $ ( 636,956 ) $ 633,149 $ ( 39,293 ) $ 896,375

* 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 TCJA providing for the reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects.

See Notes 3 and 4 for additional information.

Tax Cuts and Jobs Act ("TCJA") providing for the reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects.

Refer to Note 3, Basis of Presentation and Note 4, Revenue Recognition in the Notes to the Company's Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for additional information.

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

Notes to the Consolidated Financial Statements

ORGANIZATION AND NATURE OF BUSINESS

Description of Business

Basis of Presentation

Summary of Significant Accounting Policies

Revenue Recognition

Fair Value Measures

Derivative Instruments

Property, Equipment and Leasehold Improvements

Intangible Assets

Commitments and Contingencies

Stockholders' Equity

Earnings Per Share

Stock Based Compensation

Employee Benefit Plans

Segment Information

Risks and Concentrations of Credit Risk

Unaudited Quarterly Financial Data

Subsequent Events

DESCRIPTION OF BUSINESS

FactSet Research Systems Inc.

(the “Company”

or “FactSet”) is a global provider of integrated financial information, analytical applications and industry-leading services for the investment and corporate communities.

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 we serve 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 U.S., Europe, and Asia Pacific.

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

FactSet currently serves financial professionals, which include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, wealth advisors, and corporate clients.

FactSet provides both insights on global market trends and intelligence on companies and industries, as well as capabilities to monitor portfolio risk and performance and to execute trades.

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

FactSet revenue is primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, research management, and trade execution.

and its wholly-owned subsidiaries (collectively, the "Company" or "FactSet") is a global provider of integrated financial information, analytical applications and industry-leading services for the investment and corporate communities.

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 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 (formerly known as U.S.), EMEA (Europe and Africa, formerly known as Europe), and Asia Pacific.

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

FactSet currently serves a wide range of financial professionals, which include but are not limited to portfolio managers, investment research professionals, investment bankers, risk and performance analysts, wealth advisors, and corporate clients.

FactSet provides both insights on global market trends and intelligence on companies and industries, as well as capabilities to monitor portfolio risk and performance and execute trades.

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

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.

The accompanying consolidated financial statements and notes of FactSet and its wholly-owned subsidiaries are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

The accompanying Consolidated Financial Statements and Notes to the Company's Consolidated Financial Statements are p repared in accordance with generally accepted accounting principles in the United States ("GAAP").

All intercompany balances, transactions, and profits have been eliminated.

The preparation of Consolidated Financial Statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Significant estimates have been made in areas that include allocation of purchase price to acquired assets and liabilities, stock-based compensation, income taxes, accrued compensation, valuation of goodwill, and useful lives and valuation of fixed and intangible assets.

Significant estimates have been made in areas that include allocation of purchase price to acquired assets and liabilities, stock-based compensation, income taxes, valuation of goodwill, and useful lives and valuation of fixed and intangible ass ets.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results could differ from those estimates.

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

Reclassification

Certain comparative figures in the Company's Consolidated Statement of Cash Flows have been reclassified to conform to the current year's presentation.

The Company reclassified certain prior year comparative figures from Interest expense, net, to Other expense, net including non-operational foreign exchange gains and losses in the Consolidated Statement of Income to conform to the current year's presentation.

The Company reclassified certain capitalized software from Property, equipment and leasehold improvements, net to Intangible assets, net, except for capitalized develop costs associated with hosted solutions, which were reclassified to Other assets, in the prior year comparative figures in the Consolidated Balance Sheets to conform to the current year's presentation.

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.

FactSet has required nearly all its employees to work remotely on a temporary basis and has implemented global travel restrictions for employees.

The Company believes the transition to remote working has been successful and has not significantly affected financial results for the fiscal year ended August 31, 2020.

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 fiscal 2020 as of August 31, 2020.

The extent of the effect on the Company’s future 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Revenue Recognition

The majority of the Company’s revenue is derived from 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, research management, and trade execution.

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Amounts that have been earned but not yet paid are reflected on the Consolidated Balance Sheets as Accounts receivable, net of reserves.

Amounts invoiced in advance of client payments that are in excess of earned subscription revenue are reflected on the Consolidated Balance Sheets as Deferred fees.

As of August 

31, 2019, the amount of accounts receivable that was unbilled totaled $ 15.8 million, which will be billed in fiscal 2020.

As of August 

31, 2018, the amount of accounts receivable that was unbilled totaled $ 6.4 million, which was billed in fiscal 2019.

Amounts invoiced in advance of client payments that are in excess of earned subscription revenue are reflected on the

Consolidated Balance Sheets as Deferred fees.

As of August 31, 2020, the amount of accounts receivable that was unbilled totaled $ 17.1 million, and will be billed in fiscal 2021.

As of August 31, 2019, the amount of accounts receivable that was unbilled totaled $ 15.8 million, and was billed in fiscal 2020.

The Company calculates its receivable reserve through analyzing aged client receivables, reviewing the recent history of client receivable write-offs and understanding general market and economic conditions.

In accordance with this policy, a receivable reserve of $ 10.5 million and $ 3.5 million was recorded as of August 

31, 2019 and 2018, respectively, within the Consolidated Balance Sheets as a reduction to Accounts receivable.

In accordance with this policy, a receivable reserve of $ 8.0 million and $ 10.5 million was recorded as of August 31, 2020 and 2019, respectively, within the Consolidated Balance Sheets as a reduction to Accounts receivable.

Cost of Services

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Selling, General and Administrative

Selling, general and administrative expenses include compensation for the sales and various other support and administrative departments in addition to travel and entertainment expenses, marketing costs, rent, amortization of leasehold improvements, depreciation of furniture and fixtures, office expenses, professional fees and other miscellaneous expenses.

Selling, general and administrative expenses include compensation for the sales and various other support and administrative departments in addition to travel and entertainment expenses, marketing costs, rent, depreciation of furniture and fixtures, amortization of lease right-of-use ("ROU") assets and leasehold improvements, as well as office expenses, professional fees and other miscellaneous expenses.

Research and Product Development Costs

FactSet does not have a separate research and product development department, but rather the Product Development and Engineering departments work closely with our strategists, product managers, sales and other client-facing specialists to identify areas of improvement with the goal of providing increased value to clients.

As such, research and product development costs relate to the salary and benefits for the Company’s product development, software engineering and technical support staff and, as such, these costs are expensed when incurred within cost of services as employee compensation.

The Company expects to allocate a similar percentage of its workforce in future years in order to continue to develop new products and enhancements, respond quickly to market changes and meet the needs of its clients efficiently.

As such, research and product development costs relate to the salary and benefits for the Company’s product development, software engineering and technical support staff and these costs are expensed as incurred and primarily included within Cost of services as employee compensation.

The Company expects to allocate a similar percentage of its workforce in future years in to continue to develop new products and enhancements, respond quickly to market changes and meet the needs of its clients efficiently.

FactSet incurred research and product development costs of $ 224.0 million, $ 214.7 million and $ 217.1 million during fiscal years 2020, 2019 and 2018, respectively.

Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the number of weighted average common shares outstanding during the period.

Basic earnings per share ("EPS") is computed by dividing net income by the number of weighted average common shares outstanding during the period.

Diluted EPS is computed by dividing net income by the number of weighted average common shares outstanding during the period increased by the dilutive effect of potential common shares outstanding during the period.

The number of potential common shares outstanding has been determined in accordance with the treasury stock method to the extent they are dilutive.

For the purpose of calculating EPS, common shares outstanding include common shares issuable upon the exercise of outstanding share-based compensation awards, including employee stock options and restricted stock.

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.

Under the treasury stock method, the exercise price paid by the option holder and future stock-based compensation expense that the Company has not yet recognized are assumed to be used to repurchase shares.

Comprehensive Income (Loss)

The Company discloses comprehensive income (loss) in accordance with applicable standards for the reporting and display of comprehensive income (loss) in a set of financial statements.

Comprehensive income (loss) is defined as the change in net assets of a business enterprise during a period from transactions generated from non-owner sources.

Comprehensive Income

The Company discloses comprehensive income in accordance with applicable standards for the reporting and display of comprehensive income in a set of financial statements.

Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions generated from non-owner sources.

It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.

In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible.

The Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability.

The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The accounting guidance for fair value measurements establishes a fair value hierarchy that

requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

There are three levels of inputs that may be used to measure fair value based on the reliability of inputs.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s cash equivalents are classified as Level 1 while the Company’s derivative instruments (foreign exchange forward contracts) and certificates of deposit are classified as Level 2.

There were no Level 3 assets or liabilities held by FactSet as of August 

31, 2019 or 2018.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s cash equivalents are classified as Level 1 while the Company’s derivative instruments (foreign exchange forward contracts) and certificates of deposit are classified as Level 2.

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

Refer to Note 5, Fair Value Measures for the definition of the fair value hierarchy.

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Cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or less and are reported at fair value.

The Company’s corporate money market funds are readily convertible into cash and the net asset value of each fund on the last day of the quarter is used to determine its fair value.

Investments consist of both mutual funds and certificates of deposit as both are part of the Company’s investment strategy.

These mutual funds and certificates of deposit are included as Investments (short-term) on the Company’s Consolidated Balance Sheets as the certificates of deposit have original maturities greater than three months, but less than one year and the mutual funds can be liquidated at that Company’s discretion.

The Company’s corporate money market funds are readily convertible into cash and the net asset value of each fund on the last day of the quarter is used to determine its fair value.

Investments consist of both mutual funds and certificates of deposit as both are part of the Company’s investment strategy.

These mutual funds and certificates of deposit are included as Investments (short-term) on the Company’s Consolidated Balance Sheets as the mutual funds can be liquidated at the Company’s discretion and the certificates of deposit have original maturities greater than three months.

The mutual funds and certificates of deposit are held for investment and are not considered debt securities.

Preservation of principal is the primary goal of our cash and investment policy.

Pursuant to our established investment guidelines, we try to achieve high levels of credit quality, liquidity and diversification.

Our investment guidelines do not permit us to invest in puts, calls, strips, short sales, straddles, options, commodities, precious metals, futures or investments on margin.

Interest income earned from these investments during fiscal 2020, 2019 and 2018 was $ 1.1 million, $ 1.5 million and $ 1.3 million, respectively.

The Company’s cash, cash equivalents and investments portfolio did not experience any realized or unrealized losses as a result of counterparty credit risk or ratings change during fiscal 2019 and 2018.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization.

Computers and related equipment are depreciated on a straight-line basis over estimated useful lives of three years.

Computers and related equipment are depreciated on a straight-line basis over an estimated useful life ranging from three to five years .

Furniture and fixtures are depreciated on a straight-line basis over their estimated useful lives of seven years .

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Goodwill at the reporting unit level is reviewed for impairment annually, and more frequently if impairment indicators exist.

Goodwill is deemed to be impaired and written-down in the period in which the carrying value of the reporting unit exceeds its fair value. FactSet has three reporting units, U.S, Europe and Asia Pacific, which are consistent with the operating segments reported, as discrete financial information is not available for subsidiaries within the operating segments.

Goodwill is deemed to be impaired and written-down in the period in which the carrying value of the reporting unit exceeds its fair value.

FactSet has three reporting units, Americas, EMEA and Asia Pacific, which are consistent with the operating segments reported, as discrete financial information is not available for subsidiaries within the operating segments.

FactSet may elect to perform a qualitative analysis for the reporting units to determine whether it is more likely than not the fair value of the reporting unit is greater than its carrying value.

In performing a qualitative assessment, FactSet considers such factors as macro-economic conditions, industry and market conditions in which FactSet operates including the competitive environment and significant changes in demand for the Company’s services.

The Company also considers its share price both in absolute terms and in relation to peer companies.

If the qualitative analysis indicates that it is more likely than not the fair value of a reporting unit is less than its carrying amount or if FactSet elects not to perform a qualitative analysis, a quantitative analysis is performed to determine whether a goodwill impairment exists.

The quantitative goodwill impairment analysis is used to identify potential impairment by comparing fair value of a reporting unit with its carrying amount using an income approach, along with other relevant market information, derived from a discounted cash flow model to estimate fair value of FactSet’s reporting units.

The annual review of carrying value of goodwill requires the Company develop estimates of future business performance.

These estimates are used to derive expected cash flows and include assumptions regarding future sales levels and the level of working capital needed to support a given business.

The discounted cash flow model also includes a determination of FactSet’s weighted average cost of capital by reporting unit.

Cost of capital is based on assumptions about interest rates, as well as a risk-adjusted rate of return required by FactSet’s equity investors.

These estimates are used to derive expected cash

flows and include assumptions regarding future sales levels and the level of working capital needed to support a given business.

The discounted cash flow model also includes a determination of FactSet’s weighted average cost of capital by reporting unit.

Cost of capital is based on assumptions about interest rates, as well as a risk-adjusted rate of return required by FactSet’s equity investors.

Changes in these estimates can impact present value of expected cash flows used in determining fair value of a reporting unit.

An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any, would be recognized.

The loss recognized would not exceed total amount of goodwill allocated to that reporting unit.

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Intangible Assets

FactSet’s identifiable intangible assets consist of acquired content databases, client relationships, software technology, non-compete agreements and trade names resulting from previous acquisitions, which have been fully integrated into the Company’s operations.

Acquired Intangible Assets

The Company amortizes intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization.

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The intangible assets have no assigned residual values.

Internally Developed Software

FactSet capitalizes internal and external costs related to developing, modifying or obtaining software for internal use, incurred during the application development stage in accordance with ASC 350-40, Internal-Use Software.

Costs related to software upgrades and enhancements are capitalized if it is determined that these upgrades or enhancements provide additional functionality to the software.

The capitalized software is amortized using the straight-line method over the estimated useful life of the software, generally three to five years .

These assets are subject to the impairment test guidance specified in the acquired intangible assets above.

Accrued Liabilities

Accrued liabilities include estimates relating to employee compensation, operating expenses and tax liabilities.

At the end of each fiscal year, FactSet conducts a final review of both Company and individual performance within each department to determine the amount of discretionary employee compensation.

The Company also reviews compensation throughout the year to determine how overall performance tracks against management’s expectations.

At the end of each fiscal year, FactSet conducts a review of both Company and individual performance within each department to determine the amount of discretionary employee compensation.

The Company also reviews compensation throughout the year to determine how overall performance tracks against management’s expectations.

Management takes these and other factors, including historical performance, into account in reviewing accrued compensation estimates quarterly and adjusting accrual rates as appropriate.

The amount of the variable employee compensation recorded within accrued compensation as of August 

31, 2019 and 2018, was $ 49.4 million and $ 43.6 million, respectively.

The majority of variable employee compensation recorded within accrued compensation related to the annual performance bonus, which was $ 54.4 million and $ 49.4 million as of August 31, 2020 and 2019, respectively.

Derivative Instruments

Foreign Currency Forward Contracts

FactSet conducts business outside the U.S.

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

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

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

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

The Company utilizes derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency.

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These transactions are designated and accounted for as cash flow hedges in accordance with applicable accounting guidance.

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 hedged exposure affects earnings.

The gains and losses on foreign currency forward contracts mitigate the variability in operating expenses associated with currency movements.

Interest Rate Swap Agreement

On March 29, 2019, FactSet entered into a credit agreement with PNC Bank, National Association ("PNC") (the "2019 Credit Agreement"), which provides for a $ 750.0 million revolving credit facility (the "2019 Revolving Credit Facility").

The outstanding principal balance of $ 575.0 million bears interest at a rate equal to LIBOR plus a spread, using a debt leverage pricing grid.

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

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, effectively converting the floating interest rate to fixed for the hedged portion.

Thus, FactSet is only exposed to base interest rate risk on floating rate borrowings in excess of any amounts that are not hedged, or $ 287.5 million of the outstanding principal balance.

Derivative Instrument Classification

The changes in fair value for these cash flow hedges are initially reported as a component of accumulated other comprehensive loss ("AOCL") and subsequently reclassified into operating expenses when the hedged exposure affects earnings.

All derivatives are assessed for effectiveness at each reporting period.

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Certain wholly-owned subsidiaries operate under a functional currency different from the U.S.

dollar, such as the Euro, Indian Rupee, Philippine Peso, British Pound Sterling, and Japanese Yen.

dollar, such as the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso .

The financial statements of these foreign subsidiaries are translated into U.S.

dollars using period-end rates of exchange for assets and liabilities, and average rates for the period for revenues and expenses.

Translation gains and losses that arise from translating assets, liabilities, revenue and expenses of foreign operations are recorded in AOCL as a component of stockholders’

The accumulated foreign currency translation loss totaled $ 72.3 million and $ 48.0 million at August 

31, 2019 and 2018, respectively.

Translation gains and losses that arise from translating assets, liabilities, revenue and expenses of foreign operations are recorded in AOCL as a component of stockholders’ equity.

The accumulated foreign currency translation loss totaled $ 37.7 million and $ 72.3 million at August 31, 2020 and 2019, respectively.

Income and Deferred Taxes

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Interest is classified as income tax expense in the financial statements.

As of August 

31, 2019, the Company had gross unrecognized tax benefits totaling $ 10.9 million, including $ 1.1 million of accrued interest, recorded as Taxes payable (non-current) on the Consolidated Balance Sheets.

As of August 31, 2020, the Company had gross unrecognized tax benefits totaling $ 12.3 million, including $ 0.9 million of accrued interest, recorded as Taxes payable (non-current) on the Consolidated Balance Sheets.

Stock-Based Compensation

Accounting guidance requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including stock options, restricted stock and common shares acquired under employee stock purchases based on estimated fair values of the share awards that are scheduled to vest during the period.

Accounting guidance requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including stock options, restricted stock, performance share units, and common shares acquired under employee stock purchases based on estimated fair values of the share awards that are scheduled to vest during the period.

FactSet uses the straight-line attribution method for all awards with graded vesting features and service conditions only.

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Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Forfeitures are estimated based primarily on historical experience.

For fiscal 2019 and 2018, windfall tax benefits, defined as tax deductions that exceed recorded stock-based compensation, are classified as cash inflows from operations and in fiscal 2017 are classified as cash inflows from financing activities.

Performance-based stock options require management to make assumptions regarding the likelihood of achieving Company performance targets on a quarterly basis.

The number of performance-based options that vest will be predicated on the Company achieving certain performance levels.

A change in the financial performance levels the Company achieves could result in changes to FactSet’s current estimate of the vesting percentage and related stock-based compensation.

Forfeitures are estimated based primarily on historical experi ence.

Windfall tax benefits, defined as tax deductions that exceed recorded stock-based compensation, are classified as cash inflows from operations.

Performance-based options and performance share units require management to make assumptions regarding the likelihood of achieving Company performance targets on a quarterly basis.

The number of performance-based options and performance share units that vest will be predicated on the Company achieving certain performance levels.

A change in the financial performance levels the Company achieves could result in changes to FactSet’s current estimate of the vesting percentage and related stock-based compensation.

Treasury Stock

The Company accounts for repurchased common stock under the cost method and includes such treasury stock as a component of its stockholders’

The Company accounts for the formal retirement of treasury stock by deducting its par value from common stock, reducing additional paid-in capital (“APIC”) by the average amount recorded in APIC when the stock was originally issued and any remaining excess of cost deducted from retained earnings.

Operating Leases

The Company conducts all of its operations in leased facilities which have minimum lease obligations under non-cancelable operating leases.

Certain of these leases contain rent escalations based on specified percentages.

Most of the leases contain renewal options and require payments for taxes, insurance and maintenance.

Rent expense is charged to operations as incurred except for escalating rents, which are charged to operations on a straight-line basis over the life of the lease.

Lease incentives, relating to allowances provided by landlords, are amortized over the term of the lease as a reduction of rent expense.

Costs associated with acquiring a subtenant, including broker commissions and tenant allowances, are amortized over the sublease term as a reduction of sublease income.

The Company accounts for repurchased common stock under the cost method and includes such treasury stock as a component of its Stockholders’ equity.

The Company accounts for the formal retirement of treasury stock by deducting its par value from common stock, reducing additional paid-in capital ("APIC") by the average amount recorded in APIC when the stock was originally issued and any remaining excess of cost deducted from retained earnings.

FactSet adopted the standard, ASC 842-10, Leases ("ASC 842") as of September 1, 2019, using a modified retrospective approach.

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

FactSet reviews new arrangements at inception to evaluate whether the Company obtains substantially all the economic benefits of and has the right to control the use of an asset.

If FactSet determines that an arrangement qualifies as a lease, with a lease term of greater than one year, the Company records a lease ROU asset and lease liability at the lease commencement date.

As there is no rate implicit in the Company’s operating lease arrangements, these balances are initially recorded as the present value of the future minimum lease payments, (including fixed lease payments and certain qualifying index-based variable payments) over the lease term, using FactSet’s incremental borrowing rate ("IBR") within the geography where the leased asset is located.

As FactSet does not have any outstanding public debt, the Company estimates the IBR based on FactSet’s estimated credit rating and available market information.

The IBR is determined at lease commencement and subsequently reassessed upon a modification to the lease arrangement.

Certain adjustments to our lease ROU assets may be required for items such as initial direct costs paid or incentives received.

FactSet elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one single lease component, which we recognize over the expected term on a straight-line expense basis in occupancy costs (a component of SG&A expense).

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

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

Business Combinations

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The amounts and useful lives assigned to acquisition-related tangible and intangible assets impact the amount and timing of future amortization expense.

Determining the fair value of assets acquired and liabilities assumed and the expected useful life, requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items.

Determining the fair value of assets acquired and liabilities assumed and the expected useful life requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items.

Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.

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New Accounting Standards or Updates Recently Adopted

As of the beginning of fiscal 2019, FactSet 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 last three fiscal years that had a material impact on the consolidated financial statements.

Revenue Recognition

In May 2014 and July 2015, the FASB issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with clients and superseded most current revenue recognition guidance, including industry-specific guidance.

The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services.

The new guidance also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients.

The standard allows two methods of adoption:

i) retrospectively to each prior period presented ("full retrospective method"), or ii) retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption ("modified retrospective method"). FactSet adopted the new standard using the modified retrospective method as of the beginning of its first quarter of fiscal 2019.

FactSet’s implementation efforts include the evaluation of contract revenue under the new guidance.

Additionally, an assessment of the qualitative and quantitative impacts of pricing changes during the contractual term and fulfillment costs was made.

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 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.

FactSet recorded an opening cumulative increase to retained earnings of $ 2.5 million, or $ 2.0 million net of tax, during the first quarter of fiscal 2019, related to certain fulfillment costs, which include up-front costs to allow for the delivery of services and products that are expected to be recovered.

Under the new standard, such up-front costs are recognized as an asset and amortized consistent with the associated revenue for providing the services.

The adoption of the new standards did not materially change the Company’s accounting policy for revenue recognition and did not have a material impact on the Company’s consolidated financial statements.

Refer to Note 4 Revenue Recognition for further details.

Recognition and Measurement of Financial Assets and Financial Liabilities

During the first quarter of fiscal 2019, FactSet adopted the accounting standard update issued by the FASB in January 2016, which amended the recognition, measurement, presentation, and disclosure of certain financial instruments.

Under the amended guidance, investments in equity securities, excluding equity method investments, will be measured at fair value with changes in fair value to be recognized in net income.

This guidance was applied on a modified retrospective approach through a cumulative effect adjustment to retained earnings as permitted by the standard and did not have a material impact on the Company’s consolidated financial statements.

Cash Flow Simplification

During the first quarter of fiscal 2019, FactSet adopted the accounting standard update issued by the FASB in August 2016, which simplified how certain transactions are classified in the statement of cash flows.

This included revised guidance on the cash flow classification of debt prepayments and debt extinguishment costs, contingent consideration payments made after a business combination and distributions received from equity method investments.

The guidance is intended to reduce diversity in practice across all industries.

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

Income Taxes on Intra-Entity Transfers of Assets

During the first quarter of fiscal 2019, FactSet adopted the accounting standard update issued by the FASB in October 2016, which removed the prohibition against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory.

The guidance was issued in order to reduce diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property.

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

Share-Based Payments

During the first quarter of fiscal 2019, FactSet adopted the accounting standard update issued by the FASB in May 2017, which amended the scope of modification accounting for share-based payment arrangements.

The guidance focused on changes to the terms or conditions of share-based payment awards that would require the application of modification accounting and specifies that an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification.

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

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

During the first quarter of fiscal 2019, FactSet adopted the accounting standard update issued by the FASB in February 2018, which allowed companies to reclassify certain stranded income tax effects resulting from the enactment of the Tax Cuts and Jobs Act (the "TCJA") from accumulated other comprehensive income to retained earnings.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Implementation Costs in a Cloud Computing Arrangement

During the first quarter of fiscal 2019, FactSet adopted the accounting standard update issued by the FASB in August 2018, which related to a client’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

This guidance aligns the requirements for capitalizing implementation costs in a cloud computing service contract with the guidance for capitalizing implementation costs to develop or obtain internal-use software.

Capitalized implementation costs will be amortized over the term of the arrangement.

This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021, however the Company elected to early adopt this standard on a prospective basis during the first quarter of fiscal 2019.

There was no impact to the Company’s consolidated financial statements as a result of the adoption of this standard, as FactSet is currently accounting for costs incurred in a cloud computing arrangement in accordance with the guidance provided in this standard.

As of the beginning of fiscal 2020, FactSet 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 last three fiscal years that had a material impact on the Company's Consolidated Financial Statements, other than the new lease accounting standard discussed below.

Refer to Note 11, Leases for additional information.

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

The update requires the recognition of lease ROU assets and lease liabilities on the balance sheet and the disclosure of qualitative and quantitative information about leasing arrangements .

The guidance also eliminates the requirement for an entity to use bright-

line tests in determining lease classification.

FactSet adopted the new accounting standard effective September 1, 2019, using a modified retrospective approach to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption, rather than in the earliest comparative period presented.

As such, the Company's historical Consolidated Financial Statements were not restated and follow the Company's previous policy under ASC 840, Leases .

Refer to FactSet’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019 for further details of the Company’s policy prior to adoption of ASC 842.

FactSet elected the package of practical expedients permitted under the transition guidance, which permits the Company not to reassess the prior conclusions about lease identification, lease classification, and initial direct costs.

FactSet did not elect the use-of-hindsight practical expedient in determining the lease term and in assessing impairment.

FactSet elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one single lease component.

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

FactSet will recognize lease payments on a straight-line basis over the lease term.

As of November 30, 2019, the Company recognized Lease ROU assets, net of amortization of $ 217.0 million and corresponding Current and Long-term lease liabilities of $ 266.4 million, related primarily to the Company’s real estate leases.

There was no material impact to the Company’s Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and Consolidated Statement of Changes in Stockholders' Equity.

Refer to Note 11, Leases for more information regarding the Company's lease accounting.

Hedge Accounting Simplification

During the first quarter of fiscal 2020, FactSet adopted the accounting standard updated issued by the FASB in August 2017, which focused on reducing the complexity of and simplifying the application of hedge accounting.

The guidance refines and expands hedge accounting for both financial and nonfinancial risk components, eliminates the need to separately measure and report hedge ineffectiveness, and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

The adoption of this standard had no impact on the Company's Consolidated Financial Statements.

Recent Accounting Standards or Updates Not Yet Effective

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

The guidance introduces a lessee model that requires most leases to be reported on the balance sheet.

The accounting standard update aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard.

The guidance also eliminates the requirement in current GAAP for an entity to use bright-line tests in determining lease classification.

FactSet will adopt the new accounting standard effective September 1, 2019, using a modified retrospective approach to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption, rather than in the earliest comparative period presented.

As such, the Company's historical consolidated financial statements will not be restated.

FactSet will elect the package of practical expedients permitted under the transition guidance, which permits the Company not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs.

FactSet will not elect the use-of-hindsight practical expedient in determining the lease term and in assessing impairment.

FactSet will also elect the practical expedient to not separate lease components from non-lease components but, rather, to combine them into one single lease component.

The Company has also elected to apply the short-term lease exception to not recognize lease liabilities and right-of-use 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.

The Company does not expect the adoption of the new lease accounting standard to have a material impact on its Consolidated Statements of Income, Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash flows.

The Company does expect the adoption to have a material impact to its Consolidated Balance Sheet due to the recognition of the required right of use asset and liability, which will primarily relate to the Company's real estate operating leases.

Refer to Note 19 Commitments and Contingencies for information regarding the Company's undiscounted future lease commitments.

Credit Losses on Financial Instruments

In June 2016, the FASB issued an accounting standard that significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The standard will replace today’s “incurred loss”

approach with an “expected loss”

model for instruments measured at amortized cost.

This guidance will be effective for the Company beginning in the first quarter of fiscal 2021.

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

The standard will replace today’s "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost.

The guidance will be effective for the Company beginning in the first quarter of fiscal 2021.

The Company has evaluated the impact of this accounting standard update and has determined that its adoption will not have a material impact on the Company's Consolidated Financial Statements.

Goodwill Impairment Test

In January 2017, the FASB issued an accounting standard update which removes the requirement for companies to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted for any impairment tests performed after January 1, 2017 and is not expected to have a material impact on the consolidated financial statements.

Hedge Accounting Simplification

In August 2017, the FASB issued an accounting standard update to reduce the complexity of and simplify the application of hedge accounting.

This guidance will be effective for the Company beginning in the first quarter of fiscal 2020.

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

No other new accounting pronouncements issued or effective as of August 

31, 2019 have had or are expected to have an impact on the Company’s consolidated financial statements.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

The Company has evaluated the impact of this accounting standard update and has determined that its adoption will not have a material impact on the Company's Consolidated Financial Statements.

Income Tax Simplification

In December 2019, the FASB issued an accounting standard update to simplify various aspects related to accounting for income taxes, eliminating certain exceptions to the general principles in accounting for income taxes related to intraperiod tax allocation, simplifying when companies recognize deferred taxes in an interim period, and clarifying certain aspects of the current guidance to promote consistent application.

The guidance will be effective for the Company in the first quarter of fiscal 2022, with early adoption permitted.

Most amendments are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company is currently evaluating the potential impact of adopting the guidance on its 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 LIBOR.

As a result of the reference rate reform initiative, certain widely used reference rates such as LIBOR 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 LIBOR 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 August 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, portfolio analytics, enterprise data and research management.

The Company determined that 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.

Based on the nature of the services and products offered by FactSet, the Company applies an input time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform.

The Company records revenue for its contracts using the over-time revenue recognition model as a client is invoiced or performance in satisfied, which is comparable with how revenue is recognized today.

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.

In FactSet’s assessment of contracts with clients, the Company did identify a small portion of contracts with certain fulfillment costs, which include up-front costs to allow for the delivery of services and products that are expected to be recovered.

In connection with the adoption of the new standard, these fulfillment costs are recognized as an asset and amortized consistent with the associated revenue for providing the services, which prior to adoption were expensed.

As a result, during the first quarter of fiscal 2019, FactSet recorded an opening cumulative increase to Retained earnings of $ 2.5 million, or $ 2.0 million net of tax, with an offsetting increase related to the current asset portion in Prepaid expenses and other current assets and the non-current asset portion in Other assets based on the term of the license period.

Prospectively, fulfillment costs will continue to be recognized in the same accounts used for the adoption impact, which include the Prepaid expenses and other current assets account for the current portion and Other assets for the non-current portion, based on the term of the license period.

The differences between the Company’s reported operating results as of August 

31, 2019, which reflect the application of the new standard on the Company’s contracts, and the results that would have been reported as if the accounting was performed pursuant to the accounting standards previously in effect, were not material.

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 as a performance obligation for clients with contractual terms that are one year or less and the Company has elected the practical expedient.

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.

In connection with the adoption of the revenue recognition standard, fulfillment costs are recognized as an asset, recorded in the Prepaid expenses and other current assets account for the current portion and Other assets for the non-current portion, based on the term of the license period, and amortized consistent with the associated revenue for providing the services.

There are no significant judgments that would impact the timing of revenue recognition.

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Disaggregated Revenue

The Company disaggregates revenue from contracts with clients by demographic region which include U.S., Europe and Asia Pacific.

FactSet believes these geographic regions are reflective of how the Company manages the business and the demographic markets in which it serves.

The geographic regions best depict the nature, amount, timing and uncertainty of revenue and cash flows related to contracts with clients.

The Company disaggregates revenue from contracts with clients by geographic region, which includes the Americas , EMEA and Asia Pacific.

FactSet believes these regions are reflective of how the Company manages the business and the markets in which it serves.

These regions best depict the nature, amount, timing and uncertainty of revenue and cash flows related to contracts with clients.

Refer to Note 18, Segment Information for further information on revenue by geographic region.

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(in thousands)

2020 2019 2018

$ 929,444 $ 894,554 $ 841,908

$ 422,203 $ 408,084 $ 387,589

$ 142,464 $ 132,713 $ 120,648

Total Revenue

$ 1,494,111 $ 1,435,351 $ 1,350,145

FAIR VALUE MEASURES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible.

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There are three levels of inputs that may be used to measure fair value based on the reliability of inputs.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.

FactSet has categorized its cash equivalents, investments and derivatives within the fair value hierarchy as follows:

Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

These Level 1 assets and liabilities include FactSet’s corporate money market funds that are classified as cash equivalents.

These Level 1 assets and liabilities include the Company's corporate money market funds that are classified as cash equivalents.

Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets;

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or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

The Company’s certificates of deposit, mutual funds and derivative instruments are classified as Level 2.

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 FactSet as of August 

31, 2019 or 2018.

(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 August 

31, 2019 and 2018:

Fair Value Measurements at August 31, 2019

(in thousands)  

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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 August 31, 2020 and 2019.

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

(in thousands) Fair Value Measurements at August 31, 2020

Level 1 Level 2 Level 3 Total

Corporate money market funds (1)

$ 276,852 $ — $ — $ 276,852

Mutual Funds (2)

— 17,257 — 17,257

Certificates of deposit (3)

— 2,315 — 2,315

Derivative instruments (4)

— 3,644 — 3,644

Total assets measured at fair value $ 276,852 $ 23,216 $ — $ 300,068

Derivative instruments (4)

$ — $ 5,773 $ — $ 5,773

Total liabilities measured at fair value $ — $ 5,773 $ — $ 5,773

Fair Value Measurements at August 31, 2018

(in thousands)  

(in thousands) Fair Value Measurements at August 31, 2019

Level 1 Level 2 Level 3 Total

Corporate money market funds (1)

$ 75,849 $ — $ — $ 75,849

Mutual Funds (2)

— 18,583 — 18,583

Certificates of deposit (3)

— 7,090 — 7,090

Derivative instruments (4)

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Derivative instruments (4)

$ — $ 3,575 $ — $ 3,575

Total liabilities measured at fair value $ — $ 3,575 $ — $ 3,575

The Company’s corporate money market funds are readily convertible into cash and the net asset value of each fund on the last day of the quarter is used to determine its fair value.

As such, the Company’s corporate money market funds are classified as Level 1 assets and included in Cash and cash equivalents within the Consolidated Balance Sheets.

The Company’s mutual funds have a fair value based on the fair value of the underlying investments held by the mutual funds allocated to each share of the mutual fund using a net asset value approach.

(1) The Company’s corporate money market funds are readily convertible into cash and the net asset value of each fund on the last day of the quarter is used to determine its fair value.

As such, the Company’s corporate money market funds are classified as Level 1 assets and included in Cash and cash equivalents within the Consolidated Balance Sheets.

(2) The Company’s mutual funds have a fair value based on the fair value of the underlying investments held by the mutual funds, allocated to each share of the mutual fund using a net asset value approach.

The fair value of the underlying investments is based on observable inputs.

As such, the Company’s mutual funds are classified as Level 2 assets and are classified as Investments (short-term) on the Consolidated Balance Sheets.

The Company’s certificates of deposit held for investment are not debt securities and are classified as Level 2 assets.

As such, the Company’s mutual funds are classified as Level 2 and are classified as Investments (short-term) on the Consolidated Balance Sheets.

(3) The Company’s certificates of deposit held for investment are not debt securities and are classified as Level 2 assets.

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 derivative 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 therefore are classified as Level 2 assets.

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

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

Certain assets, including goodwill and intangible assets, and liabilities, are measured at fair value on a non-recurring basis;

that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances such as when they are deemed to be other-than-temporarily impaired.

(4) The Company utilizes the income approach to measure fair value for its 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.

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.

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

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, operating lease assets, goodwill and intangible assets.

The fair values of these non-financial assets and liabilities are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparable information, and discounted cash flow projections.

An impairment charge is recorded when the cost exceeds its fair value, based upon the results of such valuations.

During fiscal 2019 and 2018, no fair value adjustments or material fair value measurements were required for the Company’s non-financial assets or liabilities.

As of August 

31, 2019, and 2018, 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.

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 the carrying amount may not be recoverable.

During fiscal 2020 and 2019, no fair value adjustments or material fair value measurements were required for the Company’s non-financial assets or liabilities.

Assets and Liabilities Measured at Fair Value for Disclosure Purposes Only

As of each of August 31, 2020 and 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 LIBOR 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 the Euro, Indian Rupee, Philippine Peso, British Pound Sterling, and Japanese Yen.

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

in several currencies including th e 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.

The Company does not enter into foreign currency forward contracts for trading or speculative purposes.

See Note 19, Commitments and Contingencies - Concentration of Credit Risk, for further discussion on counterparty credit risk.

Refer to Note 19, Risks and Concentrations of Credit Risk , for further discussion on counterparty credit risk.

In designing a specific hedging approach, FactSet considered several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge.

The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements.

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 fiscal 2019 or 2018, 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 August 

31, 2019, FactSet maintained the following foreign currency forward contracts to hedge its exposures:

Philippine Peso –

foreign currency forward contracts to hedge approximately 75 % of its Philippine Peso exposure through the fourth quarter of fiscal 2020.

Indian Rupee –

foreign currency forward contracts to hedge approximately 50 % of its Indian Rupee exposure through the end of the third quarter of fiscal 2020, and 25 % of its Indian Rupee exposure through the fourth quarter of fiscal 2020.

Euro –

foreign currency forward contracts to hedge approximately 75 % of its Euro exposure through the first quarter of fiscal 2020, 50 % of its Euro exposure from the second quarter through the third quarter of fiscal 2020, and 25 % of its Euro exposure through the fourth quarter of fiscal 2020.

British Pound Sterling –

foreign currency forward contracts to hedge approximately 75 % of its British Pound sterling exposure through the first quarter of fiscal 2020, 50 % of its British Pound Sterling exposure from the second quarter through the third quarter of fiscal 2020, and 25 % of its British Pound Sterling exposure through the fourth quarter of fiscal 2020.

The following is a summary of all hedging positions and corresponding fair values:

Currency Hedged

Gross Notional Value

Fair Value (Liability) Asset

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

There was no discontinuance of cash flow hedges during 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 August 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 25 % to 75 % over their respective hedged periods.

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

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

dollars was ₱ 1.3 billion and Rs 1.4 billion, respectively.

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

dollars with Euros and British Pound Sterling was € 31.8 million and £ 36.4 million, respectively.

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 12, Debt ).

As of August 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 plus a spread using a debt leverage pricing grid, which was 0.875 % as of August 31, 2020 .

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

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 utilized to calculate the interest expense from the 2019 Revolving Credit Facility.

The interest rate swap agreement matures on March 29, 2024.

Refer to Note 12, 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:

(in thousands, in U.S.

dollars)  

August 31, 2019

August 31, 2018

Gross Notional Value

August 31, 2020

August 31, 2019

Philippine Peso

British Pound Sterling

As of August 

31, 2019, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S.

dollars was ₱

1.4 billion and Rs.

1.4 billion, respectively.

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

dollars with Euros and British Pound Sterling was €

35.7 million and £

20.5 million, respectively.

Fair Value of Derivative Instruments

The following tables provide a summary of the fair value amounts of derivative instruments and gains and losses on derivative instruments:

Designation of Derivatives

(in thousands)

Balance Sheet Location

Derivatives designated as hedging instruments

Foreign currency forward contracts $ 129,649 $ 113,700

Prepaid expenses and other current assets

Liabilities :

Foreign Currency Forward Contracts

Accounts payable and accrued expenses

Deferred rent and other non-current liabilities

All derivatives were designated as hedging instruments as of August 

31, 2019 and 2018, respectively.

Interest rate swap agreement 287,500 —

Total cash flow hedges $ 417,149 $ 113,700

Fair Value of Derivative Instruments

The following is a summary of the fair values of the derivative instruments:

Fair Value of Derivative Instruments

Derivatives designated as hedging instruments Derivative Assets Derivative Liabilities

August 31, August 31,

2020 2019 2020 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 $ 3,644 $ 520 Accounts payable and accrued expenses $ 93 $ 3,575

Interest rate swap agreement Prepaid expenses and other current assets — — Accounts payable and accrued expenses 1,861 —

Other assets — — Other non-current liabilities 3,819 —

Total cash flow hedges $ 3,644 $ 520 $ 5,773 $ 3,575

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

Derivatives in Cash Flow Hedging Relationships

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the each of the three fiscal years ended August 

31, 2019, 2018 and 2017:

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the each of the three fiscal years ended August 31, 2020, 2019 and 2018:

(in thousands)

(Loss) Gain Recognized

Gain (Loss) Recognized

in AOCL on Derivatives

(Effective Portion)

Location of (Loss)

Gain Reclassified

Location of (Loss) Gain Reclassified

(Effective Portion)

(Loss) Gain Reclassified

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Derivatives in Cash Flow Hedging Relationships

(Effective Portion)

Foreign currency forward contracts

No amount of ineffectiveness was recorded in the Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

As of August 

31, 2019, FactSet estimates that $ 3.1 million of net derivative losses related to its cash flow hedges included in AOCL will be reclassified into earnings within the next 12 months.

2020 2019 2018 2020 2019 2018

Foreign currency forward contracts $ 5,049 $ ( 187 ) $ ( 7,700 ) SG&A $ ( 1,556 ) $ ( 1,794 ) $ 3,106

Interest rate swap agreement $ ( 6,138 ) $ — $ — Interest expense, net $ ( 458 ) $ — $ —

Total cash flow hedges $ ( 1,089 ) $ ( 187 ) $ ( 7,700 ) $ ( 2,014 ) $ ( 1,794 ) $ 3,106

As of August 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 August 31, 2020 , the Company estimates that net pre-tax derivative gains of $ 1.7 million included in AOCL will be reclassified into earnings within the next 12 months.

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 August 

31, 2019 and 2018, 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 during the fiscal years ended August 

31, 2019, 2018 and 2017 are as follows:

August 31, 2019

August 31, 2018

August 31, 2017

(in thousands)

Foreign currency translation adjustments

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

Other comprehensive (loss) i ncome

The components of AOCL are as follows:

(in thousands)

August 31, 2019

August 31, 2018

Accumulated unrealized losses on cash flow hedges, net of tax

Accumulated foreign currency translation adjustments

Total accumulated other comprehensive loss

SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that have the following characteristics:

(i) it engages in business activities from which they may earn revenues and incur expenses, (ii) its operating results are regularly reviewed by the company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) its discrete financial information is available.

Executive management, along with the CEO, constitute FactSet’s chief operating decision making group (“CODMG”).

Executive management consists of certain executives who directly report to the CEO, consisting of the Chief Financial Officer, Chief Technology and Product Officer, Global Head of Sales and Client Solutions, General Counsel, Chief Human Resources Officer and Head of Analytics and Trading.

The CODMG reviews financial information at the operating segment level and is responsible for making decisions about resources allocated amongst the operating segments based on actual results.

The Company's operating segments are aligned with how the Company, including its CODMG, manages the business and the demographic markets in which it serves.

The Company’s internal financial reporting structure is based on three segments:

the U.S., Europe and Asia Pacific.

The Company believes this alignment helps to better manage the business and view the markets it serves, which are centered on providing integrated global financial and economic information.

Sales, consulting, data collection, product development and software engineering are the primary functional groups within the U.S., Europe and Asia Pacific segments.

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

segment serves investment professionals including financial institutions throughout the Americas.

The Europe and Asia Pacific segments serve investment professionals located throughout Europe and Asia Pacific, respectively.

Segment revenue reflects direct sales to clients based in their respective geographic locations.

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.

Expenditures associated with the Company’s data centers, third -party data costs and corporate headquarters charges are recorded by the U.S.

segment and are not allocated to the other segments.

The content collection centers located in India, the Philippines, and Latvia, benefit all the Company’s operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenue.

The following reflects the results of operations of the segments, consistent with the Company’s management structure.

These results are used, in part, by management, both in evaluating the performance of, and in allocating resources to, each of the segments.

(in thousands)

Year Ended August 31, 2019

Revenue from clients

Segment operating profit

Depreciation and amortization

Stock-based compensation

Capital expenditures

Year Ended August 31, 2018

Revenue from clients

Segment operating profit

Depreciation and amortization

Stock-based compensation

Capital expenditures

Year Ended August 31, 2017

Revenue from clients

Segment operating profit

Depreciation and amortization

Stock-based compensation

Capital expenditures

GEOGRAPHIC INFORMATION - The following table sets forth information for those countries that are 10% or more of revenue:

Years ended August 31,

(in thousands)  

United States

United Kingdom

All other European countries

Total revenue

Revenue is attributed to countries based on the location of the client.

The following table sets forth long-lived assets by geographic area:

At August 31,

(in thousands)  

Long-lived Assets (1)

United States

United Kingdom

All other European countries

Total long-lived assets

Long-lived assets consist of property, equipment and leasehold improvements, net of accumulated depreciation and amortization and exclude goodwill, intangible assets, deferred taxes and other assets.

BUSINESS COMBINATIONS

On March 17, 2017, FactSet acquired BI-SAM Technologies (“BISAM”) for a total purchase price of $ 217.6 million.

BISAM is a global provider of portfolio performance and attribution, multi-asset risk, GIPS composites management and reporting.

BISAM’s product offerings include B-One, BISAM’s cross-asset solution, which will serve as a complement to both FactSet’s portfolio analytics suite and client reporting solutions, and Cognity, which enhances FactSet’s risk analysis for derivatives and quantitative portfolio construction.

These factors contributed to a purchase price in excess of fair value of BISAM’s net tangible and intangible assets, leading to the recognition of goodwill.

At the time of acquisition, BISAM employed over 160 employees based primarily in its New York, Boston, Paris, London and Sofia offices.

Total transaction costs of $ 3.2 million were recorded within Selling, General and Administrative (“SG&A”) expenses in the Consolidated Statements of Income during fiscal 2017.

The total purchase price of $217.6 million was allocated to BISAM’s net tangible and intangible assets based upon their estimated fair value as of the date of acquisition.

The allocation included $ 27.6 million to tangible assets and $ 56.6 million to amortizable intangible assets consisting of client relationships, amortized over 16 years using an accelerated amortization method;

software technology, amortized over five years using a straight-line amortization method;

and a trade name, amortized over four years using a straight-line amortization method.

Goodwill totaling $ 173.9 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

Goodwill generated from the BISAM acquisition is included in the US and European segments and is not deductible for income tax purposes.

The results of operations of BISAM have been included in the Company’s Consolidated Statements of Income since the completion of the acquisition on March 17, 2017.

Pro forma information has not been presented because the effect of the BISAM acquisition is not material to the Company’s consolidated financial results.

On November 8, 2016, FactSet acquired Vermilion Holdings Limited (“Vermilion”) for a total purchase price of $ 67.9 million.

Vermilion is a global provider of client reporting and communications solutions and services to the financial services industry.

Client reporting is a growing area of the market as regulatory requirements rise and with the acquisition of Vermilion and its Vermilion Reporting Suite (“VRS”), FactSet now offers a workflow around all elements of the client reporting process, which it expects will expand as investors grow increasingly sophisticated.

This factor contributed to a purchase price in excess of fair value of Vermilion’s net tangible and intangible assets, leading to the recognition of goodwill.

At the time of acquisition, Vermilion employed 59 individuals in its London, Boston and Singapore offices.

Total transaction costs related to the acquisition were $ 0.7 million in fiscal 2017 and recorded within SG&A expenses in the Consolidated Statements of Income during fiscal 2017.

The total purchase price of $67.9 million was allocated to Vermilion’s net tangible and intangible assets based upon their estimated fair value as of the date of acquisition.

The allocation included $ 8.0 million to tangible assets and $ 18.2 million to intangible assets, consisting of client relationships, amortized over 15 years using an accelerated amortization method;

software technology, amortized over six years using a straight-line amortization method;

non-compete agreements, amortized over three years using a straight-line amortization method;

and a trade name, amortized over four years using a straight-line amortization method.

Goodwill totaling $ 51.2 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

Goodwill generated from the Vermilion acquisition is included in the European segment and is not deductible for income tax purposes.

The results of operations of Vermilion have been included in the Company’s Consolidated Statements of Income since the completion of the acquisition on November 8, 2016.

Pro forma information has not been presented because the effect of the Vermilion acquisition is not material to the Company’s consolidated financial results.

Changes in the carrying amount of goodwill by segment for fiscal years ended August 

31, 2019 and 2018 are as follows:

(in thousands)

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

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

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

(in thousands) August 31,

Leasehold improvements $ 182,899 $ 155,520

Computers and related equipment 127,794 129,549

Furniture and fixtures 56,269 48,986

Subtotal $ 366,962 $ 334,055

Less accumulated depreciation and amortization ( 233,860 ) ( 214,671 )

Property, equipment and leasehold improvements, net $ 133,102 $ 119,384

Depreciation expense was $ 32.2 million, $ 35.4 million and $ 32.6 million for fiscal years 2020, 2019 and 2018, respectively.

Changes in the carrying amount of goodwill by segment for fiscal years ended August 31, 2020 and 2019 are as follows:

(in thousands) Americas EMEA Asia Pacific Total

Balance at August 31, 2018 $ 386,195 $ 312,694 $ 2,944 $ 701,833

Acquisitions and other adjustments

Foreign currency translations — ( 16,235 ) 131 ( 16,104 )

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At least annually, the Company is required to test goodwill at the reporting unit level for potential impairment, and, if impaired, write down to fair value based on the present value of discounted cash flows.

The Company’s reporting units evaluated for potential impairment were the U.S., Europe and Asia Pacific, which reflect the level of internal reporting the Company uses to manage its business and operations.

The Company’s reporting units evaluated for potential impairment were the Americas, EMEA and Asia Pacific, which reflect the level of internal reporting the Company uses to manage its business and operations.

The three reporting units are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries within each operating segment.

1 unchanged sentence

INTANGIBLE ASSETS

The weighted average useful life of the Company’s intangible assets at August 

31, 2019 was 12.6 years.

FactSet’s identifiable intangible assets consist of acquired content databases, client relationships, acquired software technology, internally developed software, non-compete agreements and trade names resulting from previous acquisitions, which have been fully integrated into the Company’s operations.

The Company amortizes intangible assets over their estimated useful lives.

Data content intangible assets have estimated useful lives ranging from five to 20 years.

Client relationship intangible assets have estimated useful lives ranging from eight to 18 years.

Acquired software technology intangible assets have estimated useful lives ranging from three to nine years .

The majority of the developed software technology intangible assets has estimated useful lives ranging from three to five years .

Non-compete agreement intangible assets have estimated useful lives ranging from two to four years .

Trade name intangible assets have estimated useful lives ranging from four to seven years .

The weighted average useful life of the Company’s intangible assets at August 31, 2020 was 11.9 years.

The Company evaluates the intangible asset useful lives on an annual basis to determine whether events and circumstances warrant a revision to the remaining period of amortization.

There have been no material changes to the estimate of the remaining useful lives during fiscal years 2020, 2019 and 2018.

If indicators of impairment are present, amortizable intangible assets are tested for impairment comparing the carrying value to undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows.

The Company assesses the intangible assets for indicators of impairment on a quarterly basis.

If indicators of impairment are present, amortizable intangible assets are tested for impairment by comparing the carrying value to undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows.

No impairment of intangible assets has been identified during any of the periods presented.

The intangible assets have no assigned residual values.

The gross carrying amounts and accumulated amortization totals related to the Company’s identifiable intangible assets are as follows:

At August 31, 2019 (in thousands)

Gross Carrying

The gross carrying amounts and accumulated amortization totals related to the Company’s identifiable intangible assets are as follows:

At August 31, 2020 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Data content $ 35,872 $ 24,847 $ 11,025

Client relationships 100,316 43,026 57,290

Software technology

Acquired software technology 108,384 72,396 35,988

Internally developed software 30,276 13,689 16,587

Non-compete agreements 1,388 1,355 33

At August 31, 2018 (in thousands)

Gross Carrying

Trade names 4,106 3,934 172

Total $ 280,342 $ 159,247 $ 121,095

At August 31, 2019 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Data content $ 32,200 $ 21,512 $ 10,688

Client relationships 95,905 35,506 60,399

Software technology

Acquired software technology 105,426 56,965 48,461

Internally developed software 14,262 10,365 3,897

Non-compete agreements 1,311 1,228 83

Trade names 3,994 3,074 920

Total $ 253,098 $ 128,650 $ 124,448

Amortization expense recorded for intangible assets during fiscal years 2020, 2019 and 2018 was $ 25.4 million, $ 25.1 million and $ 24.7 million, respectively.

As of August 

31, 2019, estimated intangible asset amortization expense for each of the next five years and thereafter are as follows:

As of August 31, 2020, estimated intangible asset amortization expense for each of the next five years and thereafter are as follows:

Fiscal Year (in thousands)

Estimated Amortization Expense

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

(in thousands)  

Leasehold improvements

Computers and related equipment

Furniture and fixtures

Less accumulated depreciation and amortization

Property, equipment and leasehold improvements, net

Depreciation expense was $ 35.4 million, $ 32.6 million and $ 28.0 million for fiscal years 2019, 2018 and 2017, respectively.

COMMON STOCK AND EARNINGS PER SHARE

17, 2019, FactSet's Board of Directors approved a 12.5 % increase in the regular quarterly dividend from $ 0.64 to $ 0.72 per share.

Shares of common stock outstanding were as follows:

Years ended August 31,

(in thousands)  

Balance, beginning of year (September 1)

Common stock issued for employee stock plans

Repurchase of common stock from employees(1)

Repurchase of common stock under the share repurchase program

Repurchase of common stock under accelerated share repurchase agreement

Balance, end of year (August 31)

For fiscal 2019, 2018 and 2017, the Company repurchased 31,644 , 8,070 and 49,771 shares, or $ 7.2 million, $ 1.5 million and $ 7.8 million, of common stock, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock.

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

(in thousands, except per share data)

Weighted Average Common Shares

(Denominator)

For the year ended August 31, 2019

Income available to common stockholders

Dilutive effect of stock options and restricted stock

Income available to common stockholders plus assumed conversions

For the year ended August 31, 2018

Income available to common stockholders

Dilutive effect of stock options and restricted stock

Income available to common stockholders plus assumed conversions

For the year ended August 31, 2017

Income available to common stockholders

Dilutive effect of stock options and restricted stock

Income available to common stockholders plus assumed conversions

Dilutive potential common shares consist of stock options and unvested restricted stock awards.

There were 11,481 stock options excluded from the fiscal 2019 calculation of diluted EPS, because their inclusion would have been anti-dilutive.

There were no stock options excluded from the fiscal 2018 calculation of diluted EPS and there were 704,786 stock options excluded from the fiscal 2017 calculations of diluted EPS, because their inclusion would have been anti-dilutive.

There were no performance-based stock options excluded from the calculation of diluted EPS for fiscal 2019.

As of August 

31, 2018 and 2017, the number of performance-based stock options excluded from the calculation of diluted EPS was 249,443 and 415,061 , respectively.

Performance-based stock options are omitted from the calculation of diluted EPS until the performance criteria is considered probable of being achieved.

STOCKHOLDERS’

Preferred Stock

At August 

31, 2019 and 2018, there were 10,000,000 shares of preferred stock ($ 0.01 par value per share) authorized, of which no shares were issued and outstanding.

FactSet’s Board of Directors may from time to time authorize the issuance of one or more series of preferred stock and, in connection with the creation of such series, determine the characteristics of each such series including, without limitation, the preference and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of the series.

At August 

31, 2019 and 2018, there were 150,000,000 shares of common stock ( $ 0.01 par value per share) authorized, of which 40,104,192 and 39,264,849 shares were issued, respectively.

The authorized shares of common stock are issuable for any proper corporate purpose, including future stock splits, stock dividends, acquisitions, raising equity capital or to adopt additional employee benefit plans.

Treasury Stock

On January 31, 2018, FactSet retired 13,292,689 shares of treasury stock.

These retired shares are now included in the Company’s pool of authorized but unissued shares.

The retired treasury stock was initially recorded using the cost method and had a carrying value of $ 1.7 billion at January 31, 2018.

The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock ($ 0.1 million), reduce additional paid-in capital (“APIC”) by the average amount recorded in APIC when stock was originally issued ($ 186.7 million) and any remaining excess of cost as a reduction to retained earnings ($ 1.5 billion).

As of August 

31, 2019, and August 

31, 2018, there were 1,986,352 and 1,072,263 shares of treasury stock (at cost) outstanding, respectively.

Share Repurchase Program

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

During fiscal 2019, the Company repurchased 882,445 shares for $ 213.1 million compared to 1,534,398 shares for $ 302.4 million in fiscal 2018.

On June 24, 2019, the Board of Directors of FactSet approved a $ 210.0 million expansion of the existing share repurchase program.

Subsequent to this expansion, $ 238.6 million remains authorized for future share repurchases as of August 

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.

Restricted Stock

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

During fiscal 2019, previously granted restricted stock awards of 85,401 shares vested and were included in common stock outstanding as of August 

31, 2019 (recorded net of 31,644 shares repurchased from employees at a cost of $ 7.2 million to cover their cost of taxes upon vesting of the restricted stock).

During fiscal 2018, 26,599 shares of previously granted restricted stock awards vested and were included in common stock outstanding as of August 

31, 2018 (recorded net of 8,070 shares repurchased from employees at a cost of $ 1.5 million to cover their cost of taxes upon vesting of the restricted stock).

The Company’s Board of Directors declared the following dividends on our common stock during the periods presented:

Dividends per

(in thousands)

First Quarter

November 30, 2018

December 18, 2018

Second Quarter

February 28, 2019

March 19, 2019

Third Quarter

June 18, 2019

Fourth Quarter

August 30, 2019

September 19, 2019

First Quarter

November 30, 2017

December 19, 2017

Second Quarter

February 28, 2018

March 20, 2018

Third Quarter

June 19, 2018

Fourth Quarter

August 31, 2018

September 18, 2018

All the above cash dividends were paid from existing cash resources.

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

EMPLOYEE STOCK OPTION AND RETIREMENT PLANS

Stock Options Awards

The FactSet Research Systems Inc.

Stock Option and Award Plan, as amended and restated (the “Long Term Incentive Plan”

or “LTIP”) provides for the grant of share-based awards, including stock options and restricted stock awards to employees of FactSet.

The expiration date of the Long Term Incentive Plan is December 19, 2027.

Stock options granted under the LTIP expire not more than ten years from the date of grant and the majority vest ratably over a period of five years .

Options become vested and exercisable provided the employee continues employment with the Company through the applicable vesting date and remain exercisable until expiration or cancellation.

Options are not transferable or assignable other than by will or the laws of descent and distribution.

During the grantee’s lifetime, the options may be exercised only by the grantee.

As of August 

31, 2019, a total of 2,524,304 stock options were outstanding at a weighted average exercise price of $ 168.50 .

Unamortized stock-based compensation of $ 80.4 million is expected to be recognized as stock-based compensation expense over the remaining weighted average vesting period of 3.0 years.

Stock Option Activity

In fiscal years 2019, 2018 and 2017, FactSet granted 502,139 , 610,628 and 1,026,984 stock options, respectively.

These stock options have a weighted average exercise price of $ 223.68 , $ 190.65 and $ 157.09 to existing employees of the Company, respectively.

A summary of stock option activity is as follows:

Number Outstanding

Weighted Average

Exercise Price Per Share

Balance at August 31, 2016

Granted –

non performance-based

Granted –

performance-based

Granted –

non-employee Directors grant

Balance at August 31, 2017

Granted –

non performance-based

Granted –

performance-based

Granted –

non-employee Directors grant

Balance at August 31, 2018

Granted –

non performance-based

Granted –

non-employee Directors grant

Balance at August 31, 2019

Stock Options Outstanding and Exercisable

The following table summarizes ranges of outstanding and exercisable options as of August 

31, 2019 (in thousands, except per share data and the weighted average remaining years of contractual life):

Range of Exercise

Prices Per Share

Total Fiscal 2019

The following table summarizes outstanding and exercisable options as of August 

31, 2018 and 2017 (in thousands, except the weighted average exercise price per share):

August 31, 2018

August 31, 2017

Exercise Price

Outstanding at fiscal year end

Exercisable at fiscal year end

The total number of in-the-money options exercisable as of August 

31, 2019 was 0.9 million with a weighted average exercise price $ 139.32 .

The aggregate intrinsic value of in-the-money stock options exercisable at August 

31, 2019 and 2018 was $ 116.1 million and $ 105.3 million, respectively.

The aggregate intrinsic value represents the difference between the Company’s closing stock price as of August 

31, 2019 of $ 272.09 and the exercise price, multiplied by the number of options exercisable as of that date.

The weighted average remaining contractual life of stock options exercisable at August 

31, 2019 and 2018 was 5.3 years and 5.6 years, respectively.

The total pre-tax intrinsic value of stock options exercised during fiscal 2019, 2018 and 2017 was $ 73.0 million, $ 50.1 million and $ 38.0 million, respectively.

Performance-based Equity Awards

Performance-based equity awards, whether in the form of stock options or restricted stock, require management to make assumptions regarding the likelihood of achieving Company performance targets.

The number of performance-based awards that vest will be predicated on the Company achieving performance levels during the measurement period subsequent to the date of grant.

Dependent on the financial performance levels attained by FactSet, a percentage of the performance-based awards will vest to the grantees.

However, there is no current guarantee that such awards will vest in whole or in part.

June 2017 Performance-based Option Grant Review

In connection with the acquisition of BISAM, FactSet granted 206,417 performance-based stock options in June 2017.

These performance-based options were scheduled to vest 40 % on the second anniversary date of the grant and 20 % on each subsequent anniversary date, if certain BISAM revenue and operating income targets were achieved by March 31, 2019.

In the third quarter of fiscal 2019, it was determined that the performance criteria were not achieved by March 31, 2019, and, as such, the options were forfeited, and no stock-based compensation expense was recorded for this performance-based option grant for fiscal 2019.

Restricted Stock and Stock Unit Awards

The Company’s Option Plan plans permit the issuance of restricted stock and restricted stock units.

Restricted stock awards are subject to continued employment over a specified period.

Restricted Stock and Stock Unit Awards Activity

In fiscal years 2019, 2018 and 2017, FactSet granted 73,047 , 3,497 and 62,400 restricted stock awards to employees of the Company, respectively.

These awards have a weighted average grant date fair value of $ 239.03 , $ 189.28 and $ 158.26 for fiscal years 2019, 2018 and 2017, respectively.

As of August 

31, 2019, a total of 123,794 shares of restricted stock and restricted stock units were unvested and outstanding, which results in unamortized stock-based compensation of $ 21.8 million to be recognized as stock-based compensation expense over the remaining vesting period of 3.1 years.

A summary of restricted stock award activity is as follows:

(in thousands, except per award data)

Weighted Average Grant

Date Fair Value Per Award

Balance at August 31, 2016

Granted (restricted stock and stock units)

Canceled/forfeited

Balance at August 31, 2017

Granted (restricted stock and stock units)

Canceled/forfeited

Balance at August 31, 2018

Granted (restricted stock and stock units)

Canceled/forfeited

Balance at August 31, 2019

The 132,194 restricted stock awards that vested during fiscal 2017 were comprised of:

73,522 of awards relating to restricted stock granted on November 1, 2013, which cliff vested 60 % after three years, 17,328 of awards relating to restricted stock granted on October 16, 2015, which vested 20 % annually upon the anniversary date of the grant and 30,162 of awards relating to restricted stock granted on October 16, 2015, which were modified to accelerate vest 100 % in conjunction with employee severance. Additionally, 11,182 awards vested related to other grants.

The 26,599 restricted stock awards that vested during fiscal 2018 were comprised of:

9,765 of awards relating to restricted stock granted on October 16, 2015 and 8,600 of awards relating to restricted stock granted on June 30, 2017 which vest at a rate of 20 % annually upon the anniversary date of the grant, respectively.

Additionally, 8,234 awards vested related to other grants.

The 85,401 restricted stock awards that vested during fiscal 2019 were comprised of:

42,276 of awards relating to restricted stock granted on November 1,2013 and 9,451 of awards relating to restricted stock granted on October 16, 2015, which vest at a rate of 20 % annually upon the anniversary date of the grant, respectively, 18,691 of awards relating to restricted stock granted on February 9, 2015, which vest 100 % upon the four year anniversary date of the grant, 8,924 of awards relating to restricted stock granted on June 30, 2017, which vest 60 % after three years and 40 % after five years .

Additionally, there were 6,059 awards that vested related to other grants.

Share-based Awards Available for Grant

A summary of share-based awards available for grant is as follows:

(in thousands)

Share-based Awards

Available for Grant under the

Employee Stock Option Plan

Share-based Awards

Available for Grant under the

Non-Employee Stock Option Plan

Balance at August 31, 2016

Granted –

non performance-based options

Granted –

performance-based options

Granted –

non-employee Directors grant

Restricted stock awards granted (1)

Share-based awards canceled/forfeited (2)

Balance at August 31, 2017

Increase in the number of shares available for issuance

Granted –

non performance-based options

Granted –

performance-based options

Granted –

non-employee Directors grant

Restricted stock awards granted (1)

Share-based awards canceled/forfeited (2)

Balance at August 31, 2018

Granted –

non performance-based options

Restricted stock awards granted (1)

Share-based awards canceled/forfeited (2)

Balance at August 31, 2019

Each restricted stock award granted is equivalent to 2.5 shares granted under the Company’s Option Plan.

Under the Company’s Option Plan, for each restricted stock award canceled/forfeited, an equivalent of 2.5 shares is added back to the available share-based awards balance.

Employee Stock Purchase Plan

Shares of FactSet common stock may be purchased by eligible employees under the FactSet Research Systems Inc.

Employee Stock Purchase Plan, as Amended and Restated (the "ESPP") in three -month intervals.

The purchase price is equal to 85 % of the lesser of the fair market value of the Company’s common stock on either the first day or the last day of each three -month offering period.

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

During fiscal 2019, employees purchased 48,532 shares at a weighted average price of $ 205.64 as compared to 64,230 shares at a weighted average price of $ 160.34 for fiscal 2018.

At August 

31, 2019, the ESPP had 220,410 shares reserved for future issuance.

Employee Benefit Plans

The Company established its 401 (k) Plan in fiscal 1993.

The 401 (k) Plan is a defined contribution plan covering all full-time, U.S.

employees of the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 (“IRC”).

Each year, participants may contribute up to 60 % of their eligible annual compensation, subject to annual limitations established by the IRC.

The Company matches up to 4 % of employees’

earnings, capped at the Internal Revenue Service annual maximum.

Company matching contributions are subject to a five -year graduated vesting schedule.

All full-time, U.S.

employees are eligible for the matching contribution by the Company.

The Company contributed $ 10.9 million, $ 11.6 million, and $ 10.1 million in matching contributions to employee 401 (k) accounts during fiscal 2019, 2018 and 2017, respectively.

STOCK-BASED COMPENSATION

The Company recognized total stock-based compensation expense of $ 32.4 million, $ 31.5 million and $ 34.2 million in fiscal 2019, 2018 and 2017, respectively.

As of August 

31, 2019, $ 80.4 million of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted average period of 3.0 years.

There was no stock-based compensation capitalized as of August 

31, 2019 and 2018, respectively.

Employee Stock Option Fair Value Determinations

The Company utilizes the lattice-binomial option-pricing model (“binomial model”) to estimate the fair value of new employee stock option grants.

The binomial model is affected by the Company’s stock price, as well as, assumptions regarding several variables, which include, but are not limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors, to determine the grant date stock option award fair value.

454,598 non-performance-based employee stock options were granted at a weighted average exercise price of $ 221.93  and a weighted average estimated fair value of $ 56.77  per share.

6,115 non-performance-based employee stock options were granted at a weighted average exercise price of $ 207.84  and a weighted average estimated fair value of $ 53.18  per share.

2,320 non-performance-based employee stock options were granted at a weighted average exercise price of $ 267.02  and a weighted average estimated fair value of $ 68.33  per share.

18,530 non-performance-based employee stock options were granted at a weighted average exercise price of $ 283.96  and a weighted average estimated fair value of $ 65.60  per share.

553,942 non-performance-based employee stock options were granted at a weighted average exercise price of $ 189.98  and a weighted average estimated fair value of $ 48.27  per share.

15,363 non-performance-based employee stock options were granted at a weighted average exercise price of $ 192.11  and a weighted average estimated fair value of $ 48.82  per share.

There were no employee stock options granted during the three months ended May 31, 2018.

5,848 non-performance-based employee stock options and 16,512 performance-based employee stock options were both granted at a weighted average exercise price of $ 200.20 with a weighted average estimated fair value of $ 50.87 per share.

671,263 non performance-based employee stock options and 22,460 performance-based employee stock options were both granted at a weighted average exercise price of $ 152.51 with a weighted average estimated fair value of $ 39.60 per share.

61,744 performance-based employee stock options were granted at a weighted average exercise price of $ 169.16 and a weighted average estimated fair value of $ 43.81 per share.

11,604 non performance-based employee stock options were granted at a weighted average exercise price of $ 163.05 and a weighted average estimated fair value of $ 42.23 per share.

29,650 non performance-based employee stock options and 206,417 performance-based employee stock options were granted at a weighted average exercise price of $ 165.75 and a weighted average estimated fair value of $ 42.93 per share.

The weighted average estimated fair value of employee stock options granted during fiscal 2019, 2018 and 2017 was determined using the binomial model with the following weighted average assumptions:

Term structure of risk-free interest rate

Expected life (years)

Term structure of volatility

Dividend yield

Weighted average estimated fair value

Weighted average exercise price

Fair value as a percentage of exercise price

The risk-free interest rate assumption for periods within the contractual life of the option is based on the U.S.

Treasury yield curve in effect at the time of grant.

Expected volatility is based on a combination of historical volatility of the Company’s stock and implied volatilities of publicly traded options to buy FactSet common stock with contractual terms closest to the expected life of options granted to employees.

The approach to utilize a mix of historical and implied volatility was based upon the availability of actively traded options on the Company’s stock and the Company’s assessment that a combination of implied volatility and historical volatility is best representative of future stock price trends.

The Company uses historical data to estimate option exercises and employee termination within the valuation model.

The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the binomial model.

The binomial model estimates employees exercise behavior based on the option’s remaining vested life and the extent to which the option is in-the-money.

The binomial model estimates the probability of exercise as a function of these two variables based on the entire history of exercises and cancellations of all past option grants made by the Company.

Non-Employee Director Stock Option Fair Value Determinations

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 August 

31, 2019, shares available for future grant under the Director Plan was 263,956 .

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

The Company utilizes the Black-Scholes model to estimate the fair value of new non-employee Director stock option grants.

The Black-Scholes model is affected by the Company’s stock price, as well as, assumptions regarding several variables, which include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors, to determine the grant date stock-based payment award fair value.

On January 15, 2019, FactSet granted 20,576 stock options to the Company’s non-employee Directors.

These options have a weighted average estimated fair value of $ 42.77 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate

Expected life (years)

Expected volatility

Dividend yield

On January 12, 2018, FactSet granted 18,963 stock options to the Company’s non-employee Directors.

These options have a weighted average estimated fair value of $ 38.76 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate

Expected life (years)

Expected volatility

Dividend yield

On January 13, 2017, FactSet granted 23,846 stock options to the Company’s non-employee Directors, including one -time new director grants of 2,104 for both Malcolm Frank and Sheila B.

Jordan, who were elected to FactSet’s Board of Directors on December 20, 2016.

All the options granted on January 13, 2017, have a weighted average estimated fair value of $ 35.65 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate

Expected life (years)

Expected volatility

Dividend yield

Restricted Stock Fair Value Determinations

Restricted stock granted to employees entitles the holder to shares of common stock as the award vests over time, but not to dividends declared on the underlying shares, while the restricted stock is unvested.

The grant date fair value of restricted stock awards is measured by reducing the grant date price of FactSet’s share 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 expense associated with restricted stock awards is amortized over the vesting period.

During fiscal 2019, there were 73,047 restricted stock awards granted with a weighted average grant date fair value of $ 239.03 compared to 3,497 restricted stock awards granted with a weighted average grant date fair value of $ 189.28 in fiscal 2018.

41,102 shares of restricted stock were granted at a weighted average estimated fair value of $ 212.66  per share.

51 shares of restricted stock were granted at a weighted average estimated fair value of $ 210.67  per share.

265 shares of restricted stock were granted at a weighted average estimated fair value of $ 255.95  per share.

31,629 shares of restricted stock were granted at a weighted average estimated fair value of $ 273.19  per share.

961 shares of restricted stock were granted at a weighted average estimated fair value of $ 182.17  per share.

No restricted stock granted.

2,536 shares of restricted stock were granted at a weighted average estimated fair value of $ 191.97  per share.

5,084 shares of restricted stock were granted at a weighted average estimated fair value of $ 151.63  per share.

7,843 shares of restricted stock were granted at a weighted average estimated fair value of $ 161.31  per share.

No restricted stock granted.

49,473 shares of restricted stock were granted at a weighted average estimated fair value of $ 158.46  per share.

Employee Stock Purchase Plan Fair Value Determinations

During fiscal 2019, employees purchased 48,532 shares at a weighted average price of $ 205.64 compared to 64,230 shares at a weighted average price of $ 160.34 in fiscal 2018 and 75,372 shares at a weighted average price of $ 136.34 in fiscal 2017.

Stock-based compensation expense recorded during fiscal 2019, 2018 and 2017 relating to the employee stock purchase plan was $ 2.0 million, $ 1.6 million and $ 2.1 million, respectively.

The Company uses the Black-Scholes model to calculate the estimated fair value for the employee stock purchase plan.

The weighted average estimated fair value of employee stock purchase plan grants during fiscal years 2019, 2018 and 2017, was $ 41.06 , $ 31.83 and $ 28.16 per share, respectively, with the following weighted average assumptions:

Risk-free interest rate

Expected life (months)

Expected volatility

Dividend yield

Accuracy of Fair Value Estimates

The Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards.

The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as, assumptions regarding several highly complex and subjective variables.

These variables include but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeiture rates and actual and projected employee stock option exercise behaviors.

Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable.

2021 $ 26,939

Thereafter 33,830

Total $ 121,095

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:

Years ended August 31,

(in thousands)  

(in thousands) Years ended August 31,

2020 2019 2018

operations $ 280,283 $ 288,860 $ 199,654

operations 146,851 133,105 152,184

Income before income taxes $ 427,134 $ 421,965 $ 351,838

operations $ 31,926 $ 55,824 $ 65,778

operations 22,270 13,351 18,975

Total provision for income taxes $ 54,196 $ 69,175 $ 84,753

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The components of the provision for income taxes consist of the following:

Years ended August 31,

(in thousands)  

(in thousands) Years ended August 31,

2020 2019 2018

federal $ 9,332 $ 35,688 $ 58,835

state and local 8,034 18,389 5,159

27,640 17,376 22,669

Total current taxes $ 45,006 $ 71,453 $ 86,663

federal $ 11,896 $ 1,813 $ 2,079

state and local 2,665 ( 217 ) ( 295 )

( 5,371 ) ( 3,874 ) ( 3,694 )

Total deferred taxes $ 9,190 $ ( 2,278 ) $ ( 1,910 )

Total provision for income taxes $ 54,196 $ 69,175 $ 84,753

The Company’s effective tax rate will vary based on, among other things, changes in levels of foreign income, as well as discrete and other nonrecurring events that may not be predictable.

The provision for income taxes differs from the amount of income tax determined by applying the U.S.

statutory federal income tax rate to income before income taxes as a result of the following factors:

statutory federal income tax rate to income before income taxes as a result of the following recurring factors and nonrecurring events, including the taxation of foreign income:

Years ended August 31,

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Foreign income at other than U.S.

 (3)  

Foreign derived intangible income deduction

rates ( 1.4 ) ( 1.4 ) ( 3.2 )

Foreign derived intangible income ("FDII") deduction ( 1.8 ) ( 1.7 ) —

Domestic production activities deduction — — ( 1.6 )

Income tax benefits from R&D tax credits ( 3.8 ) ( 3.5 ) ( 3.7 )

Income tax benefits from foreign tax credits

Share-based payments ( 3.7 ) ( 3.2 ) ( 2.7 )

One-time transition tax from TCJA — ( 0.4 ) (1)

 (2)  

Other, net ( 0.7 ) 1.6 0.1

Effective tax rate 12.7 % 16.4 % 24.1 %

During the first quarter of fiscal 2018, FactSet adopted an accounting standard that requires all excess tax benefits or deficiencies related to share-based payments to be reported within the consolidated statement of income that were previously reported within equity.

The adoption of this standard resulted in the recognition of $ 9.5 million of excess tax benefits to FactSet’s provision for income taxes during fiscal 2018.

The enactment of the TCJA resulted in a one -time transition tax expense of $ 23.2 million during the second quarter of fiscal 2018.

Includes a 200 basis point benefit as a result of FactSet’s global realignment.

Effective September 1, 2016, FactSet realigned certain aspects of its global operations from FactSet Research Systems Inc., its U.S.

parent company, to FactSet UK Limited, a U.K.

operating company, to better position the Company to serve its growing client base outside the U.S.

This realignment allows the Company to further implement strategic corporate objectives and helps achieve operational and financial efficiencies, while complementing FactSet’s increasing global growth and reach.

The fiscal 2019 provision for income taxes was $ 69.2 million, a decrease of 18.4 % from the same period a year ago.

The decrease was primarily attributable to the enactment of the TCJA.

The TCJA imposed a one -time transition tax expense, which resulted in a $ 23.2 million impact to the income tax provision for fiscal 2018, without a comparable impact in fiscal 2019.

This transition tax impact was revised during fiscal 2019, resulting in a net benefit of $ 3.4 million upon finalizing the accounting for the tax effects of the TCJA.

The TCJA also lowered the statutory U.S corporate income tax rate from 35 % to 21 %, effective January 1, 2018, which was fully applicable for fiscal 2019 compared to the lower tax rate being phased in for the prior year comparable period.

The reduction in the U.S.

corporate income tax rate required a remeasurement of FactSet's net U.S.

deferred tax position, which resulted in a non-recurring tax charge of $ 2.2 million during fiscal 2018.

The decrease in the income tax provision was partially offset by a $ 3.3 million income tax expense from finalizing prior years’

tax returns and other discrete items for fiscal 2019.

The enactment of the TCJA resulted in a one-time transition tax expense of $ 23.2 million during fiscal 2018 and a $ 3.4 million net benefit revision recorded during fiscal 2019 associated with finalizing the accounting for the tax effects of the TCJA during fiscal 2019.

The fiscal 2020 provision for income taxes was $ 54.2 million, compared to $ 69.2 million in fiscal 2019, a decrease of 21.7 %.

The decrease was primarily due to a lower effective tax rate in fiscal 2020 compared to the prior year period, driven mainly by higher research and development ("R&D") tax credits and a higher FDII deduction.

The decrease was also driven by a reduction from finalizing prior year tax returns, which resulted in a benefit of $ 3.7 million from finalizing prior year tax returns in fiscal 2020 compared to an increase to the provision of $ 7.7 million in fiscal 2019.

Additionally, the decrease in the provision was attributed to $ 1.9 million in higher windfall tax benefits from stock-based compensation for fiscal 2020 compared to fiscal 2019, partially offset by a $ 3.4 million income tax benefit from the revision of the one-time transition tax permitted by the TCJA recognized during fiscal 2019.

Due to the changes in taxation of undistributed foreign earnings under the TCJA, FactSet will continue to analyze foreign subsidiary earnings, as well as global working capital requirements, and may repatriate earnings when the amounts are remitted substantially free of additional tax.

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The significant components of deferred tax assets that recorded within the Consolidated Balance Sheets were as follows:

At August 31,

(in thousands)  

(in thousands) At August 31,

Deferred tax assets:

Receivable reserve

Depreciation on property, equipment and leasehold improvements $ — $ 2,264

Deferred rent — 9,479

Lease liabilities 56,280 —

Stock-based compensation 16,341 14,822

Purchased intangible assets, including acquired technology

Unrealized tax loss on investment 4,172 —

Other 8,840 9,903

Total deferred tax assets $ 85,633 $ 36,468

The significant components of deferred tax liabilities recorded within the Consolidated Balance Sheets were as follows:

At August 31,

(in thousands  

(in thousands) At August 31,

Deferred tax liabilities:

Stock-based compensation

Depreciation on property, equipment and leasehold improvements $ 15,291 $ —

Purchased intangible assets, including acquired technology 43,088 44,304

Lease right-of-use assets 45,344 —

Other 1,623 984

Total deferred tax liabilities $ 105,346 $ 45,288

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Additionally, FactSet accrues interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws.

The determination of liabilities related to unrecognized tax benefits, including associated interest and penalties, requires significant estimates.

There can be no assurance that the Company will accurately predict the audit outcomes, however, FactSet has no reason to believe that such audits will result in the payment of additional taxes and/or penalties that would have a material adverse effect on the Company’s results of operations or financial position, beyond current estimates. For this reason and due to ongoing audits by multiple tax authorities, FactSet will regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.

The determination of liabilities related to unrecognized tax benefits , including associated interest and penalties, requires significant estimates.

For this reason and due to ongoing audits by multiple tax authorities, FactSet will regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions.

The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate.

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This interest is classified as income tax expense in the financial statements.

As of August 

31, 2019, FactSet had gross unrecognized tax benefits totaling $ 10.9 million, including $ 1.1 million of accrued interest, recorded as Taxes Payable (non-current) within the Consolidated Balance Sheets.

As of August 31, 2020 , FactSet had gross unrecognized tax benefits totaling $ 12.3 million, including $ 0.9 million of accrued interest, recorded as Taxes Payable (non-current) within the Consolidated Balance Sheets.

The following table summarizes the changes in the balance of gross unrecognized tax benefits:

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Statute of limitations lapse ( 3,146 )

Reductions from settlements with Taxing Authorities ( 2,600 )

Unrecognized income tax benefits at August 31, 2018 $ 9,223

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Statute of limitations lapse ( 1,979 )

Reductions from settlements with Taxing Authorities

Unrecognized income tax benefits at August 31, 2019 $ 10,884

Additions based on tax positions related to the current year 3,533

Additions for tax positions of prior years

Statute of limitations lapse

Reductions from settlements with Taxing Authorities

Release for tax positions of prior years ( 2,086 )

Unrecognized income tax benefits at August 31, 2020 $ 12,331

In the normal course of business, the Company’s tax filings are subject to audit by federal, state and foreign tax authorities.

At August 

31, 2019, the Company remained subject to examination in the following major tax jurisdictions for the tax years as indicated below:

Major Tax Jurisdictions

Open Tax Years

State (various)

United Kingdom

FactSet’s debt obligations consisted of the following:

At August 31,

(in thousands)  

In the normal course of business, the Company’s tax filings are subject to audit by federal, state and foreign tax authorities.

At August 31, 2020, the Company remained subject to examination in the following major tax jurisdictions for the tax years as indicated below:

Major Tax Jurisdictions Open Tax Years

Federal 2017 through 2019

State (various) 2017 through 2019

United Kingdom 2018 through 2019

France 2018 through 2019

Germany 2017 through 2019

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

The update requires the recognition of lease ROU assets and lease liabilities on the balance sheet and the disclosure of qualitative and quantitative information about leasing arrangements.

FactSet adopted the standard, ASC 842, as of September 1, 2019, using a modified retrospective approach to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption.

FactSet reviews new arrangements at inception to evaluate whether the Company obtains substantially all the economic benefits of and has the right to control the use of an asset.

If FactSet determines that an arrangement qualifies as a lease, a lease liability and a corresponding lease ROU asset are recognized on the lease commencement date which includes fixed lease payments and certain qualifying index-based variable payments.

In determining the amount of lease payments used in measuring each lease ROU asset and lease liability, FactSet elected the package of practical expedients permitted under the transition guidance, which permits the Company not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs.

FactSet did not elect the use-of-hindsight practical expedient in determining the lease term and in assessing impairment.

FactSet elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one single lease component, which we recognize over the expected lease term on a straight-line expense basis in occupancy costs (a component of SG&A expense).

The Company has also elected to apply the short-term lease exception to not recognize lease ROU assets and lease liabilities 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 occupancy costs.

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

As a result of the adoption of the standard, the Company recognized lease liabilities (initially measured at the pre sent value of the future minimum lease payments over the remaining lease term at the commencement date) of $ 266.4 million as of November 30, 2019, included in Current and Long-term lease liabilities on the Consolidated Balance Sheet.

The Company also recognized lease ROU assets, net of amortization (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 August 31, 2020, the Lease right-of-use assets, net balance was $ 248.9 million and the Current and Long-term lease liabilities balance was $ 301.3 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.

As FactSet does not have any outstanding public debt, the Company estimates the IBR based on FactSet’s estimated credit rating and available market information.

The IBR is determined at lease commencement, or as of September 1, 2019 for operating leases in existence upon adoption of ASC 842.

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

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

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

For fiscal 2019 and 2018, the Company followed ASC 840-10, Leases , which required the recognition of rent expense on a straight-line basis over the lease term.

Rent expense for office space, as well as operating expenses associated with the leased premises, primarily related to utilities, real estate taxes, insurance and maintenance for fiscal 2019 and 2018 was $ 56.7 million and $ 54.6 million, respectively.

For fiscal 2020, the Company followed ASC 842, and recognized fixed lease payments and qualifying index-based variable payments on a straight-line basis over the lease term, resulting in a net operating lease expense of $ 43.0 million for fiscal 2020.

FactSet recognized $ 17.9 million in occupancy costs that were not included in the measurement of the lease liabilities during fiscal 2020, primarily related to variable non-lease costs and leases that qualified for the short-term lease exception.

These variable non-lease costs included costs that were not fixed at the lease commencement date nor dependent on an index or a rate, which primarily related to utilities, real estate taxes, insurance and maintenance.

The following table reconciles FactSet’s future undiscounted cash flows related to the Company’s operating leases and the reconciliation to the Current and Long-term lease liabilities as of August 31, 2020 :

(in thousands)

Minimum Lease

Fiscal Years Ended August 31

2021 $ 40,848

Thereafter 186,658

Total 372,162

Imputed Interest 70,837

Present Value $ 301,325

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 and the first quarter of fiscal 2021.

The rental space that FactSet has not taken possession of as of August 31, 2020 is not included in the table above nor included in the Lease ROU assets, net and Current and Long-term lease liabilities on the Consolidated Balance Sheets as of August 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 August 31, 2020 is approximately $ 19 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 August 31, 2020 :

As of August 31, 2020

Weighted average remaining lease term (in years)

Weighted average discount rate (IBR)

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

(in thousands)

As of August 31, 2020

Cash paid for amounts included in the measurement of lease liabilities $ 39.7

Lease ROU assets obtained in exchange for lease liabilities $ 43.7

FactSet’s debt obligations consisted of the following:

(in thousands) At August 31,

2019 Revolving Credit Facility $ 575,000 $ 575,000

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

Loan origination fees $ ( 646 ) ( 826 )

Long-term debt $ 574,354 $ 574,174

2019 Credit Agreement

On March 29, 2019, the Company entered into the 2019 Credit Agreement (the "2019 Credit Agreement") between FactSet, as the borrower, and PNC Bank, National Association ("PNC"), as the administrative agent and lender.

On March 29, 2019, the Company entered into a credit agreement between FactSet, as the borrower, and PNC Bank, National Association ("PNC") (the "2019 Credit Agreement"), as the administrative agent and lender.

The 2019 Credit Agreement provides for a $ 750.0 million revolving credit facility (the "2019 Revolving Credit Facility").

FactSet may request borrowings under the 2019 Revolving Credit Facility until its maturity date of March 29, 2024.

FactSet may request borrowings

under the 2019 Revolving Credit Facility until its maturity date of March 29, 2024.

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.

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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 August 

All outstanding loan amounts are reported as Long-term debt within the consolidated balance sheets at August 31, 2020.

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

The fair value of our long-term debt was $ 575.0 million as of August 

31, 2019, which the Company believe approximates carrying amount as the terms and interest rates 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 %.

During fiscal years 2019, 2018 and 2017, FactSet recorded interest expense of $ 19.8 million, $ 15.9 million and $ 8.4 million, respectively, on its outstanding debt amounts.

The weighted average interest rate on amounts outstanding under our credit facilities was 3.35 % and 2.69 % as of August 31, 2019 and 2018, respectively.

The fair value of our long-term debt was $ 575.0 million as of August 31, 2020, which the Company believe approximates carrying amount as the terms and interest rates 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 plus a spread using a debt leverage pricing grid, currently at 0.875 %.

During fiscal 2020, FactSet recorded interest expense on its outstanding debt, including the amortization of debt issuance costs, net of the effects of the interest rate swap agreement of $ 12.9 million.

During fiscal 2019 and 2018, FactSet recorded interest expense on its outstanding debt, including the amortization of debt issua nce costs, of $ 19.8 million and $ 15.9 million, respectively.

Including the effects of the interest rate swap agreement, the weighted average interest rate on amounts outstanding under the Company's credit facilities was 2.20 %.

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

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

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In addition, the 2019 Credit Agreement requires that FactSet maintain a consolidated net leverage ratio, as measured by total net funded debt/EBITDA 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 August 

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

The borrowings from the 2019 Credit Agreement were used to retire all outstanding debt under the previous 2017 Credit Agreement between FactSet, as the borrower, and PNC as the lender on March 29, 2019.

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2017 Credit Agreement

On March 17, 2017, the Company entered into a Credit Agreement (the "2017 Credit Agreement") between FactSet, as the borrower, and PNC Bank, National Association ("PNC"), as the administrative agent and lender.

The 2017 Credit Agreement provided for a $ 575.0 million revolving credit facility (the "2017 Revolving Credit Facility").

FactSet could have requested borrowings under the 2017 Revolving Credit Facility until its maturity or retirement date.

The 2017 Credit Agreement also allowed FactSet, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount of up to $ 225.0 million, provided that any such request for additional borrowings was in a minimum amount of $ 25.0 million.

Borrowings under the loan were subject to interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00 %.

On March 17, 2017, the Company entered into a Credit Agreement (the "2017 Credit Agreement") between FactSet, as the borrower, and PNC, as the administrative agent and lender.

The 2017 Credit Agreement provided for a $ 575.0 million revolving credit facility.

Borrowings under the loan were subject to interest on the outstanding principal amount at a rate equal to the daily LIBOR plus 1.00 %.

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

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FactSet records liabilities for commitments when incurred (i.e., when the goods or services are received).

Lease Commitments

Including new lease agreements executed during fiscal 2019, the Company's worldwide leased office space increased to approximately 1,860,000 square feet of office space under various non-cancelable operating leases which expire on various dates through 2035.

Total minimum rental payments associated with the leases are recorded as occupancy expense (a component of Selling, General & Administrative, "SG&A" expense) on a straight-line basis over the periods of the respective non-cancelable lease terms.

Future minimum commitments for the Company's operating leases in place as of August 

31, 2019 are as follows:

(in thousands)

Years ended August 31,

Minimum Lease Payments

During fiscal 2019, 2018 and 2017, rent expense (including operating costs) for all operating leases amounted to $ 56.7 million, $ 54.6 million and $ 48.4 million, respectively.

At August 

31, 2019 and 2018, deferred rent reported within the Consolidated Balance Sheets totaled $ 42.6 million and $ 39.4 million, of which $ 39.1 million and $ 33.6 million, respectively, was reported as a non-current liability within the line item Deferred Rent and Other Non-Current Liabilities .

Approximately $ 2.8 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 August 

These standby letters of credit contain covenants that, among other things, require FactSet to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios.

As of August 

31, 2019 and 2018, FactSet was in compliance with all covenants contained in the standby letters of credit.

Purchase Commitments with Suppliers

Purchase obligations represent payments due in future periods in respect of commitments to the Company’s various data vendors as well as commitments to purchase goods and services such as telecommunication and computer maintenance services.

These purchase commitments are agreements that are enforceable and legally binding on FactSet, and they specify all significant terms, including:

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and the approximate timing of the transaction.

As of August 

31, 2019 and 2018, the Company had total purchase commitments with suppliers of $ 83.3 million and $ 79.0 million, respectively.

There were no material changes in the Company’s purchase commitments with suppliers during fiscal 2019.

As of August 31, 2020 and 2019, the Company had total purchase commitments with suppliers of $ 226.0 million and $ 69.9 million, respectively.

Refer to Note 11, Leases and Note 12, Debt for information regarding lease commitments and outstanding debt obligations, respectively.

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 August 31, 2020.

These standby letters of credit contain covenants that, among other things, require FactSet to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios.

As of August 31, 2020 and 2019, FactSet was in compliance with all covenants contained in the standby letters of credit.

Contingencies

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If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of tax benefits in the period FactSet determines the liabilities are no longer necessary.

If the Company’s estimates of the federal, state, and foreign income tax liabilities are less than the ultimate assessment, a further charge to expense would result.

Legal Matters

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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 August 

31, 2019, 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 August 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.

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 (the "Commonwealth") relating to prior tax periods.

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

Based upon the Notice, it is the Commonwealth's intention to assess sales/use tax, interest and penalties on previously recorded sales transactions.

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 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 August 

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 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 August 31, 2020.

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

if FactSet does not prevail, the amount could have a material impact on the Company’s consolidated financial position, cash flows and results of operations.

Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, FactSet has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at FactSet’s request in such capacity.

These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

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The Company believes the estimated fair value of these indemnification obligations is immaterial.

STOCKHOLDERS’ EQUITY

Preferred Stock

At August 31, 2020 and 2019, there were 10,000,000 shares of preferred stock ($ 0.01 par value per share) authorized, of which no shares were issued and outstanding.

At August 31, 2020 and 2019, there were 150,000,000 shares of common stock ($ 0.01 par value per share) authorized, of which 40,767,708 and 40,104,192 shares were issued, respectively.

The authorized shares of common stock are issuable for any proper corporate purpose, including future stock splits, stock dividends, acquisitions, raising capital or to adopt additional employee benefit plans.

Shares of common stock outstanding were as follows:

(in thousands) Years ended August 31,

2020 2019 2018

Balance, beginning of year at September 1, 2019, 2018 and 2017, respectively

38,118 38,193 39,023

Common stock issued for employee stock plans 663 839 712

Repurchase of common stock from employees (1)

( 12 ) ( 32 ) ( 8 )

Repurchase of common stock under the share repurchase program ( 739 ) ( 882 ) ( 1,534 )

Balance, end of year at August 31, 2020, 2019, and 2018 respectively

38,030 38,118 38,193

(1) For fiscal years 2020, 2019 and 2018, the Company repurchased 11,945 , 31,644 and 8,070 shares, or $ 3.5 million, $ 7.2 million and $ 1.5 million, of common stock, respectively, in settlement of employee tax withholding obligations to cover their cost of taxes due upon the vesting and exercise of stock-based awards.

Treasury Stock

On January 31, 2018, FactSet retired 13,292,689 shares of treasury stock.

These retired shares are now included in the Company’s pool of authorized but unissued shares.

The retired treasury stock was initially recorded using the cost method and had a carrying value of $ 1.7 billion at January 31, 2018.

The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock ($ 0.1 ) million, reduce additional paid-in capital ("APIC") by the average amount recorded in APIC when stock was originally issued ($ 186.7 ) million and any remaining excess of cost as a reduction to retained earnings ($ 1.5 ) billion.

At August 31, 2020, and 2019, there were 2,737,456 and 1,986,352 shares of treasury stock (at cost) outstanding, respectively.

Share Repurchase Program

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

During fiscal 2020, the Company repurchased 0.7 million shares for $ 199.6 million compared to 0.9 million shares for $ 213.1 million in fiscal 2019.

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 $ 259.0 million remained authorized for future share repurchases as of August 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.

Restricted Stock

Awards of restricted stock entitle the holder to shares of common stock as the awards vest over time.

During fiscal 2020, 32,996 shares of previously granted restricted stock vested and were included in common stock outstanding as of August 31, 2020 (recorded net of 11,945 shares repurchased from employees at a cost of $ 3.5 million to cover their cost of taxes upon vesting of the restricted stock).

During fiscal 2019, 85,401 shares of previously granted restricted stock vested and were included in

common stock outstanding as of August 31, 2019 (recorded net of 31,644 shares repurchased from employees at a cost of $ 7.2 million to cover their cost of taxes upon vesting of the restricted stock).

The Company’s Board of Directors declared the following dividends on our common stock during the periods presented:

Year Ended Dividends per

Common Stock Record Date Total amount

(in thousands)

First Quarter $ 0.72 November 29, 2019 $ 27,291 December 19, 2019

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

Third Quarter $ 0.77 May 29, 2020 $ 29,189 June 18, 2020

Fourth Quarter $ 0.77 August 31, 2020 $ 29,283 September 17, 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

Fourth Quarter $ 0.72 August 31, 2019 $ 27,445 September 19, 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.

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.

Accumulated Other Comprehensive Loss

The components of AOCL are as follows:

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

Accumulated unrealized losses on cash flow hedges, net of tax $ ( 1,591 ) $ ( 2,266 )

Accumulated foreign currency translation adjustments ( 37,702 ) ( 72,278 )

Total AOCL $ ( 39,293 ) $ ( 74,544 )

EARNINGS PER SHARE

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

(in thousands, except per share data) Net Income

(Numerator) Weighted Average Common Shares

(Denominator) Per Share Amount

For the year ended August 31, 2020

Income available to common stockholders $ 372,938 37,936 $ 9.83

Dilutive effect of stock options and restricted stock 710

Income available to common stockholders plus assumed conversions $ 372,938 38,646 $ 9.65

For the year ended August 31, 2019

Income available to common stockholders $ 352,790 38,144 $ 9.25

Dilutive effect of stock options and restricted stock 729

Income available to common stockholders plus assumed conversions $ 352,790 38,873 $ 9.08

For the year ended August 31, 2018

Income available to common stockholders $ 267,085 38,733 $ 6.90

Dilutive effect of stock options and restricted stock 644

Income available to common stockholders plus assumed conversions $ 267,085 39,377 $ 6.78

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

There were 1,750 stock options excluded from the calculation of diluted EPS as of August 31, 2020, because their inclusion would have been anti-dilutive.

There were 11,481 stock options excluded from the calculation of diluted EPS as of August 31, 2019.

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.

As of August 31, 2020, there were 35,666 performance-based awards excluded from the calculation of diluted EPS.

There were no performance-based awards excluded from the calculation of diluted EPS as of August 31, 2019.

STOCK-BASED COMPENSATION

The Company recognized total stock-based compensation expense of $ 36.6 million, $ 32.4 million and $ 31.5 million in fiscal 2020, 2019 and 2018, respectively.

As of August 31, 2020, $ 81.9 million of total unrecognized compensation expense related to

non-vested awards is expected to be recognized over a weighted average period of 2.9 years.

There was no stock-based compensation capitalized as of August 31, 2020 and 2019, respectively.

Stock Option Awards

A summary of stock option activity is as follows:

Number Outstanding Weighted Average

Exercise Price Per Share Aggregate Intrinsic Value Weighted Average Remaining Contractual Life (years)

Outstanding as of August 31, 2017 3,366 $ 139.29

Granted – non performance-based 575 $ 190.14

Granted – performance-based 17 $ 200.20

Granted – non-employee Directors grant 19 $ 197.75

Exercised ( 622 ) $ 113.73

Forfeited ( 212 ) $ 158.14

Outstanding as of August 31, 2018 3,143 $ 153.05

Granted – non performance-based 482 $ 224.35

Granted – non-employee Directors grant 20 $ 207.88

Exercised ( 705 ) $ 137.61

Forfeited ( 416 ) $ 170.54

Outstanding as of August 31, 2019 2,524 $ 168.50

Granted – non performance-based 424 $ 256.43

Granted – non-employee Directors grant 16 $ 271.51

Exercised ( 588 ) $ 145.54

Forfeited ( 122 ) $ 218.36

Outstanding as of August 31, 2020 2,254 $ 189.32 $ 129.6 6.6

Options vested and exercisable as of August 31, 2020 875 $ 155.58 $ 170.4 5.1

Options expected to vest as of August 31, 2020 1,264 $ 209.33 $ 178.4 7.5

The aggregate intrinsic value represents the difference between the Company’s closing stock price as of August 31, 2020 of $ 350.40 and the exercise price, multiplied by the number of options exercisable as of that date.

The total pre-tax intrinsic value of stock options exercised during fiscal 2020, 2019 and 2018 was $ 85.0 million, $ 73.0 million and $ 50.1 million, respectively.

Employee Stock Option Awards

The FactSet Research Systems Inc.

Stock Option and Award Plan, as amended and restated (the "Long Term Incentive Plan" or "LTIP") provides for the grant of share-based awards, including stock options and performance-based stock options, to employees of FactSet.

The expiration date of the Long Term Incentive Plan is December 19, 2027.

Stock options granted under the LTIP expire not more than ten years from the date of grant and the majority vest ratably over a period of five years .

Options become vested and exercisable, provided the employee continues employment with the Company through the applicable vesting date, and remain exercisable until expiration or cancellation.

Vesting of the shares underlying the performance-based stock options are also subject to the Company achieving performance levels during the measurement period subsequent to the date of grant.

Employee Stock Option Fair Value Determinations

The Company utilizes the lattice-binomial option-pricing model ("binomial model") to estimate the fair value of new employee stock option grants.

The binomial model is affected by the Company’s stock price, as well as, assumptions regarding several

variables, which include, but are not limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors, to determine the grant date stock option award fair value.

The weighted average estimated fair value of employee stock options granted during fiscal 2020, 2019 and 2018 was determined using the binomial model with the following weighted average assumptions:

(Weighted average assumptions)

2020 2019 2018

Term structure of risk-free interest rate 0.10 % — 1.79 % 1.28 % — 3.14 % 1.28 % — 2.41 %

Expected life (years) 7.2 — 7.2 7.1 — 7.1 7.4 — 7.4

Term structure of volatility 25 % — 25 % 18 % — 29 % 19 % — 29 %

Dividend yield 1.09 % 1.15 % 1.32 %

Weighted average estimated fair value $ 60.33 $ 57.12 $ 48.39

Weighted average exercise price $ 256.43 $ 224.35 $ 190.42

Fair value as a percentage of exercise price 23.5 % 25.5 % 25.4 %

The risk-free interest rate assumption for periods within the contractual life of the option is based on the U.S.

Treasury yield curve in effect at the time of grant.

The Company uses historical data to estimate option exercises and employee termination within the valuation model.

The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the binomial model.

The binomial model estimates employees exercise behavior based on the option’s remaining vested life and the extent to which the option is in-the-money.

The binomial model estimates the probability of exercise as a function of these two variables based on the entire history of exercises and cancellations of all past option grants made by the Company.

Non-Employee Directors' Stock Option Awards

The FactSet Research Systems Inc.

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.

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

The non-qualified stock options granted to directors vest 100% after three years on the anniversary date of the grant and expire seven years from the date the options were granted.

As of August 31, 2020, shares available for future grant under the Director Plan was 249,886 .

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

Non-Employee Director Stock Option Fair Value Determinations

The Company utilizes the Black-Scholes model to estimate the fair value of new non-employee Director stock option grants.

On January 15, 2020, January 15, 201 9, and January 12, 2018, FactSet granted, 16,080 , 20,576 , and 18,963 stoc k options, respectively, to the Company’s non-employee Directors using the weighted average fair values, based on the following weighted average assumptions used in the Black-Scholes option-pricing model:

(Weighted average assumptions)

Years ended August 31,

2020 2019 2018

Fair value $ 54.74 $ 42.77 $ 38.76

Risk-free interest rate 1.64 % 2.51 % 2.34 %

Expected life (years) 5.4 5.4 5.4

Expected volatility 22.0 % 20.5 % 19.7 %

Dividend yield 1.11 % 1.17 % 1.16 %

Restricted Stock and Performance Share Unit Awards

The Company’s LTIP provides for the grant of share-based awards, including awards of restricted stock and performance share units ("PSUs";

restricted stock and PSUs, collectively, "Stock Awards").

The Stock Awards are subject to continued employment over a specified period.

The Stock Awards granted to employees entitle the holders to shares of common stock as the Stock Awards vest over time, but not to dividends declared on the underlying shares, while the stock subject to the Stock Awards is unvested.

Vesting of the shares underlying the PSUs are also subject to the Company achieving performance levels during the measurement period subsequent to the date of grant.

The grant date fair value of Stock Awards 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 expense associated with Stock Awards is amortized over the vesting period.

As of August 31, 2020, a total of 145,897 shares underlying Stock Awards were unvested and outstanding, which results in unamortized stock-based compensation of $ 28.2 million to be recognized as stock-based compensation expense over the remaining vesting period of 2.7 years.

A summary of Stock Award activity is as follows:

(in thousands, except per award data) Number Outstanding Weighted Average Grant

Date Fair Value Per Award

Balance at August 31, 2017 182 138.62

Granted - restricted stock (1)

Vested - restricted stock ( 27 ) 155.95

Forfeited ( 15 ) 116.29

Balance at August 31, 2018 143 139.34

Granted - restricted stock (1)

Vested - restricted stock ( 85 ) 125.04

Forfeited ( 7 ) 181.32

Balance at August 31, 2019 124 205.47

Granted - restricted stock & PSUs (1)(2)

Vested - restricted stock ( 33 ) 197.37

Forfeited ( 19 ) 198.53

Balance at August 31, 2020 146 231.55

(1) Each Stock Award granted is equivalent to 2.5 shares granted under the LTIP.

(2) FactSet granted 36,709 awards of restricted stock and 36,888 PSUs.

Performance-based Equity Awards

Performance-based equity awards, whether in the form of performance-based stock options or PSUs, require management to make assumptions regarding the likelihood of achieving Company performance targets.

The number of performance-based

awards that vest will be predicated on the Company achieving performance levels during the measurement period subsequent to the date of grant.

Dependent on the financial performance levels attained by FactSet, a percentage of the performance-based awards will vest to the grantees.

However, there is no current guarantee that such awards will vest in whole or in part.

Share-based Awards Available for Grant

A summary of share-based awards available for grant is as follows:

(in thousands) Share-based Awards

Available for Grant under the

Employee Stock Option Plan Share-based Awards

Available for Grant under the

Non-Employee Stock Option Plan

Balance at August 31, 2017 897 42

Increase in the number of shares available for issuance 5,750 250

Granted – non performance-based options ( 575 ) —

Granted – performance-based options ( 17 ) —

Granted – non-employee Directors options — ( 19 )

Granted – restricted stock (1)

Forfeited - Share-based awards (2)

Balance at August 31, 2018 6,298 282

Granted – non performance-based options ( 481 ) —

Granted – non-employee Directors options — ( 20 )

Granted – restricted stock (1)

Forfeited - Share-based awards (2)

Balance at August 31, 2019 6,067 264

Granted – non performance-based options ( 424 ) —

Granted – non-employee Directors options — ( 16 )

Granted – restricted stock (1)

Granted – PSUs (1)

Forfeited – Share-based awards (2)

Balance at August 31, 2020 5,626 250

(1) Each Stock Award granted is equivalent to 2.5 shares granted under the LTIP.

(2) Under the LTIP, for each Stock Award canceled/forfeited, an equivalent of 2.5 shares is added back to the available share-based awards balance.

Employee Stock Purchase Plan

Shares of FactSet common stock may be purchased by eligible employees under the FactSet Research Systems Inc.

Employee Stock Purchase Plan, as Amended and Restated (the "ESPP") in three-month intervals.

The purchase price is equal to 85 % of the lesser of the fair market value of the Company’s common stock on the first day or the last day of each three-month offering period.

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

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

During fiscal 2020, employees purchased 42,606 shares at a weighted average price of $ 234.41 compared to 48,532 shares at a weighted average price of $ 205.64 in fiscal 2019 and 64,230 shares at a weighted average price of $ 160.34 in fiscal 2018.

Stock-based compensation expense recorded during fiscal 2020, 2019 and 2018 relating to the employee stock purchase plan was $ 2.1 million, $ 2.0 million and $ 1.6 million, respectively.

At August 31, 2020, the ESPP had 177,804 shares reserved for future issuance.

The Company uses the Black-Scholes model to calculate the estimated fair value for the employee stock purchase plan.

The weighted average estimated fair value of employee stock purchase plan grants during fiscal years 2020, 2019 and 2018, was $ 50.69 , $ 41.06 and $ 31.83 per share, respectively, with the following weighted average assumptions:

(Weighted average assumptions)

2020 2019 2018

Risk-free interest rate 0.95 % 2.33 % 1.55 %

Expected life (months) 3 3 3

Expected volatility 20.04 % 10.89 % 10.19 %

Dividend yield 1.08 % 1.12 % 1.27 %

EMPLOYEE BENEFIT PLANS

Defined Contribution Plan

The Company established its 401(k) Plan in fiscal 1993.

The 401(k) Plan is a defined contribution plan covering all full-time, U.S.

employees of the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 ("IRC").

Each year, participants may contribute up to 60 % of their eligible annual compensation, subject to annual limitations established by the IRC.

The Company matches up to 4 % of employees’ earnings, capped at the Internal Revenue Service annual maximum.

Company matching contributions are subject to a five -year graduated vesting schedule.

All full-time, U.S.

employees are eligible for the matching contribution by the Company.

The Company contributed $ 11.3 million, $ 10.9 million, and $ 11.6 million in matching contributions to employee 401(k) accounts during fiscal 2020, 2019 and 2018, respectively.

SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that have the following characteristics:

(i) it engages in business activities from which it may earn revenue and incur expense, (ii) its operating results are regularly reviewed by the company’s chief operating decision maker ("CODM") for resource allocation decisions and performance assessment, and (iii) its discrete financial information is available.

The Company's Chief Executive Officer functions as the CODM.

The Company's operating segments are aligned with how the Company, including its CODM, manages the business and the geographic markets in which it serves, with a primary focus on providing integrated global financial and economic information.

The Company’s internal financial reporting structure is based on three segments:

the Americas, EMEA and Asia Pacific.

Withing each of the segments, the Company primarily delivers insight and information through four workflow solutions including 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.

The Americas segment serves our clients throughout North, Central, and South America.

The EMEA segment serves our clients in countries in Europe and Africa.

The Asia Pacific segment serves our clients in countries in Asia and Australia.

Segment revenue reflects direct sales to clients based in these respective geographic locations.

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

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.

The content collection centers, located in India, the Philippines, and Latvia, benefit all the Company’s operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenue.

Segment Information

Segment Results of Operations

The following tables reflect the results of operations of the Company's segments:

(in thousands)

Year Ended August 31, 2020 Americas

Revenue from clients $ 929,444 $ 422,203 $ 142,464 $ 1,494,111

Segment operating profit 168,909 179,831 90,920 439,660

Depreciation and amortization 36,128 14,338 7,148 57,614

Stock-based compensation 28,780 6,576 1,223 36,579

Capital expenditures 60,204 2,079 15,359 77,642

Year Ended August 31, 2019 Americas

Revenue from clients $ 894,554 $ 408,084 $ 132,713 $ 1,435,351

Segment operating profit 179,374 179,258 79,403 438,035

Depreciation and amortization 40,018 14,703 5,742 60,463

Stock-based compensation 26,152 5,320 928 32,400

Capital expenditures 43,647 2,595 13,128 59,370

Year Ended August 31, 2018 Americas

Revenue from clients $ 841,908 $ 387,589 $ 120,648 $ 1,350,145

Segment operating profit 148,095 148,977 69,132 366,204

Depreciation and amortization 37,453 15,710 4,122 57,285

Stock-based compensation 26,014 4,857 645 31,516

Capital expenditures 20,358 3,140 10,022 33,520

Segment Total Assets

The following table reflects the total assets for the Company's segments:

As of August 31,

(in thousands) 2020 2019

Segment Assets

Americas $ 1,111,600 $ 851,014

EMEA 757,524 588,911

Asia Pacific 214,264 120,205

Total assets $ 2,083,388 $ 1,560,130

Geographic Information

The following tables reflect FactSet revenues and long-lived assets, split geographically by the Company's country of domicile (the United States) and other countries where major subsidiaries are domiciled.

Geographic Revenue

The following table sets forth revenue by geography, attributed to countries based on the location of the client:

(in thousands) Years ended August 31,

2020 2019 2018

United States $ 885,082 $ 854,675 $ 806,426

United Kingdom 179,966 166,944 157,346

Other European Countries 242,237 241,140 230,243

All Other Countries 186,826 172,592 156,130

Total revenue $ 1,494,111 $ 1,435,351 $ 1,350,145

Geographic Long-Lived Assets

The following table sets forth long-lived assets by geographic area.

Long-lived assets consist of Property, equipment and leasehold improvements, net and Lease right-of-use assets, net and excludes goodwill, intangible assets, deferred taxes and other assets.

(in thousands) At August 31,

Long-lived Assets

United States $ 205,929 $ 86,238

Philippines 53,124 4,188

India 42,923 15,051

United Kingdom 32,184 5,347

All Other Countries 47,871 8,560

Total long-lived assets $ 382,031 $ 119,384

RISKS AND CONCENTRATIONS OF CREDIT RISK

Financial Risk Management

Foreign Currency Exchange Risk

The Company conducts business outside the U.S.

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

The financial statements of these foreign subsidiaries are translated into U.S.

dollars using period-end rates of exchange for assets and liabilities and average rates for the period for revenues and expenses.

Foreign Cur rency Exchange Risk

In the normal course of business, FactSet is exposed to foreign currency exchange risk as the Company conducts business outside the U.S.

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

Changes in the exchange rates for such currencies into U.S.

dollars can affect our revenues, earnings, and the carrying values of our assets and liabilities in our consolidated balance sheet, either positively or negatively.

To manage the exposures related to the effects of foreign exchange rate fluctuations, the Company utilizes derivative instruments (foreign currency forward contracts).

The changes in fair value for these foreign currency forward contracts are initially reported as a component of AOCL and subsequently reclassified into operating expenses when the hedged exposure affects earnings.

By their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk.

The market risk associated with these instruments resulting from currency exchange movements is expected to offset the market risk of the underlying transactions, assets and liabilities being hedged.

FactSet does not believe there is significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a major financial institution.

Further, the Company’s policy is to deal with counterparties having a minimum investment grade or better credit rating.

Further, the Company’s policy is to deal with counterparties having a minimum investment grade

or better credi t rating.

Credit risk is managed through the continuous monitoring of exposures to such counterparties.

FactSet’s primary objective in holding derivatives is to reduce the volatility of earnings associated with changes in foreign currency.

Refer to Note 6, Derivative Instruments for more information on our foreign currency exposures and our foreign currency forward contracts.

Interest Rate Risk

Cash and Cash Equivalents and Investments

The fair market value of FactSet’s cash and cash equivalents and investments at August 

31, 2019 was $ 385.6 million.

The Company’s cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or less and are reported at fair value.

The Company’s investments consist of both mutual funds and certificates of deposit as both are part of the Company’s investment strategy.

These mutual funds and certificates of deposit are included as Investments (short term) on the Company’s Consolidated Balance Sheets as the mutual funds can be liquidated at our discretion and the certificates of deposit have original maturities greater than three months, but less than one year.

The mutual funds and certificates of deposit are held for investment and are not considered debt securities.

It is anticipated that the fair market value of the Company’s cash and cash equivalents and investments will continue to be immaterially affected by fluctuations in interest rates.

Preservation of principal is the primary goal of FactSet’s cash and cash equivalents and investment policy.

Pursuant to the FactSet's established investment guidelines, the Company tries to achieve high levels of credit quality, liquidity and diversification.

The Company's investment guidelines do not permit FactSet to invest in puts, calls, strips, short sales, straddles, options, commodities, precious metals, futures or investments on margin.

As the Company has a restrictive investment policy, its financial exposure to fluctuations in interest rates is expected to remain low.

The Company does not believe that the value or liquidity of its cash and cash equivalents and investments have been significantly impacted by current market events.

As of August 

31, 2019, the fair value of FactSet’s long-term debt was $ 575.0 million, which approximated its carrying amount.

The application of a floating interest rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid, approximates the current market rate for similar transactions.

It is anticipated that the fair market value of FactSet’s debt will continue to be immaterially affected by fluctuations in interest rates and the Company does not believe that the value of its debt has been significantly impacted by current market events.

The debt bears 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 %.

During fiscal 2019 and fiscal 2018, the Company recorded interest expense of $ 19.8 million and $ 15.9 million, respectively, on its outstanding debt amounts.

Assuming all terms of the Company’s outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one -month LIBOR rate would result in a $ 1.4 million change in its annual interest expense.

The fair market value of our cash and cash equivalents and investments at August 31, 2020 was $ 605.2 million.

Our cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or less and are reported at fair value.

We are exposed to interest rate risk through fluctuations of interest rates on our investments.

As we have a restrictive investment policy, our financial exposure to fluctuations in interest rates is expected to remain low.

Refer to Note 3, Summary of Significant Accounting Policies for more information on our cash and cash equivalents.

As of August 31, 2020, the Company had long term debt outstanding under the 2019 Revolving Credit Facility, with a principal balance of $ 575.0 million.

The debt bears interest on the outstanding principle at a rate equal to LIBOR plus a spread, using a debt leverage pricing grid.

The variable rate of interest on our long-term debt can expose us to interest rate volatility due to changes in LIBOR.

To mitigate this exposure, on March 5, 2020, we entered into an interest rate swap agreement with a notional amount of $ 287.5 million to hedge the variable interest rate obligation, effectively converting the floating interest rate to fixed for the hedged portion.

Thus, we are only exposed to base interest rate risk on floating rate borrowings in excess of any amounts that are not hedged, or $ 287.5 million of our outstanding principal balance.

Assuming all terms of the Company’s outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one-month LIBOR would result in a $ 0.7 million change in its annual interest expense.

Refer to Note 12, Debt for additional information regarding our outstanding debt obligations.

Current market events have not required the Company to modify materially or change its financial risk management strategies with respect to its exposures to foreign currency exchange risk and interest rate risk.

11 unchanged sentences

No single client represented 10% or more of FactSet's total revenue in any fiscal year presented.

At August 

31, 2019, the Company’s largest individual client accounted for approximately 3 % of total annual subscriptions, and subscriptions from the ten largest clients did not surpass 15% of total annual subscriptions, consistent with August 

As of August 

31, 2019 and 2018, the receivable reserve was $ 10.5 million and $ 3.5 million, respectively.

At August 31, 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 15 % of total annual subscriptions, consistent with August 31, 2019.

As of August 31, 2020 and 2019, the receivable reserve was $ 8.0 million and $ 10.5 million, respectively.

Derivative Instruments

As a result of the use of derivative instruments, FactSet is exposed to counterparty credit risk.

The Company has incorporated counterparty credit risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities, when applicable.

For derivative instruments, the Company calculates credit risk from observable data related to credit default swaps (“CDS”) as quoted by publicly available information.

The Company has incorporated counterparty credit risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities, when applicable.

For derivative instruments, the Company calculates credit risk from observable data related to credit default swaps ("CDS") as quoted by publicly available information.

Counterparty risk is represented by CDS spreads related to the senior secured debt of the respective bank with whom the Company has executed these derivative transactions.

To mitigate counterparty credit risk, the Company enters into contracts with large financial institutions and regularly reviews its credit exposure balances as well as the creditworthiness of the counterparties.

For the Company's liabilities, as CDS spread information is not available for FactSet, the Company's credit risk is determined based on using a simple average of CDS spreads for peer companies.

To mitigate counterparty credit risk, the Company enters into contracts with large financial institutions and

regularly reviews its credit exposure balances as well as the creditworthiness of the counterparties.

For the Company's liabilities, as CDS spread information is not available for FactSet, the Company's credit risk is determined based on using a simple averag e of CDS spreads for peer companies.

The Company does not expect any losses as a result of default of its counterparties.

4 unchanged sentences

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 during fiscal 2019, except for one vendor, which is a supplier of risk models and portfolio optimizer data to FactSet and represented 11 % of FactSet’s data costs in fiscal 2019.

No single vendor or data supplier represented more than 10% of FactSet's total data costs during fiscal 2020, except for one vendor, which is a supplier of risk models and portfolio optimizer data to FactSet and represented 11 % of FactSet’s data costs in fiscal 2020.

UNAUDITED QUARTERLY FINANCIAL DATA

The following table presents selected unaudited financial information for each of the quarterly periods in the years ended August 

31, 2019 and 2018.

The following table presents selected unaudited financial information for each of the quarterly periods in the years ended August 31, 2020 and 2019.

The results for any quarter are not necessarily indicative of future quarterly results and, accordingly, period-to-period comparisons should not be relied upon as an indication of future performance.

Fiscal 2019 (in thousands, except per share data)

Fiscal 2020 (in thousands, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 366,658 $ 369,780 $ 374,083 $ 383,590

Cost of services $ 164,957 $ 176,218 $ 170,703 $ 183,568

1 unchanged sentence

Operating income $ 113,186 $ 106,257 $ 121,640 $ 98,577

Net income $ 93,957 $ 88,686 $ 101,216 $ 89,079

Diluted EPS (1)

$ 2.43 $ 2.30 $ 2.63 $ 2.29

Diluted weighted average common shares 38,587 38,576 38,481 38,940

Fiscal 2018 (in thousands, except per share data)

Fiscal 2019 (in thousands, except per share data) First

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 351,640 $ 354,895 $ 364,533 $ 364,283

Cost of services $ 166,776 $ 165,108 $ 163,832 $ 167,730

1 unchanged sentence

Operating income $ 100,539 $ 108,688 $ 117,240 $ 111,568

Net income $ 84,296 $ 84,702 $ 92,265 $ 91,527

Diluted EPS (1)

$ 2.17 $ 2.19 $ 2.37 $ 2.34

Diluted weighted average common shares 38,809 38,619 38,993 39,056

1 unchanged sentence

Accordingly, the sum of the quarterly EPS amounts may not equal the total for the fiscal year.

SUBSEQUENT EVENTS

As previously announced, effective September 21, 2020, the Company entered into an Amendment to the 2019 Credit Agreement (the “Amendment”).

The Amendment provides, among other things, that the Company may make an investment in

a person that is not a subsidiary of FactSet, so long as no potential default has occurred and is continuing or would result from such an investment.

As previously announced, on October 20, 2020, FactSet entered into a definitive agreement to acquire all of the issued and outstanding shares of Truvalue Labs, Inc.

The acquisition of TVL further enhances FactSet's commitment to providing industry leading environmental, social, and governance ("ESG") data.

Revenue from TVL will be recognized based on geographic business activities in accordance with how the Company’s operating segments are currently aligned.

The Company expects the majority of the TVL purchase price to be allocated to goodwill and acquired intangible assets.

The transaction is expected to close during 2020 and is not expected to have a material impact on FactSet’s fiscal 2021 results.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data