Index to Consolidated Financial StatementsConsolidated Financial Statements: Statements | Page | | | | | | | | | Consolidated Financial Statements: | | | | | | | | | | | | | | Financial Statement Schedule: | | | 100
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Management’s Statement of Responsibility for Financial Statements FactSet’s consolidated financial statementsConsolidated Financial Statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying consolidated financial statementsConsolidated 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’sour Board of Directors, has established and maintains a strong ethical climate so that itsour 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. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. 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, 20192021 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 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;FactSet; (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 CompanyFactSet are being made only in accordance with authorizations of management and directors of the Company;FactSet; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’sour 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, 2019.2021. 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.
| | | | | | | | | | /s/ F. PHILIP SNOW | | /s/ HELEN L. SHAN LINDA S. HUBER | | | | F. Philip Snow | | Helen L. Shan
Linda S. Huber | Chief Executive Officer | | Executive Vice President, and Chief Financial Officer | October 30, 2019 22, 2021 | | October 30, 2019 22, 2021 |
Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of FactSet Research Systems Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of FactSet Research Systems Inc. (the Company) as of August 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2021, 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, 2021, 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 22, 2021 expressed an unqualified opinion thereon. Adoption of Accounting Standards Update (ASU) No. 2016-02 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. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| | | | | | | | | Measurement of income tax provision | | Description of the Matter | As discussed in Note 3, Summary of Significant Accounting Policies, and 11, 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. 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. For the year-ended August 31, 2021, the Company recognized a consolidated provision for income taxes of $68 million with $41 million related to its U.S. operations and $27 million related to its non-U.S. operations.
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 11, 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. Stamford, CT October 22, 2021
Report of Independent Registered Public Accounting Firm 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, 2019,2021, 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, 2019,2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements2021 Consolidated Financial Statements of the Company and our report dated October 30, 2019,22, 2021, expressed an unqualified opinion thereon. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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. 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.
FactSet Research Systems Inc. Opinion on the Financial Statements
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”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2019, 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.
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. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| | 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. For the year-ended August 31, 2019, the Company recognized a consolidated provision for income taxes of $69.2 million with $55.8 million related to its U.S. operations and $13.4 million related to its non-U.S. operations.
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.
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
Stamford, CT
October 30, 2019
FactSet Research Systems Inc.
Consolidated Statements of Income | | | | | | | | | | | | | | | | | | | (in thousands, except per share data) | For the years ended August 31, | | 2021 | | 2020 | | 2019 | | Revenues | $ | 1,591,445 | | | $ | 1,494,111 | | | $ | 1,435,351 | | | Operating expenses | | | | | | | Cost of services | 786,400 | | | 695,446 | | | 663,446 | | | Selling, general and administrative | 331,004 | | | 359,005 | | | 333,870 | | | Total operating expenses | 1,117,404 | | | 1,054,451 | | | 997,316 | | | | | | | | | Operating income | 474,041 | | | 439,660 | | | 438,035 | | | | | | | | | Other income (expense) | | | | | | | Interest expense, net | (6,394) | | | (9,829) | | | (16,624) | | | Other income (expense), net | (30) | | | (2,697) | | | 554 | | | Total other expense, net | (6,424) | | | (12,526) | | | (16,070) | | | | | | | | | Income before income taxes | 467,617 | | | 427,134 | | | 421,965 | | | | | | | | | Provision for income taxes | 68,027 | | | 54,196 | | | 69,175 | | | Net income | $ | 399,590 | | | $ | 372,938 | | | $ | 352,790 | | | | | | | | | Basic earnings per common share | $ | 10.56 | | | $ | 9.83 | | | $ | 9.25 | | | Diluted earnings per common share | $ | 10.36 | | | $ | 9.65 | | | $ | 9.08 | | | | | | | | | Basic weighted average common shares | 37,856 | | | 37,936 | | | 38,144 | | | Diluted weighted average common shares | 38,570 | | | 38,646 | | | 38,873 | |
| | Years ended August 31, | | | (in thousands, except per share data) | | 2019 | | | 2018 | | | 2017 | | Revenue | | $ | 1,435,351 | | | $ | 1,350,145 | | | $ | 1,221,179 | | Operating expenses | | | | | | | | | | | | | Cost of services | | | 663,446 | | | | 659,296 | | | | 566,580 | | Selling, general and administrative | | | 333,870 | | | | 324,645 | | | | 302,464 | | Total operating expenses | | | 997,316 | | | | 983,941 | | | | 869,044 | | | | | | | | | | | | | | | | Operating income | | | 438,035 | | | | 366,204 | | | | 352,135 | | | | | | | | | | | | | | | | Other expenses | | | | | | | | | | | | | (Loss) on sale of business | | | — | | | | — | | | | (1,223 | ) | Interest expense, net of interest income | | | (16,070 | ) | | | (14,366 | ) | | | (6,600 | ) | Total other expense | | | (16,070 | ) | | | (14,366 | ) | | | (7,823 | ) | | | | | | | | | | | | | | | Income before income taxes | | | 421,965 | | | | 351,838 | | | | 344,312 | | | | | | | | | | | | | | | | Provision for income taxes | | | 69,175 | | | | 84,753 | | | | 86,053 | | Net income | | $ | 352,790 | | | $ | 267,085 | | | $ | 258,259 | | | | | | | | | | | | | | | | Basic earnings per common share | | $ | 9.25 | | | $ | 6.90 | | | $ | 6.55 | | Diluted earnings per common share | | $ | 9.08 | | | $ | 6.78 | | | $ | 6.51 | | | | | | | | | | | | | | | | Basic weighted average common shares | | | 38,144 | | | | 38,733 | | | | 39,444 | | Diluted weighted average common shares | | | 38,873 | | | | 39,377 | | | | 39,642 | |
The accompanying notes are an integral part of these consolidated financial statements. Consolidated Financial Statements.
FactSet Research Systems Inc. Consolidated Statements of Comprehensive Income | | | | | | | | | | | | | | | | | | | (in thousands) | For the years ended August 31, | | 2021 | | 2020 | | 2019 | | Net income | $ | 399,590 | | | $ | 372,938 | | | $ | 352,790 | | | Other comprehensive income, net of tax: | | | | | | | Net unrealized (loss) gain on cash flow hedges* | (504) | | | 674 | | | 504 | | | Foreign currency translation adjustments | 835 | | | 34,577 | | | (24,325) | | | Other comprehensive income (loss) | 331 | | | 35,251 | | | (23,821) | | | Comprehensive income | $ | 399,921 | | | $ | 408,189 | | | $ | 328,969 | |
| | Years ended August 31, | | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | Net income | | $ | 352,790 | | | $ | 267,085 | | | $ | 258,259 | | | | | | | | | | | | | | | | Other comprehensive (loss) income, net of tax | | | | | | | | | | | | | Net unrealized gain (loss) on cash flow hedges(1) | | | 504 | | | | (7,288 | ) | | | 5,017 | | Foreign currency translation adjustments | | | (24,325 | ) | | | (9,431 | ) | | | 28,816 | | Other comprehensive (loss) income | | | (23,821 | ) | | | (16,719 | ) | | | 33,833 | | Comprehensive income | | $ | 328,969 | | | $ | 250,366 | | | $ | 292,092 | |
(1)
| The unrealized gain (loss) on cash flow hedges disclosed above was net of tax (expense) benefit of ($387), $3,518, and ($3,049) for the fiscal years ended August 31, 2019, 2018 and 2017, respectively.
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The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.
FactSet Research Systems Inc. Consolidated Balance Sheets | | | | | | | | | | | | | (in thousands, except share data) | August 31, | | 2021 | | 2020 | | ASSETS | | | | | Cash and cash equivalents | $ | 681,865 | | | $ | 585,605 | | | Investments | 35,984 | | | 19,572 | | | Accounts receivable, net of reserves of $6,431 at August 31, 2021 and $7,987 at August 31, 2020 | 151,187 | | | 155,011 | | | Prepaid taxes | 13,917 | | | 38,067 | | | Prepaid expenses and other current assets | 50,625 | | | 43,675 | | | Total current assets | 933,578 | | | 841,930 | | | | | | | Property, equipment and leasehold improvements, net | 131,377 | | | 133,102 | | | Goodwill | 754,205 | | | 709,703 | | | Intangible assets, net | 134,986 | | | 121,095 | | | Deferred taxes | 2,250 | | | — | | | Lease right-of-use assets, net | 239,064 | | | 248,929 | | | Other assets | 29,480 | | | 28,629 | | | TOTAL ASSETS | $ | 2,224,940 | | | $ | 2,083,388 | | | | | | | LIABILITIES | | | | | Accounts payable and accrued expenses | $ | 85,777 | | | $ | 82,094 | | | Current lease liabilities | 31,576 | | | 29,056 | | | Accrued compensation | 104,403 | | | 81,873 | | | Deferred revenue | 63,104 | | | 53,987 | | | Dividends payable | 30,845 | | | 29,283 | | | Total current liabilities | 315,705 | | | 276,293 | | | | | | | Long-term debt | 574,535 | | | 574,354 | | | Deferred taxes | 14,752 | | | 19,713 | | | Deferred revenue, non-current | 8,394 | | | 9,319 | | | Taxes payable | 30,279 | | | 27,739 | | | Long-term lease liabilities | 259,980 | | | 272,269 | | | Other liabilities | 4,942 | | | 7,326 | | | TOTAL LIABILITIES | $ | 1,208,587 | | | $ | 1,187,013 | | | Commitments and contingencies (see Note 14) | 0 | | 0 | | | | | | STOCKHOLDERS’ EQUITY | | | | | Preferred stock, $0.01 par value, 10,000,000 shares authorized, none issued | $ | — | | | $ | — | | | Common stock, $0.01 par value, 150,000,000 shares authorized, 41,163,192 and 40,767,708 shares issued, 37,615,419 and 38,030,252 shares outstanding at August 31, 2021 and 2020, respectively | 412 | | | 408 | | | Additional paid-in capital | 1,048,305 | | | 939,067 | | | Treasury stock, at cost: 3,547,773 and 2,737,456 shares at August 31, 2021 and 2020, respectively | (905,917) | | | (636,956) | | | Retained earnings | 912,515 | | | 633,149 | | | Accumulated other comprehensive loss | (38,962) | | | (39,293) | | | TOTAL STOCKHOLDERS’ EQUITY | $ | 1,016,353 | | | $ | 896,375 | | | | | | | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,224,940 | | | $ | 2,083,388 | |
| | August 31, | | | (in thousands, except share data) | | 2019 | | | 2018 | | ASSETS | | | | | | | | | Cash and cash equivalents | | $ | 359,799 | | | $ | 208,623 | | Investments | | | 25,813 | | | | 29,259 | | Accounts receivable, net of reserves of $10,511 at August 31, 2019 and $3,490 at August 31, 2018 | | | 146,309 | | | | 156,639 | | Prepaid taxes | | | 15,033 | | | | 6,274 | | Prepaid expenses and other current assets | | | 36,858 | | | | 30,121 | | Total current assets | | | 583,812 | | | | 430,916 | | | | | | | | | | | | Property, equipment and leasehold improvements, net | | | 132,524 | | | | 100,545 | | | | | | | | | | | | Goodwill | | | 685,729 | | | | 701,833 | | Intangible assets, net | | | 120,551 | | | | 148,935 | | Deferred taxes | | | 7,571 | | | | 9,716 | | Other assets | | | 29,943 | | | | 27,502 | | TOTAL ASSETS | | $ | 1,560,130 | | | $ | 1,419,447 | | | | | | | | | | | | LIABILITIES | | | | | | | | | Accounts payable and accrued expenses | | $ | 79,620 | | | $ | 72,059 | | Accrued compensation | | | 64,202 | | | | 66,479 | | Deferred fees | | | 47,656 | | | | 49,700 | | Taxes payable | | | — | | | | 8,453 | | Dividends payable | | | 27,445 | | | | 24,443 | | Total current liabilities | | | 218,923 | | | | 221,134 | | | | | | | | | | | | Long-term debt | | | 574,174 | | | | 574,775 | | Deferred taxes | | | 16,391 | | | | 21,190 | | Deferred fees | | | 10,088 | | | | 7,833 | | Taxes payable | | | 26,292 | | | | 29,626 | | Deferred rent and other non-current liabilities | | | 42,006 | | | | 38,989 | | TOTAL LIABILITIES | | $ | 887,874 | | | $ | 893,547 | | Commitments and contingencies (See Note 19) | | | | | | | | | | | | | | | | | | | STOCKHOLDERS’ EQUITY | | | | | | | | | Preferred stock, $.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 | | | 401 | | | | 393 | | Additional paid-in capital | | | 806,973 | | | | 667,531 | | Treasury stock, at cost: 1,986,352 and 1,072,263 shares at August 31, 2019 and 2018, respectively | | | (433,799 | ) | | | (213,428 | ) | Retained earnings | | | 373,225 | | | | 122,843 | | Accumulated other comprehensive loss | | | (74,544 | ) | | | (51,439 | ) | TOTAL STOCKHOLDERS’ EQUITY | | $ | 672,256 | | | $ | 525,900 | | | | | | | | | | | | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 1,560,130 | | | $ | 1,419,447 | |
The accompanying notes are an integral part of these consolidated financial statements. Consolidated Financial Statements.
FactSet Research Systems Inc. Consolidated Statements of Cash Flows | | | | | | | | | | | | | | | | | | | (in thousands) | Years ended August 31, | | 2021 | | 2020 | | 2019 | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | Net income | $ | 399,590 | | | $ | 372,938 | | | $ | 352,790 | | | Adjustments to reconcile net income to net cash provided by operating activities | | | | | | | Depreciation and amortization | 64,476 | | | 57,614 | | | 60,463 | | | Amortization of lease right-of-use assets | 42,846 | | | 43,185 | | | — | | | Stock-based compensation expense | 45,065 | | | 36,579 | | | 32,400 | | | Deferred income taxes | (4,602) | | | 10,626 | | | (2,278) | | | Impairment Charge | — | | | 16,500 | | | — | | | | | | | | | Changes in assets and liabilities, net of effects of acquisitions | | | | | | | Accounts receivable, net of reserves | 3,646 | | | (8,608) | | | 10,205 | | | Accounts payable and accrued expenses | 2,068 | | | 12,427 | | | (2,290) | | | Accrued compensation | 21,815 | | | 16,446 | | | (1,743) | | | Deferred fees | 5,078 | | | 5,571 | | | 458 | | | Taxes payable, net of prepaid taxes | 26,298 | | | (24,224) | | | (19,238) | | | Lease liabilities, net | (42,750) | | | (33,340) | | | — | | | Other, net | (8,304) | | | 126 | | | (3,631) | | | Net cash provided by operating activities | 555,226 | | | 505,840 | | | 427,136 | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | Purchases of property, equipment, leasehold improvements and internal-use software | (61,325) | | | (77,642) | | | (59,370) | | | Acquisition of businesses, net of cash and cash equivalents acquired | (58,056) | | | — | | | — | | | Purchases of investments | (18,787) | | | (2,736) | | | (11,135) | | | Proceeds from maturity or sale of investments | 2,176 | | | 6,746 | | | 14,405 | | | Net cash used in investing activities | (135,992) | | | (73,632) | | | (56,100) | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | Repurchases of common stock | (264,702) | | | (199,625) | | | (220,372) | | | Dividend payments | (117,927) | | | (110,439) | | | (100,052) | | | Repayment of debt | — | | | — | | | (575,000) | | | Proceeds from debt | — | | | — | | | 575,000 | | | Proceeds from employee stock plans | 64,177 | | | 95,520 | | | 107,051 | | | Other financing activities | (4,259) | | | (3,531) | | | (901) | | | Net cash used by financing activities | (322,711) | | | (218,075) | | | (214,274) | | | Effect of exchange rate changes on cash and cash equivalents | (263) | | | 11,673 | | | (5,586) | | | Net increase in cash and cash equivalents | 96,260 | | | 225,806 | | | 151,176 | | | Cash and cash equivalents at beginning of period | 585,605 | | | 359,799 | | | 208,623 | | | Cash and cash equivalents at end of period | $ | 681,865 | | | $ | 585,605 | | | $ | 359,799 | | | | | | | | | Supplemental Disclosure of Cash Flow Information | | | | | | | Cash paid during the year for interest | $ | 8,021 | | | $ | 12,876 | | | $ | 19,509 | | | Cash paid during the year for income taxes, net of refunds | $ | 46,588 | | | $ | 69,092 | | | $ | 89,997 | | | | | | | | | Supplemental Disclosure of Non-Cash Transactions | | | | | | | Dividends declared, not paid | $ | 30,845 | | | $ | 29,283 | | | $ | 27,445 | |
| | Years ended August 31, | | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | | Net income | | $ | 352,790 | | | $ | 267,085 | | | $ | 258,259 | | Adjustments to reconcile net income to net cash provided by operating activities | | | | | | | | | | | | | Depreciation and amortization | | | 60,463 | | | | 57,285 | | | | 48,294 | | Stock-based compensation expense | | | 32,400 | | | | 31,516 | | | | 34,183 | | Deferred income taxes | | | (2,278 | ) | | | (1,910 | ) | | | 4,879 | | Loss on sale of assets | | | 196 | | | | 140 | | | | 1,282 | | Tax benefits from share-based payment arrangements | | | — | | | | — | | | | (10,331 | ) | Changes in assets and liabilities, net of effects of acquisitions | | | | | | | | | | | | | Accounts receivable, net of reserves | | | 10,205 | | | | (8,417 | ) | | | (29,503 | ) | Accounts payable and accrued expenses | | | (2,290 | ) | | | 12,077 | | | | (2,226 | ) | Accrued compensation | | | (1,743 | ) | | | 5,735 | | | | 6,427 | | Deferred fees | | | 458 | | | | 6,035 | | | | (229 | ) | Taxes payable, net of prepaid taxes | | | (19,238 | ) | | | 27,659 | | | | 7,877 | | Other, net | | | (3,827 | ) | | | (11,537 | ) | | | 1,613 | | Net cash provided by operating activities | | | 427,136 | | | | 385,668 | | | | 320,527 | | | | | | | | | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | | Acquisition of businesses and investments, net of cash and cash equivalents acquired | | | — | | | | (15,000 | ) | | | (303,086 | ) | Purchases of investments | | | (11,135 | ) | | | (12,470 | ) | | | (30,757 | ) | Proceeds from maturity or sale of investments | | | 14,405 | | | | 12,459 | | | | 23,399 | | Purchases of property, equipment and leasehold improvements | | | (59,370 | ) | | | (33,520 | ) | | | (36,862 | ) | Net cash used in investing activities | | | (56,100 | ) | | | (48,531 | ) | | | (347,306 | ) | | | | | | | | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | Dividend payments | | | (100,052 | ) | | | (89,408 | ) | | | (80,898 | ) | Repurchase of common stock | | | (220,372 | ) | | | (303,955 | ) | | | (260,978 | ) | Repayment of debt | | | (575,000 | ) | | | — | | | | (365,000 | ) | Proceeds from debt | | | 575,000 | | | | — | | | | 640,000 | | Proceeds from employee stock plans | | | 107,051 | | | | 71,610 | | | | 50,045 | | Tax benefits from share-based payment arrangements | | | — | | | | — | | | | 10,331 | | Other financing activities, net | | | (901 | ) | | | 1,716 | | | | (1,661 | ) | Net cash used in financing activities | | | (214,274 | ) | | | (320,037 | ) | | | (8,161 | ) | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | (5,586 | ) | | | (3,208 | ) | | | 1,264 | | Net increase (decrease) in cash and cash equivalents | | | 151,176 | | | | 13,892 | | | | (33,676 | ) | Cash and cash equivalents at beginning of period | | | 208,623 | | | | 194,731 | | | | 228,407 | | Cash and cash equivalents at end of period | | $ | 359,799 | | | $ | 208,623 | | | $ | 194,731 | | | | | | | | | | | | | | | | Supplemental Disclosure of Cash Flow Information | | | | | | | | | | | | | Cash paid during the year for interest | | $ | 19,509 | | | $ | 15,676 | | | $ | 8,466 | | Cash paid during the year for income taxes, net of refunds | | $ | 89,997 | | | $ | 68,707 | | | $ | 74,788 | | | | | | | | | | | | | | | | Supplemental Disclosure of Non-Cash Transactions | | | | | | | | | | | | | Dividends declared, not paid | | $ | 27,445 | | | $ | 24,443 | | | $ | 21,853 | |
The accompanying notes are an integral part of these consolidated financial statements. Consolidated Financial Statements.
FactSet Research Systems Inc. Consolidated Statements of Changes in Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands, except share data) | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Total
Stockholders’
Equity | | Shares | | Par Value | | | Shares | | Amount | | | Balance as of September 1, 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) | | | Common stock issued for employee stock plans | 753,942 | | | 7 | | | 107,043 | | | | | | | | | | | 107,050 | | | Vesting of restricted stock | 85,401 | | | 1 | | (1) | | | 31,644 | | | (7,241) | | | | | | | (7,241) | | | Repurchases of common stock | | | | | | | 882,445 | | | (213,130) | | | | | | | (213,130) | | | Stock-based compensation | | | | | 32,400 | | | | | | | | | | | 32,400 | | | Dividends declared | | | | | | | | | | | (103,710) | | | | | (103,710) | | | 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 | | | Net income | | | | | | | | | | | 372,938 | | | | | 372,938 | | | Other comprehensive loss | | | | | | | | | | | | | 35,251 | | | 35,251 | | | Common stock issued for employee stock plans | 630,520 | | | 7 | | | 95,515 | | | 75 | | | (21) | | | | | | | 95,501 | | | Vesting of restricted stock | 32,996 | | | | | | | 11,945 | | | (3,511) | | | | | | | (3,511) | | | Repurchases of common stock | | | | | | | 739,084 | | | (199,625) | | | | | | | (199,625) | | | Stock-based compensation | | | | | 36,579 | | | | | | | | | | | 36,579 | | | Dividends declared | | | | | | | | | | | (113,014) | | | | | (113,014) | | | Balance as of August 31, 2020 | 40,767,708 | | | $ | 408 | | | $ | 939,067 | | | 2,737,456 | | | $ | (636,956) | | | $ | 633,149 | | | $ | (39,293) | | | $ | 896,375 | | | Net income | | | | | | | | | | | 399,590 | | | | | 399,590 | | | Other comprehensive income | | | | | | | | | | | | | 331 | | | 331 | | | Common stock issued for employee stock plans | 360,877 | | | 4 | | | 64,173 | | | 318 | | (104) | | | | | | | 64,073 | | | Vesting of restricted stock | 34,607 | | | — | | | | | 12,614 | | | (4,155) | | | | | | | (4,155) | | | Repurchases of common stock | | | | | | | 797,385 | | | (264,702) | | | | | | | (264,702) | | | Stock-based compensation | | | | | 45,065 | | | | | | | | | | | 45,065 | | | Dividends declared | | | | | | | | | | | (120,224) | | | | | (120,224) | | | Balance as of August 31, 2021 | 41,163,192 | | | $ | 412 | | | $ | 1,048,305 | | | 3,547,773 | | | $ | (905,917) | | | $ | 912,515 | | | $ | (38,962) | | | $ | 1,016,353 | |
| | Common Stock | | | Additional | | | Treasury Stock | | | | | | Accumulated Other | | | Total | | | (in thousands, except share data) | | Shares | | | Par Value | | | Paid-in Capital | | | Shares | | | Amount | | | Retained Earnings | | | Comprehensive Loss | | | Stockholders’ Equity | | Balance as of September 1, 2016 | | | 51,150,978 | | | $ | 512 | | | $ | 623,195 | | | | 11,112,753 | | | $ | (1,321,700 | ) | | $ | 1,283,927 | | | $ | (68,553 | ) | | $ | 517,381 | | Net income | | | | | | | | | | | | | | | | | | | | | | | 258,259 | | | | | | | | 258,259 | | Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 33,833 | | | | 33,833 | | Common stock issued for employee stock plans | | | 561,960 | | | | 6 | | | | 50,039 | | | | | | | | | | | | | | | | | | | | 50,045 | | Vesting of restricted stock | | | 132,194 | | | | | | | | | | | | 49,771 | | | | (7,847 | ) | | | | | | | | | | | (7,847 | ) | Repurchases of common stock | | | | | | | | | | | | | | | 1,556,660 | | | | (253,131 | ) | | | | | | | | | | | (253,131 | ) | Stock-based compensation expense | | | | | | | | | | | 34,183 | | | | | | | | | | | | | | | | | | | | 34,183 | | Tax benefits from share-based payment arrangements | | | | | | | | | | | 10,331 | | | | | | | | | | | | | | | | | | | | 10,331 | | Accelerated share repurchase | | | | | | | | | | | 24,000 | | | | 102,916 | | | | (24,000 | ) | | | | | | | | | | | — | | Dividends declared | | | | | | | | | | | | | | | | | | | | | | | (83,363 | ) | | | | | | | (83,363 | ) | Balance as of August 31, 2017 | | | 51,845,132 | | | $ | 518 | | | $ | 741,748 | | | | 12,822,100 | | | $ | (1,606,678 | ) | | $ | 1,458,823 | | | $ | (34,720 | ) | | $ | 559,691 | | 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 | | Vesting of restricted stock | | | 26,599 | | | | | | | | | | | | 8,070 | | | | (1,514 | ) | | | | | | | | | | | (1,514 | ) | Repurchases of common stock | | | | | | | | | | | | | | | 1,534,782 | | | | (302,441 | ) | | | | | | | | | | | (302,441 | ) | Stock-based compensation expense | | | | | | | | | | | 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 | ) | Common stock issued for employee stock plans | | | 753,942 | | | | 7 | | | | 107,043 | | | | | | | | | | | | | | | | | | | | 107,050 | | Vesting of restricted stock | | | 85,401 | | | | 1 | | | | (1 | ) | | | 31,644 | | | | (7,241 | ) | | | | | | | | | | | (7,241 | ) | Repurchases of common stock | | | | | | | | | | | | | | | 882,445 | | | | (213,130 | ) | | | | | | | | | | | (213,130 | ) | Stock-based compensation expense | | | | | | | | | | | 32,400 | | | | | | | | | | | | | | | | | | | | 32,400 | | Dividends declared | | | | | | | | | | | | | | | | | | | | | | | (103,710 | ) | | | | | | | (103,710 | ) | 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 | |
*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 TCJAU.S. Tax Cuts and Jobs Act ("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.
The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
1. ORGANIZATION AND NATURE DESCRIPTION OF BUSINESS FactSet Research Systems Inc. (the “Company”and its wholly-owned subsidiaries (collectively, "we," "our," "us," the "Company" or “FactSet”"FactSet") is a global provider of integrated financial information, analytical applicationsdata and industry-leading services foranalytics company with open and flexible technology and a purpose to drive the investment community to see more, think bigger, and corporate communities. do their best work. Our strategy is to become the leading open content and financial analytics platform in the industry that delivers differentiated advantage for our clients’ success. For over 40 years, the FactSet platform has delivered expansive data, sophisticated analytics, and flexible technology that global financial professionals have utilized the Company’s contentneed to power their critical investment workflows. Over 160,000 asset managers and multi-asset classowners, bankers, wealth managers, corporate firms, including private equity and venture capital firms, and others, use our personalized solutions across each stage of theto identify opportunities, explore ideas, and gain a competitive advantage, in areas spanning 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, 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 bothreporting across the investment portfolio lifecycle or as standalone components serving different workflows in the organization. FactSet is focusedlifecycle. We provide financial data and market intelligence on growing the business throughout each of its 3 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 onsecurities, companies and industries to enable our clients to research investment ideas, as well as offering them the capabilities to analyze, monitor portfolio risk and performance and to execute trades. The Company combinesmanage their portfolios. We combine dedicated client service with open and flexible technology offerings, such as a configurable desktop and mobile platform, comprehensive data marketplace, a configurable mobile and desktop platform,feeds, cloud-based digital portalssolutions, and application programming interface (“APIs”interfaces ("APIs"). FactSetOur revenue is primarily derived from subscriptions to our products and services such as workstations, portfolio analytics, enterpriseand market data.
We advance our industry by comprehensively understanding our clients’ workflows, solving their most complex challenges, and helping them achieve their goals. By providing them with the leading open content and analytics platform, an expansive universe of concorded data research management,they can trust, next-generation workflow support designed to help them grow and trade execution.see their next best action, and the industry’s most committed service specialists, FactSet puts our clients in a position to outperform. We are focused on growing our business through 3 reportable segments ("segments"): the Americas, EMEA and Asia Pacific. Refer to Note 19, Segment Information, in the Notes to the Consolidated Financial Statements included in Part II, Item 8. of this Annual Report on Form 10-K for further discussion. Within each of our segments, we primarily deliver insight and
information through our three workflow solutions: Research & Advisory; Analytics & Trading; and Content & Technology ("CTS"). 2. BASIS OF PRESENTATION FactSet conducts
We conduct business globally and is managedmanage our business on a geographic basis. The accompanying consolidated financial statementsConsolidated Financial Statements and notes of FactSet and its wholly-owned subsidiariesNotes to the Consolidated Financial Statements included in this Annual Report on Form 10-K are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”("GAAP"). for annual financial information and the instructions to Form 10-K and Article 10 of Regulation S-X. The accompanying Consolidated Financial Statements include our accounts and those of our wholly-owned subsidiaries; all intercompany activity and balances have been eliminated. Use of Estimates The preparation of consolidated financial statementsour 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 may have been made in areas that include income taxes, stock-based compensation, the valuation of goodwill and allocation of purchase price to acquired assets and liabilities, stock-based compensation, income taxes, accrued compensation, valuation of goodwill, and useful lives and valuationimpairments of fixedlong-lived tangible and intangible assets. The Company bases itsassets and reserves for litigation and other contingencies. We base our 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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The
Our significant accounting policies of the Company and its subsidiaries are summarized below. The majority of the Company’sour revenue is derived from client access to itsour 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. The CompanyWe 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. Based on the nature of the services and products offered by FactSet, the Company appliesus, we apply an inputoutput time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. The Company recordsWe record revenue for itsour contracts using the over-time revenue recognition model as a client is invoiced or performance is satisfied. A provision for billing adjustments and cancellation of servicescurrent expected credit losses is estimated and accounted for as a reduction to revenue, with a corresponding reduction to accounts receivable.
Cost of Services
Cost of services is comprised of compensation for our employees within the content collection, consulting, product development, software and systems engineering groups in addition to data costs, computer maintenance and depreciation expenses, amortization of identifiable intangible assets, and client-related communication costs. 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, rent, professional fees, depreciation of furniture and fixtures, amortization of lease right-of-use ("ROU") assets and leasehold improvements, as well as marketing costs, office expenses,, travel and entertainment expenses, and other miscellaneous expenses. 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 units, 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. We use the straight-line attribution method for all awards with graded vesting features and service conditions only. Under this method, the amount of compensation expense that is recognized on any date is at least equal to the vested portion of the award on that date. For all stock-based awards with performance conditions, the graded vesting attribution method is used by us to determine the monthly stock-based compensation expense over the applicable vesting periods.
As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. 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. Windfall tax benefits, defined as tax deductions that exceed recorded stock-based compensation, are classified as cash inflows from operations. Performance-based equity awards require management to make assumptions regarding the likelihood of achieving company performance targets on a quarterly basis. The number of performance share units that vest will be predicated on us achieving certain performance levels. A change in the financial performance levels we achieve could result in changes to our current estimate of the vesting percentage and related stock-based compensation. Research and Product Development Costs Research and product development ("R&D") costs are expensed as incurred, unless they qualify as internal-use software development costs and are then capitalized and amortized over the estimated useful life. These costs primarily consist of personnel-related expenses, such as salaries and related benefits for our product development, software engineering and technical support departments and, if not capitalized, are included in employee compensation (found within of Cost of services expense and SG&A in the Consolidated Statements of Income). We also utilize certain third parties to develop internal-use software. These costs are capitalized and amortized over the estimated useful life. If not capitalized, these costs are included in SG&A in the Consolidated Statements of Income. We do not have a separate research and product development department, but rather rely on these departments to work closely with our strategists, product managers, sales and other client-facing specialists to develop new products and process innovations and enhance existing products. We incurred research and product development costs of $250.1 million and $224.0 million during fiscal years 2021 and 2020, respectively. Income Taxes Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using current enacted tax rates. We recognize the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will prevail upon tax examination, based solely on the technical merits of the tax position as of the reporting date. Otherwise, no benefit or expense can be recognized in the Consolidated Financial Statements. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest is classified as income tax expense in the financial statements. As of August 31, 2021, we had gross unrecognized tax benefits totaling $14.9 million, including $1.3 million of accrued interest, recorded as Taxes payable (non-current) on the Consolidated Balance Sheets. 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. Diluted EPS is computed, using the treasury stock method, by dividing net income by the number of weighted average common shares outstanding and issuable upon the exercise of outstanding share-based compensation awards (including stock options and awards of restricted stock units) during the period. 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. Comprehensive Income We disclose 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. Cash and Cash Equivalents Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less. Our cash equivalents consist of money market funds that are available for withdrawal without restriction and are carried at cost, which approximates fair value.
Accounts Receivable and Deferred Fees 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, 2021, the amount of accounts receivable that was unbilled totaled $15.8$18.3 million, which will be billed in fiscal 2020.2022. As of August 31,2018, 2020, the amount of accounts receivable that was unbilled totaled $6.4$17.1 million, which waswere billed in fiscal 2019.The Company calculates its2021.
Accounts receivable reserve through analyzing aged client receivables, reviewing the recent historyare recorded net of client receivable write-offsan allowance for credit losses based on a variety of factors, including our historical write-off activity, current economic environment, customer-specific information and understanding general market andexpectations of future economic conditions. We write-off account balances against our reserve when we have exhausted our collection efforts. In accordance with this policy, aour receivable reserve of $10.5reserves were $6.4 million and $3.5$8.0 million was recorded as of August 31,2019 2021 and 2018,2020, respectively, within the Consolidated Balance Sheetsrecorded as a reduction to Accounts receivable.Cost of Services
Cost of services is comprised of compensation for Company employeesreceivable, within the content collection, consulting, product development, software and systems engineering groups in addition to data costs, computer maintenance and depreciation expenses, amortization of identifiable intangible assets, and client-related communication costs.
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.
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. FactSet incurred research and product development costs of $214.7 million, $217.1 million and $215.0 million during fiscal years 2019,2018 and 2017, 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. 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. 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. 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. 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. 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. Refer to Note 5 Fair Value Measures for the definition of the fair value hierarchy.
Cash and Cash Equivalents
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
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 mutual funds and certificates of deposit are held for investment and are not considered debt securities. Interest income earned from these investments during fiscal 2019,2018 and 2017 was $1.5 million, $1.3 million and $1.6 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.
Sheets. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. ComputersProperty and related equipment areis depreciated based on athe straight-line basismethod over the estimated useful lives of the assets, ranging from three years. Furnitureto five years for computers and fixtures are depreciated on a straight-line basis over their estimated useful lives of related equipment and seven years. years for furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the termsshorter of their respective useful lives or the related leases or estimated useful lives of the improvements, whichever period is shorter.lease term. Repairs and maintenance expenditures, which are not considered leasehold improvements and do not extend the useful life of the property and equipment, are expensed as incurred.The Company performs
We perform a test for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable. Should projected undiscounted future cash flows be less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value is required. Fair value is determined based on the most appropriate valuation technique, including discounted cash flows.
If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. The new cost basis will be depreciated (amortized) over the remaining useful life of that asset.
Goodwill Goodwill
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 hasWe have 3 reporting units, U.S, EuropeAmericas, 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 We 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 considerswe consider such factors as macro-economic conditions, industry and market conditions in which FactSet operateswe operate, including the competitive environment and significant changes in demand for the Company’sour services. The CompanyWe also considers itsconsider the 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 we elect 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 the 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 the fair value of FactSet’sour reporting units. The annual review of carrying value of goodwill requires the Companyus to 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’sour 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’sour 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. The Company
We performed itsour annual goodwill impairment test during the fourth quarter of fiscal 20192021 utilizing a qualitative analysis and concluded it was more likely than not the fair value of each reporting unit was greater than its respective carrying value and 0no impairment charge was required.
Intangible Assets FactSet’s
Acquired Intangible Assets Our 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’sour operations. The Company amortizesWe amortize 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. If the estimate of the remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. Amortizable Intangible assets are tested for impairment, if indicators of impairment are present, based on undiscounted cash flows, and, if impaired, written down to fair value based on discounted cash flows. NaNNo impairment of intangible assets has been identified during any of the fiscal years presented. The intangible assets have no assigned residual values. Internally Developed Software We capitalize 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. Leases We adopted the standard, ASC 842-10, Leases ("ASC 842") as of September 1, 2019, using a modified retrospective approach. Refer to Note 12, Leases, for further details. We review new arrangements at inception to evaluate whether we obtain substantially all the economic benefits of and have the right to control the use of an asset. If we determine that an arrangement qualifies as a lease, with a lease term of greater than one year, we assess whether the leased asset is an operating or financing lease. Our lease portfolio is primarily related to our office space, under various operating lease agreements. We record a lease ROU asset and lease liability as the present value of the future minimum lease payments (including fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term, beginning at the lease commencement date. As there is no rate implicit in our operating lease arrangements, these balances are initially recorded using our incremental borrowing rate ("IBR") within the geography where the leased asset is located. As we do not have any outstanding public debt, we estimate the IBR based on our 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. We elected to not record operating lease right-of-use assets or operating lease liabilities for leases with an initial term of 12 months or less. We 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, 2021, our leases have remaining terms of less than one year to just over 14 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. Accrued liabilities include estimates relating to employee compensation, operating expenses and tax liabilities. At the end of each fiscal year, FactSet conductswe conduct a final review of both the performance of the Company and individual performance within each department to determine the amount of discretionary employee compensation. The CompanyWe also reviewsreview 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 amountmajority of the variable employee compensation recorded within accrued compensation related to the annual performance bonus, which was $75.1 million and $54.4 million as of August 31,2019 2021 and 2018, was $49.4 million and $43.6 million,2020, respectively.
Derivative Instruments FactSet conducts
Foreign Currency Forward Contracts We conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso, British Pound Sterling, and Japanese Yen.Peso. As such, the Company iswe are exposed to movements in foreign currency exchange rates comparedrelative to the U.S. dollar. The Company utilizesWe utilize 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. The Company does We do not enter into foreign exchange forward contracts for trading or speculative purposes. In designing a specific hedging approach, FactSet considerswe consider several factors, including offsetting exposures, significance of exposures, forecasting risk and potential effectiveness of the hedge. 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, we 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 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 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. Treasury Stock We account for repurchased common stock under the cost method and includes such treasury stock as a component of our Stockholders’ equity. We account 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. 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. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible. We consider the principal or most advantageous market in which we would transact and consider 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. 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. Our cash equivalents are classified as Level 1 while our derivative instruments (foreign exchange forward contracts and interest rate swap) and certificates of deposit are classified as Level 2. There were no Level 3 assets or liabilities held by us as of August 31, 2021 or 2020. Refer to Note 5, Fair Value Measures for the definition of the fair value hierarchy. Foreign Currency Translation Certain wholly-owned subsidiaries operate under a functional currency different from the U.S. dollar, such as the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso, British Pound Sterling, and Japanese Yen.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’ equity. The accumulated foreign currency translation loss totaled $72.3$36.9 million and $48.0$37.7 million at August 31,2019 2021 and 2018,2020, respectively. Income and Deferred Taxes
Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using current enacted tax rates. FactSet recognizes the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will prevail upon tax examination, based solely on the technical merits of the tax position as of the reporting date. Otherwise, no benefit or expense can be recognized in the consolidated financial statements. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, FactSet accrues interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. 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.
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. FactSet uses the straight-line attribution method for all awards with graded vesting features and service conditions only. Under this method, the amount of compensation expense that is recognized on any date is at least equal to the vested portion of the award on that date. For all stock-based awards with performance conditions, the graded vesting attribution method is used by the Company to determine the monthly stock-based compensation expense over the applicable vesting periods.
As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. 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
Table 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.Treasury Stock
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.
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.
Business Combinations
The Company accounts for its business combinations using the purchase method of accounting. The acquisition purchase price is allocated to the underlying identified, tangible and intangible assets and liabilities assumed, based on their respective estimated fair values on the acquisition date. The excess of the purchase consideration over the fair values of the identified assets and liabilities is recorded as goodwill and assigned to one or more reporting units. 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. Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.
Contents Concentrations of Risk Cash
Refer to Note 20, Risks and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amountConcentrations of insurance provided on such deposits. Generally, these deposits may be redeemed upon demandCredit Risk for areas that potentially subject us to a significant concentration of risk and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties. New Accounting Standards or Updates Recently Adopted As of the beginning of fiscal 2019, FactSet2021, we implemented all applicable new accounting standards and updates issued by the Financial Accounting Standards Board (“FASB”("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 our Consolidated Financial Statements other than the consolidated financial statements.Revenue Recognition
adoption of ASC 842. Goodwill Impairment Test In May 2014 and July 2015, January 2017, the FASB issued accounting standard updates which clarified principlesASU 2017-04, Intangibles—Goodwill and Other (Topic 350); Simplifying the Test 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.
Recent Accounting Standards or Updates Not Yet Effective
Leases
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.
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. ThisWe have adopted this standard effective September 1, 2020. The adoption of this accounting standard update had no impact on our Consolidated Financial Statements. Credit Losses on Financial Instruments In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will be effectivemeasure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaces the Company beginning in"incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. Subsequent to the first quarter of fiscal 2021, with early adoption, permittedthe allowance for any impairment tests performed after January 1, 2017 doubtful accounts is made when the financial asset is first recorded to the balance sheet (and periodically thereafter) and is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We have adopted this standard effective September 1, 2020. The adoption of this accounting standard update did not expected to have a material impact on the consolidated financial statements.
our Consolidated Financial Statements.
Leases Hedge Accounting Simplification
In August 2017, February 2016, the FASB issued an accounting standard update related to reduceaccounting 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. We 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. As such, our historical Consolidated Financial Statements were not restated and follow our previous policy under ASC 840, Leases. Refer to our 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. We have elected the package of practical expedients permitted under the transition guidance, which permits us to not reassess the prior conclusions about lease identification, lease classification, and initial direct costs. We did not elect the use-of-hindsight practical expedient in determining the lease term and in assessing impairment. We elected the practical expedient not to separate lease components from non-lease components but, rather, to combine them into one single lease component. We have 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. We 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 12, Leases for more information regarding the Company's lease accounting. Hedge Accounting Simplification During the first quarter of fiscal 2020, we adopted the accounting standard updated issued by the FASB in August 2017, which focused on reducing the complexity of and simplifysimplifying the application of hedge accounting. The guidance refines and expands hedge accounting for both financial and nonfinancialnon-financial 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. ThisThe adoption of this standard had no impact on our Consolidated Financial Statements. Recent Accounting Standards or Updates Not Yet Effective Facilitation of the Effects of Reference Rate Reform on Financial Reporting In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848); Facilitation of the Effects of Reference Rate Reform on Financial Reporting, 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 willis 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 effective for the Company beginning in the first quarter of fiscal 2020. The Company isapplied through December 31, 2022. We are currently evaluating the impact of this accounting standard, update but it is not expected to have a material impact on our Consolidated Financial Statements. Income Tax Simplification In December 2019, the consolidated financial statements.FASB issued ASU 2019-12, Income Taxes (Topic 740); Simplifying the Accounting for Income Taxes, 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 us 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. We have evaluated the impact of adopting this accounting standard and have determined that adoption will not have a material impact on our Consolidated Financial Statements. No other new accounting pronouncements issued or effective as of August 31,2019 2021 have had or are expected to have ana material impact on the Company’s consolidated financial statements.our Consolidated Financial Statements.4. REVENUE RECOGNITION The Company derives
We derive most of itsour revenue by providing client access to itsour 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, and trade execution. The Companymanagement. We determined that the subscription-based service represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client. The CompanyWe also determined that 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 appliesus, we apply an inputoutput time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. The Company recordsWe record revenue for itsour 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 satisfied. We do not consider payment terms as a performance obligation for customersclients with contractual terms that are one year or less and haswe have elected the practical expedient. In FactSet’s assessment of contracts
Contracts with clients the Company did identify a small portion of contracts withcan include certain fulfillment costs, which includecomprised of up-front costs to allow for the delivery of services and products, thatwhich are expected to be recovered.recoverable. In connection with the adoption of the newrevenue recognition 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 betweenperiod, and amortized consistent with the Company’s reported operating results as of August 31,2019, which reflectassociated revenue for providing 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.services. There are no significant judgments that would impact the timing of revenue recognition. The majority of client contracts have a duration of one year or less, or the amount FactSet iswe are entitled to receive corresponds directly with the value of performance obligations completed to date, and therefore, the Company does we do not disclose the value of the remaining unsatisfied performance obligations.
Disaggregated Revenue The Company disaggregates
We disaggregate revenue from contracts with clients by demographic regionour reportable segments ("segments"), which include U.S., Europeconsist of the Americas, EMEA and Asia Pacific. FactSet believesWe believe these geographic regionssegments are reflective of how the Company manages thewe manage our business and the demographic markets in which it serves. The geographic regionswe serve and best depict the nature, amount, timing and uncertainty of revenue and cash flows related to contracts with clients. Refer to Note 819, Segment Information for further information on revenue by geographic region.
information.
The following table presents this disaggregation of revenue by geography:| | | August 31, | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | U.S. | | $ | 894,554 | | | $ | 841,908 | | | $ | 784,146 | | Europe | | $ | 408,084 | | | $ | 387,589 | | | $ | 330,332 | | Asia Pacific | | $ | 132,713 | | | $ | 120,648 | | | $ | 106,701 | | Total Revenue | | $ | 1,435,351 | | | $ | 1,350,145 | | | $ | 1,221,179 | |
| | | | | | | | | | | | | | | | | | | | August 31, | | (in thousands) | 2021 | | 2020 | | 2019 | | Americas | $ | 1,008,046 | | | $ | 943,649 | | | $ | 885,854 | | | EMEA | $ | 427,700 | | | $ | 406,498 | | | $ | 420,884 | | | Asia Pacific | $ | 155,699 | | | $ | 143,964 | | | $ | 128,613 | | | Total Revenue | $ | 1,591,445 | | | $ | 1,494,111 | | | $ | 1,435,351 | |
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”"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 considersWe consider the principal or most advantageous market in which itwe 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. 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’sOur assessment of the significance of a particular input to the fair value measurement requires judgment and may affect theirits placement within the fair value hierarchy levels. FactSet hasWe have categorized itsour 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’sour 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; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. The Company’sOur 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 0 We held no Level 3 assets or liabilities held by FactSet as of August 31,2019 2021 or 2018.
2020.
(a) Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables showsshow, by level within the fair value hierarchy, the Company’sour assets and liabilities that are measured at fair value on a recurring basis at August 31,2019 2021 and 2018: | | Fair Value Measurements at August 31, 2019 | | | (in thousands) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | Assets | | | | | | | | | | | | | | | | | 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) | | | — | | | | 520 | | | | — | | | | 520 | | Total assets measured at fair value | | $ | 75,849 | | | $ | 26,193 | | | $ | — | | | $ | 102,042 | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | Derivative instruments(4) | | $ | — | | | $ | 3,575 | | | $ | — | | | $ | 3,575 | | Total liabilities measured at fair value | | $ | — | | | $ | 3,575 | | | $ | — | | | $ | 3,575 | |
| | Fair Value Measurements at August 31, 2018 | | | (in thousands) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | Assets | | | | | | | | | | | | | | | | | Corporate money market funds(1) | | $ | 75 | | | $ | — | | | $ | — | | | $ | 75 | | Mutual Funds(2) | | | — | | | | 18,668 | | | | — | | | | 18,668 | | Certificates of deposit(3) | | | — | | | | 10,591 | | | | — | | | | 10,591 | | Derivative instruments(4) | | | — | | | | 90 | | | | — | | | | 90 | | Total assets measured at fair value | | $ | 75 | | | $ | 29,349 | | | $ | — | | | $ | 29,424 | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | Derivative instruments(4) | | $ | — | | | $ | 4,036 | | | $ | — | | | $ | 4,036 | | Total liabilities measured at fair value | | $ | — | | | $ | 4,036 | | | $ | — | | | $ | 4,036 | |
| (1)
| The Company’s corporate money market fundsarereadily convertible into cashand 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 withinthe Consolidated BalanceSheets.
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| (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 asInvestments (short-term) on the Consolidated Balance Sheets.
|
| (3)
| The Company’s certificates of deposit held for investment are not debt securitiesand 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) withintheConsolidated Balance Sheets.
|
| (4)
| 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 asspot, forward and interest rates,as well as credit default swap spreadsand therefore are classified as Level 2 assets.
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The Company2020. We did not have any transfers between Level 1 and Level 2levels of fair value measurementsmeasurement during the periods presented.
| | | | | | | | | | | | | | | | | | | (in thousands) | Fair Value Measurements at August 31, 2021 | | Level 1 | | Level 2 | | Total | | Assets | | | | | | Corporate money market funds(1) | $ | 232,519 | | | $ | — | | | $ | 232,519 | | Mutual Funds(2) | — | | | 35,984 | | | 35,984 | | | | | | | | Derivative instruments(4) | — | | | 1,384 | | | 1,384 | | | Total assets measured at fair value | $ | 232,519 | | | $ | 37,368 | | | $ | 269,887 | | | | | | | | | Liabilities | | | | | | Derivative instruments(4) | $ | — | | | $ | 4,181 | | | $ | 4,181 | | | Total liabilities measured at fair value | $ | — | | | $ | 4,181 | | | $ | 4,181 | |
| | | | | | | | | | | | | | | | | | | (in thousands) | Fair Value Measurements at August 31, 2020 | | Level 1 | | Level 2 | | Total | | Assets | | | | | | 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 | | | | | | | | | Liabilities | | | | | | Derivative instruments(4) | $ | — | | | $ | 5,773 | | | $ | 5,773 | | | Total liabilities measured at fair value | $ | — | | | $ | 5,773 | | | $ | 5,773 | |
(1)Our corporate money market fundsarereadily convertible into cashand the net asset value of each fund on the last day of the quarter is used to determine its fair value. Our corporate money market funds are classified as Level 1 assets and are included in Cash and cash equivalents withinthe Consolidated BalanceSheets.
(2)Our 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. Our mutual funds are classified as Level 2 and are included inInvestments (short-term) within the Consolidated Balance Sheets. (3)Our certificates of deposit held for investment are classified as Level 2 assets. These certificates of deposit have original maturities greater than three months but less than one year and are included in Investments (short-term) withintheConsolidated Balance Sheets. (4)We utilize the income approach to measure fair value for our foreign exchange forward contracts. The income approach uses pricing models that rely on market observable inputs such asspot, 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, we utilize 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 our derivative instruments designed as cash flow hedges and their classification within the Consolidated Balance Sheets. (b) Assets and Liabilities Measured at Fair Value on a Non-Recurring BasisCertain assets, including goodwill
Assets and intangible assets, and liabilities that are measured at fair value on a non-recurring basis; that is, thenonrecurring basis relate primarily to our tangible fixed assets, operating lease right-of-use ("ROU") assets, goodwill 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.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. AnWe review goodwill and intangible assets for impairment charge is recorded whenannually, during the cost exceeds its fairfourth quarter of each fiscal year, or as circumstances indicate the possibility for impairment. We monitor the carrying value based uponof long-lived assets for impairment whenever events or changes in circumstances indicate the results of such valuations.carrying amount may not be recoverable. During fiscal 20192021 and 2018,2020, no fair value adjustments or material fair value measurements were required for the Company’sour non-financial assets or liabilities. (c) Assets and Liabilities Measured at Fair Value for Disclosure Purposes Only As of August 31,2019, 2021 and 2018,2020, the fair value of our 2019 Revolving Credit Facility (as defined below in Note 13, Debt), included in Long-term debt within the Company’s long-term debtConsolidated Balance Sheets, was $575.0 million, which approximated its carrying amount given the application of a floating interest rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid. As 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. 6. DERIVATIVE INSTRUMENTS Cash Flow Hedges FactSet conducts
Foreign Currency Forward Contracts We conduct business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso, British Pound Sterling, and Japanese Yen.Peso. As such, it iswe are exposed to movements in foreign currency exchange rates compared towith the U.S. dollar. The Company utilizesWe utilize 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. The Company does We do not enter into foreign currency forward contracts for trading or speculative purposes. Seepurposes and limit counterparties to credit-worthy financial institutions. Refer to Note 19, Commitments20, Risks and Contingencies - ConcentrationConcentrations of Credit Risk, for further discussion on counterparty credit risk. In designing a specific hedging approach, FactSetwe 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 accumulatedAccumulated other comprehensive loss (" AOCL'"AOCL") and subsequently reclassified into operatingOperating expenses when the hedge is settled. There was 0 no discontinuance of cash flow hedges during fiscal 20192021 or 2018,fiscal 2020, and as such, no corresponding gains or losses related to changes in the value of the Company’sour contracts were reclassified into earnings prior to settlement. As of August 31,2019, FactSet 2021, we 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.
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| •
| 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.
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| •
| 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.
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| •
| 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.
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a portion of our British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures. We entered into a series of forward contracts to mitigate our 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 2022 through the fourth quarter of fiscal 2022.
The following is a summary of all hedging positions and corresponding fair values:
Currency Hedged | | Gross Notional Value | | | Fair Value (Liability) Asset | | | (in thousands, in U.S. dollars) | | August 31, 2019 | | | August 31, 2018 | | | August 31, 2019 | | | August 31, 2018 | | Philippine Peso | | $ | 26,000 | | | $ | 52,000 | | | $ | 520 | | | $ | (1,230 | ) | Indian Rupee | | | 20,410 | | | | 50,780 | | | | (998 | ) | | | (1,490 | ) | Euro | | | 40,854 | | | | 26,312 | | | | (1,230 | ) | | | (503 | ) | British Pound Sterling | | | 26,436 | | | | 18,995 | | | | (1,347 | ) | | | (723 | ) | Total | | $ | 113,700 | | | $ | 148,087 | | | $ | (3,055 | ) | | $ | (3,946 | ) |
As of August 31,2019, 2021, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S. dollars was ₱1.4₱1.4 billion and Rs.1.4Rs2.6 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€33.8 million and £20.5£37.7 million, respectively. Interest Rate Swap Agreement 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 on a portion of our outstanding debt under our 2019 Revolving Credit Facility (as defined below in Note 13, Debt). As of August 31, 2021, we have 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, 2021. Refer to Note 13, Debt, for further discussion on the 2019 Revolving Credit Facility The variable interest rate on our long-term debt can expose us to interest rate volatility arising from changes in LIBOR. Under the terms of the interest rate swap agreement, we 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.
As the terms for the interest rate swap agreement align with the 2019 Revolving Credit Facility, we do not expect any hedge ineffectiveness. We have 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. Realized gains or losses are subsequently reclassified into Interest expense, net in the Consolidated Statement of Income when settled. The following is a summary of the gross notional values of the derivative instruments: | | | | | | | | | | | |
(in thousands, in U.S. dollars) | Gross Notional Value | | August 31, 2021 | | August 31, 2020 | | Foreign currency forward contracts | $ | 154,728 | | | $ | 129,649 | | | Interest rate swap agreement | 287,500 | | | 287,500 | | | Total cash flow hedges | $ | 442,228 | | | $ | 417,149 | |
Fair Value of Derivative Instruments The following tables provideis a summary of the fair value amountsvalues of derivative instruments and gains and losses onthe derivative instruments:Designation of Derivatives (in thousands) | | Balance Sheet Location | | August 31, 2019 | | | August 31, 2018 | | Derivatives designated as hedging instruments | | Assets: Foreign Currency Forward Contracts | | | | | | | | | | | | Prepaid expenses and other current assets | | $ | 520 | | | $ | 90 | | | | | Other assets | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | Liabilities: Foreign Currency Forward Contracts | | | | | | | | | | | | Accounts payable and accrued expenses | | $ | 3,575 | | | $ | 1,731 | | | | | Deferred rent and other non-current liabilities | | $ | — | | | $ | 2,305 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Fair Value of Derivative Instruments | | Derivative Assets | | Derivative Liabilities | | Derivatives designated as hedging instruments | Balance Sheet Classification | August 31, 2021 | August 31, 2020 | | Balance Sheet Classification | August 31, 2021 | August 31, 2020 | | Foreign currency forward contracts | Prepaid expenses and other current assets | $ | 1,384 | | $ | 3,644 | | | Accounts payable and accrued expenses | $ | 1,201 | | $ | 93 | | | Interest rate swap agreement | Prepaid expenses and other current assets | — | | — | | | Accounts payable and accrued expenses | 1,934 | | 1,861 | | | Other assets | — | | — | | | Other liabilities | 1,045 | | 3,819 | | | Total cash flow hedges | | $ | 1,384 | | $ | 3,644 | | | | $ | 4,181 | | $ | 5,773 | |
All derivatives were designated as hedging instruments as of August 31,2019 2021 and 2018,2020, 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 2021, 2020 and 2017:(in thousands) | | (Loss) Gain Recognized in AOCL on Derivatives (Effective Portion) | | Location of (Loss) Gain Reclassified from AOCL | | (Loss) Gain Reclassified from AOCL into Income (Effective Portion) | | Derivatives in Cash Flow Hedging Relationships | | 2019 | | | 2018 | | | 2017 | | into Income (Effective Portion) | | 2019 | | | 2018 | | | 2017 | | Foreign currency forward contracts | | $ | (187 | ) | | $ | (7,700 | ) | | $ | 5,183 | | SG&A | | $ | (1,794 | ) | | $ | 3,106 | | | $ | (2,883 | ) |
2019: | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | Gain (Loss) Recognized in AOCL on Derivatives | Location of Gain (Loss) Reclassified from AOCL into Income | Gain (Loss) Reclassified from AOCL into Income | | Derivatives in Cash Flow Hedging Relationships | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | | Foreign currency forward contracts | $ | 1,660 | | $ | 5,049 | | $ | (187) | | SG&A | $ | 5,027 | | $ | (1,556) | | $ | (1,794) | | | Interest rate swap agreement | 745 | | (6,138) | | — | | Interest expense, net | (1,956) | | (458) | | — | | | Total cash flow hedges | $ | 2,405 | | $ | (1,089) | | $ | (187) | | | $ | 3,071 | | $ | (2,014) | | $ | (1,794) | |
As of August 31, 2021, we estimate that net pre-tax derivative losses of $1.8 million included in AOCL will be reclassified into earnings within the next 12 months. 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
Offsetting of Derivative Instruments FactSet’s
We enter into master netting and other similar arrangements with itsdesigned to permit net settlement of derivative transactions among the respective counterparties, allow for net settlement under certain conditions.settled on the same date and in the same currency. As of August 31,2019 2021 and 2018,2020, there were no material amounts recorded net on the Consolidated Balance Sheets.
7. ACQUISITION
Truvalue Labs, Inc. 7. 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) | | Pre-tax | | | Net of tax | | | Pre-tax | | | Net of tax | | | Pre-tax | | | Net of tax | | Foreign currency translation adjustments | | $ | (24,325 | ) | | $ | (24,325 | ) | | $ | (9,431 | ) | | $ | (9,431 | ) | | $ | 28,816 | | | $ | 28,816 | | Net unrealized gain (loss) on cash flow hedges recognized in AOCL | | | 891 | | | | 504 | | | | (10,806 | ) | | | (7,288 | ) | | | 8,066 | | | | 5,017 | | Other comprehensive (loss) income | | $ | (23,434 | ) | | $ | (23,821 | ) | | $ | (20,237 | ) | | $ | (16,719 | ) | | $ | 36,882 | | | $ | 33,833 | |
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 | | $ | (2,266 | ) | | $ | (3,486 | ) | Accumulated foreign currency translation adjustments | | | (72,278 | ) | | | (47,953 | ) | Total accumulated other comprehensive loss | | $ | (74,544 | ) | | $ | (51,439 | ) |
8. 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, consistingOn November 2, 2020, we acquired all of the Chief Financial Officer, Chief Technology and Product Officer, Global Headoutstanding shares 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 3 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.
The U.S. 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 | | U.S. | | | Europe | | | Asia Pacific | | | Total | | Revenue from clients | | $ | 894,554 | | | $ | 408,084 | | | $ | 132,713 | | | $ | 1,435,351 | | Segment operating profit | | | 179,374 | | | | 179,258 | | | | 79,403 | | | | 438,035 | | Total assets | | | 851,014 | | | | 588,911 | | | | 120,205 | | | | 1,560,130 | | 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 | | U.S. | | | Europe | | | Asia Pacific | | | Total | | Revenue from clients | | $ | 841,908 | | | $ | 387,589 | | | $ | 120,648 | | | $ | 1,350,145 | | Segment operating profit | | | 148,095 | | | | 148,977 | | | | 69,132 | | | | 366,204 | | Total assets | | | 724,259 | | | | 585,497 | | | | 109,692 | | | | 1,419,448 | | 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 | |
Year Ended August 31, 2017 | | U.S. | | | Europe | | | Asia Pacific | | | Total | | Revenue from clients | | $ | 784,146 | | | $ | 330,332 | | | $ | 106,701 | | | $ | 1,221,179 | | Segment operating profit | | | 137,104 | | | | 153,676 | | | | 61,355 | | | | 352,135 | | Total assets | | | 703,941 | | | | 609,368 | | | | 100,006 | | | | 1,413,315 | | Depreciation and amortization | | | 35,244 | | | | 9,837 | | | | 3,213 | | | | 48,294 | | Stock-based compensation | | | 30,247 | | | | 3,320 | | | | 616 | | | | 34,183 | | Capital expenditures | | | 29,561 | | | | 2,385 | | | | 4,916 | | | | 36,862 | |
GEOGRAPHIC INFORMATION - The following table sets forth information for those countries that are 10% or more of revenue:
| | Years ended August 31, | | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | Revenue(1) | | | | | | | �� | | | | | | United States | | $ | 894,554 | | | $ | 841,908 | | | $ | 784,146 | | United Kingdom | | | 166,944 | | | | 157,346 | | | | 163,732 | | All other European countries | | | 241,140 | | | | 230,243 | | | | 166,600 | | Asia Pacific | | | 132,713 | | | | 120,648 | | | | 106,701 | | Total revenue | | $ | 1,435,351 | | | $ | 1,350,145 | | | $ | 1,221,179 | |
| (1)
| 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) | | 2019 | | | 2018 | | Long-lived Assets(1) | | | | | | | | | United States | | $ | 99,783 | | | $ | 74,792 | | United Kingdom | | | 5,347 | | | | 5,806 | | All other European countries | | | 5,069 | | | | 5,774 | | Asia Pacific | | | 22,325 | | | | 14,173 | | Total long-lived assets | | $ | 132,524 | | | $ | 100,545 | |
| (1)
| 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.
|
9. BUSINESS COMBINATIONS
BISAM
On March 17, 2017, FactSet acquired BI-SAM Technologies (“BISAM”Truvalue Labs, Inc. ("TVL") for a total purchase price of $217.6 million. BISAM$41.9 million, subject to working capital and other adjustments. TVL is a globalleading provider of portfolio performanceenvironmental, social, and attribution, multi-asset risk, GIPS composites managementgovernance ("ESG") information. TVL applies artificial intelligence driven technology to over 100,000 unstructured text sources in multiple languages, including news, trade journals, and reporting. BISAM’s product offerings include B-One, BISAM’s cross-asset solution, which will serve as a complementnon-governmental organizations and industry reports, to both FactSet’s portfolio analytics suiteprovide daily signals that identify positive and client reporting solutions, and Cognity, whichnegative ESG behavior. The acquisition of TVL further enhances FactSet’s risk analysis for derivatives and quantitative portfolio construction. These factors contributedour commitment to aproviding industry leading access to ESG data across our platforms. The TVL purchase price was in excess of the fair value of BISAM’s net tangible and intangible assets leading toacquired, resulting in the recognition of goodwill. AtWe finalized the timepurchase accounting for the TVL acquisition during the third quarter of acquisition, BISAM employed over 160 employees based primarily in its New York, Boston, Paris, Londonfiscal 2021 and Sofia offices. Total transaction costs of $3.2 million were recorded within Selling, General and Administrative (“SG&A”) expenses indid not record any material changes to the Consolidated Statements of Income during fiscal 2017.
The totalpreliminary purchase price allocation.
The acquisition date fair values of $217.6 million was allocated to BISAM’s net tangiblemajor classes of assets acquired and intangible assets based upon their estimated fair valueliabilities assumed are 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.follows: | | | | | | | | | | | | | | | | | | | | | | | Acquisition Date Fair Value | | Acquisition Date Useful Life | | Amortization Method | | | (in thousands) | | (in years) | | | | Current assets | | $ | 812 | | | | | | | | | | | | | | Amortizable intangible assets | | | | | | | | Software technology | | 8,100 | | | 7 years | | Straight-line | | Client relationships | | 900 | | | 12 years | | Straight-line | | | | | | | | | Trade names | | 2,800 | | | 15 years | | Straight-line | | Goodwill | | 30,058 | | | | | | | Other assets | | 5,299 | | | | | | | Current liabilities | | (3,069) | | | | | | | Other liabilities | | (2,984) | | | | | | | Total purchase price | | $ | 41,916 | | | | | |
Goodwill totaling $173.9$30.1 million represents the excess of the TVL purchase price over the fair value of net assets acquired and is included in the net tangible and intangible assets acquired.Americas segment. Goodwill generated from the BISAMTVL acquisition is included in the US and European segments and is not deductible for income tax purposes. The results of TVL's operations of BISAM have been included in our Consolidated Financial Statements, within the Company’s Consolidated Statements of Income since the completion of theAmericas segment, beginning with its acquisition on March 17, 2017. November 2, 2020. Pro forma information has not been presented because the effect of the BISAMTVL acquisition is not material to the Company’s consolidated financial results.VERMILION
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 reportingour Consolidated Financial Statements.
8. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Property, equipment and communications solutions and services to the financial services industry. Client reporting is a growing arealeasehold improvements consist of the market as regulatory requirements risefollowing: | | | | | | | | | | | | | (in thousands) | August 31, | | 2021 | | 2020 | | Leasehold improvements | $ | 197,719 | | | $ | 182,899 | | | Computers and related equipment | 136,213 | | | 127,794 | | | Furniture and fixtures | 58,212 | | | 56,269 | | | Subtotal | $ | 392,144 | | | $ | 366,962 | | | Less accumulated depreciation and amortization | (260,767) | | | (233,860) | | | Property, equipment and leasehold improvements, net | $ | 131,377 | | | $ | 133,102 | |
Depreciation expense was $30.4 million, $32.2 million and with the acquisition$35.4 million for fiscal years 2021, 2020 and 2019, respectively.
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.
10. GOODWILL
Changes in the carrying amount of goodwill by segment for fiscal years ended August 31,2019 2021 and 20182020 are as follows: (in thousands) | | U.S. | | | Europe | | | Asia Pacific | | | Total | | Balance at August 31, 2017 | | $ | 386,835 | | | $ | 317,759 | | | $ | 2,966 | | | $ | 707,560 | | Acquisitions and other adjustments | | | (640 | ) | | | (1,562 | ) | | | — | | | | (2,202 | ) | Foreign currency translations | | | — | | | | (3,503 | ) | | | (22 | ) | | | (3,525 | ) | Balance at August 31, 2018 | | $ | 386,195 | | | $ | 312,694 | | | $ | 2,944 | | | $ | 701,833 | | Foreign currency translations | | | — | | | | (16,235 | ) | | | 131 | | | | (16,104 | ) | Balance at August 31, 2019 | | $ | 386,195 | | | $ | 296,459 | | | $ | 3,075 | | | $ | 685,729 | |
| | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | Americas | | EMEA | | Asia Pacific | | Total | | Balance at August 31, 2019 | $ | 386,195 | | | $ | 296,459 | | | $ | 3,075 | | | $ | 685,729 | | | Foreign currency translations | — | | | 23,968 | | | 6 | | | 23,974 | | | Balance at August 31, 2020 | $ | 386,195 | | | $ | 320,427 | | | $ | 3,081 | | | $ | 709,703 | | | Acquisitions | 43,893 | | | — | | | — | | | 43,893 | | | Foreign currency translations | — | | | 723 | | | (114) | | | 609 | | | Balance at August 31, 2021 | $ | 430,088 | | | $ | 321,150 | | | $ | 2,967 | | | $ | 754,205 | |
Goodwill is not amortized as it is estimated to have an indefinite life. At least annually, the Company iswe are required to test goodwill at the reporting unit level, which is consistent with our segments, 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 3 reporting units are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries within each operating segment. The CompanyWe performed itsour annual goodwill impairment test during the fourth quarter of fiscal 2019,2021 utilizing a qualitative analysis, consistent with the timing of previous years, utilizing a qualitative analysis andyears. We concluded it was more likely than not that the fair value of each reporting unitof our segments was greater than its respective carrying value and 0 impairment charge was required. 11.
10. INTANGIBLE ASSETS FactSet’s
Our 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’sour operations. We amortize intangible assets on a straight line basis over their estimated useful lives. The estimated useful life, gross carrying amounts and accumulated amortization totals related to our identifiable intangible assets are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | August 31, 2021 | | August 31, 2020 | | (in thousands, except useful lives) | Estimated Useful Life (years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | | Data content | 4 to 20 | $ | 36,681 | | $ | 26,835 | | $ | 9,846 | | | $ | 35,872 | | $ | 24,847 | | $ | 11,025 | | | Client relationships | 8 to 18 | 101,077 | | 49,139 | | 51,938 | | | 100,316 | | 43,026 | | 57,290 | | | Software technology | 3 to 9 | 121,556 | | 87,207 | | 34,349 | | | 108,384 | | 72,396 | | 35,988 | | | Developed technology | 3 to 5 | 57,666 | | 21,278 | | 36,388 | | | 30,276 | | 13,689 | | 16,587 | | | Non-compete agreements | 2 to 4 | — | | — | | — | | | 1,388 | | 1,355 | | 33 | | | Trade names | 15 to 15 | 6,900 | | 4,435 | | 2,465 | | | 4,106 | | 3,934 | | 172 | | | Total | | $ | 323,880 | | $ | 188,894 | | $ | 134,986 | | | $ | 280,342 | | $ | 159,247 | | $ | 121,095 | |
The weighted average useful life of the Company’sour intangible assets at August 31,2019 2021 was 12.69.1 years. The Company amortizesWe assess intangible assets over their estimatedfor indicators of impairment on a quarterly basis, including an evaluation of our useful lives which are evaluated quarterly to determine whetherif 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 2019,2018 and 2017.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. NaNWe have not identified a material impairment, nor a material change to the estimated remaining useful lives of our intangible assets has been identified during any of the periods presented.fiscal years 2021 and 2020. 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 Amount | | | Accumulated Amortization | | | Net Carrying Amount | | Data content | | $ | 32,200 | | | $ | 21,512 | | | $ | 10,688 | | Client relationships | | | 95,905 | | | | 35,506 | | | | 60,399 | | Software technology | | | 105,426 | | | | 56,965 | | | | 48,461 | | Non-compete agreements | | | 1,311 | | | | 1,228 | | | | 83 | | Trade names | | | 3,994 | | | | 3,074 | | | | 920 | | Total | | $ | 238,836 | | | $ | 118,285 | | | $ | 120,551 | |
At August 31, 2018 (in thousands) | | Gross Carrying Amount | | | Accumulated Amortization | | | Net Carrying Amount | | Data content | | $ | 33,992 | | | $ | 20,990 | | | $ | 13,002 | | Client relationships | | | 98,882 | | | | 29,387 | | | | 69,495 | | Software technology | | | 106,505 | | | | 44,231 | | | | 62,274 | | Non-compete agreements | | | 4,840 | | | | 2,381 | | | | 2,459 | | Trade names | | | 4,070 | | | | 2,365 | | | | 1,705 | | Total | | $ | 248,289 | | | $ | 99,354 | | | $ | 148,935 | |
Amortization expense recorded for intangible assets was $31.5 million, $25.4 million, and $25.1 million during fiscal years 2019,20182021, 2020, and 2017 was $25.1 million, $24.7 million and $19.9 million,2019 , respectively.
As of August 31,2019, 2021, estimated intangible asset amortization expense for each of the next five years and thereafter are as follows:Fiscal Year (in thousands) | | Estimated Amortization Expense | | 2020 | | $ | 22,151 | | 2021 | | | 20,859 | | 2022 | | | 18,088 | | 2023 | | | 13,508 | | 2024 | | | 8,061 | | Thereafter | | | 37,884 | | Total | | $ | 120,551 | |
| | | | | | Fiscal Year (in thousands) | Estimated Amortization Expense | | 2022 | $ | 34,433 | | | 2023 | 28,910 | | | 2024 | 19,375 | | | 2025 | 10,586 | | | 2026 | 9,179 | | | Thereafter | 32,503 | | | Total | $ | 134,986 | |
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment
11. INCOME TAXES Income tax expense is based on taxable income determined in accordance with current enacted laws and leasehold improvementstax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and the tax bases of assets and liabilities using currently enacted tax rates. Provision for Income Taxes The provision for income taxes is as follows: | | | | | | | | | | | | | | | | | | | (in thousands) | Years ended August 31, | | 2021 | | 2020 | | 2019 | | U.S. operations | $ | 311,767 | | | $ | 280,283 | | | $ | 288,860 | | | Non-U.S. operations | 155,850 | | | 146,851 | | | 133,105 | | | Income before income taxes | $ | 467,617 | | | $ | 427,134 | | | $ | 421,965 | | | | | | | | | U.S. operations | $ | 40,595 | | | $ | 31,926 | | | $ | 55,824 | | | Non-U.S. operations | 27,432 | | | 22,270 | | | 13,351 | | | Total provision for income taxes | $ | 68,027 | | | $ | 54,196 | | | $ | 69,175 | | | | | | | | | Effective tax rate | 14.5 | % | | 12.7 | % | | 16.4 | % |
The components of the provision for income taxes consist of the following: | | August 31, | | | (in thousands) | | 2019 | | | 2018 | | Leasehold improvements | | $ | 155,520 | | | $ | 119,479 | | Computers and related equipment | | | 153,868 | | | | 181,623 | | Furniture and fixtures | | | 48,986 | | | | 44,699 | | Subtotal | | $ | 358,374 | | | $ | 345,801 | | Less accumulated depreciation and amortization | | | (225,850 | ) | | | (245,256 | ) | Property, equipment and leasehold improvements, net | | $ | 132,524 | | | $ | 100,545 | |
Depreciation
| | | | | | | | | | | | | | | | | | | (in thousands) | Years ended August 31, | | 2021 | | 2020 | | 2019 | | Current | | | | | | | U.S. federal | $ | 26,734 | | | $ | 9,332 | | | $ | 35,688 | | | U.S. state and local | 13,894 | | | 8,034 | | | 18,389 | | | Non-U.S. | 32,001 | | | 27,640 | | | 17,376 | | | Total current taxes | $ | 72,629 | | | $ | 45,006 | | | $ | 71,453 | | | | | | | | | Deferred | | | | | | | U.S. federal | $ | 1,031 | | | $ | 11,896 | | | $ | 1,813 | | | U.S. state and local | (1,064) | | | 2,665 | | | (217) | | | Non-U.S. | (4,569) | | | (5,371) | | | (3,874) | | | Total deferred taxes | $ | (4,602) | | | $ | 9,190 | | | $ | (2,278) | | | Total provision for income taxes | $ | 68,027 | | | $ | 54,196 | | | $ | 69,175 | |
Our effective tax rate will vary based on, among other things, changes in levels of foreign income, as well as discrete and other non-recurring 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 recurring factors and non-recurring events, including the taxation of foreign income: | | | | | | | | | | | | | | | | | | | | | | | Years ended August 31, | | | (expressed as a percentage of income before income taxes) | 2021 | | 2020 | | 2019 | | | Tax at U.S. Federal statutory tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % | | | Increase (decrease) in taxes resulting from: | | | | | | | | State and local taxes, net of U.S. federal income tax benefit | 2.1 | | | 3.1 | | | 4.0 | | | | Foreign income at other than U.S. rates | (1.0) | | | (1.4) | | | (1.4) | |
| | Foreign derived intangible income ("FDII") deduction | (1.9) | | | (1.8) | | | (1.7) | | | | | | | | | | | Income tax benefits from R&D tax credits | (3.9) | | | (3.8) | | | (3.5) | | | | Share-based payments | (2.2) | | | (3.7) | | | (3.2) | | | | One-time transition tax from TCJA | — | | | — | | | (0.4) | | (1) | | Other, net | 0.4 | | | (0.7) | | | 1.6 | | | | Effective tax rate | 14.5 | % | | 12.7 | % | | 16.4 | % | |
1.The enactment of the TCJA resulted in 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 2021 provision for income taxes was $68.0 million, compared with $54.2 million in fiscal 2020, an increase of 25.5%. The increase was primarily due to net changes in jurisdictional pre-tax book income in fiscal 2021, compared with the same period in the prior year. Additionally, the increase was driven by a $4.4 million lower windfall tax benefit from stock-based compensation for fiscal 2021, compared with fiscal 2020, changes in tax rates in certain jurisdictions, and a lower benefit from finalizing prior year tax returns of $1.2 million. The increase was partially offset by the impact of the true-up of certain foreign deferred tax balances, and higher research and development tax credits. Due to the changes in taxation of undistributed foreign earnings under the TCJA, we 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. Deferred Tax Assets and Liabilities The significant components of deferred tax assets recorded within the Consolidated Balance Sheets were as follows: | | | | | | | | | | | | | (in thousands) | At August 31, | | 2021 | | 2020 | | Deferred tax assets: | | | | | Lease Liabilities | $ | 55,416 | | | $ | 56,280 | | | Stock-based compensation | 22,847 | | | 16,341 | | | Unrealized tax loss on investment | 4,135 | | | 4,172 | | | Other | 11,199 | | | 8,840 | | | Total deferred tax assets | $ | 93,597 | | | $ | 85,633 | |
The significant components of deferred tax liabilities recorded within the Consolidated Balance Sheets were as follows: | | | | | | | | | | | | | (in thousands) | At August 31, | | 2021 | | 2020 | | Deferred tax liabilities: | | | | | Depreciation on property, equipment and leasehold improvements | $ | 17,133 | | | $ | 15,291 | | | Purchased intangible assets, including acquired technology | 44,773 | | | 43,088 | | | Lease right-of-use assets | 43,904 | | | 45,344 | | | Other | 289 | | | 1,623 | | | Total deferred tax liabilities | $ | 106,099 | | | $ | 105,346 | |
Unrecognized Tax Positions Applicable accounting guidance prescribes a comprehensive model for the financial statement recognition, measurement, classification and disclosure of uncertain tax positions that a company has taken or expects to take on a tax return. We recognize the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained based on its technical merits of the tax position. Otherwise, no benefit or expense was $35.4can be recognized in the Consolidated Financial Statements. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon effective settlement with a taxing authority. Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. The determination of liabilities related to unrecognizedtaxbenefits, including associated interest and penalties, requires significant estimates. There can be no assurance that we will accurately predict the audit outcomes, however, we have 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 our results of operations or financial position, beyond current estimates. For this reason and due to ongoing audits by multiple tax authorities, we will regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. We do not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next 12 months. We classify the liability for unrecognized tax benefits as Taxes Payable (non-current) and to the extent that we anticipate payment of cash within one year, the benefit will be classified as Taxes Payable (current). Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. This interest is classified as income tax expense in the financial statements. As of August 31, 2021, we had gross unrecognized tax benefits totaling $14.9 million, $32.6including $1.3 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: | | | | | | | (in thousands) | | | Unrecognized income tax benefits at August 31, 2018 | $ | 9,223 | | | Additions based on tax positions related to the current year | 3,133 | | | Additions for tax positions of prior years | 507 | | | Statute of limitations lapse | (1,979) | | | | | Unrecognized income tax benefits at August 31, 2019 | $ | 10,884 | | | Additions based on tax positions related to the current year | 3,533 | | | Release for tax positions of prior years | (2,086) | | | | | Unrecognized income tax benefits at August 31, 2020 | $ | 12,331 | | | Additions based on tax positions related to the current year | 4,259 | | | Release for tax positions of prior years | (1,720) | | | Unrecognized income tax benefits at August 31, 2021 | $ | 14,870 | |
In the normal course of business, our tax filings are subject to audit by federal, state and foreign tax authorities. At August 31, 2021, we remained subject to examination in the following major tax jurisdictions for the tax years as indicated below: | | | | | | | | | | | | | Major Tax Jurisdictions | Open Tax Years | | U.S. | | | | | Federal | 2018 | through | 2020 | | State (various) | 2018 | through | 2020 | | | | | | Europe | | | | | United Kingdom | 2018 | through | 2020 | | France | 2018 | through | 2020 | | Germany | 2017 | through | 2020 |
12. LEASES On September 1, 2019, we adopted ASC 842,Leases ("ASC 842"). As part of this adoption, we elected to not record operating lease right-of-use assets or operating lease liabilities for leases with an initial term of 12 months or less. We 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).We review new arrangements at inception to evaluate whether we obtain substantially all the economic benefits of and have the right to control the use of an asset. Our lease portfolio is primarily related to our office space, under various operating lease agreements.Our lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments at lease commencement (which includes fixed lease payments and certain qualifying index-based variable payments) over the reasonably certain lease term. leveraging an estimated IBR. Certain adjustments to our lease ROU assets may be required for items such as initial direct costs paid or incentives received. As of August 31, 2021, we recognized $239.1 million of Lease right-of-use assets, net and $291.6 million of combined Current and Long-term lease liabilities in the Consolidated Balance Sheets. Such leases have a remaining lease term ranging from less than one year to just over 14 years and did not include any renewal or termination options that were not yet reasonably certain to be exercised.
The following table reconciles our future undiscounted cash flows related to our operating leases and the reconciliation to the Current and Long-term lease liabilities as of August 31, 2021: | | | | | | | (in thousands) | Minimum Lease
Payments | | Fiscal Years Ended August 31, | | 2022 | $ | 43,177 | | | 2023 | 39,892 | | | 2024 | 38,050 | | | 2025 | 36,203 | | | 2026 | 35,541 | | | Thereafter | 161,849 | | | Total | 354,712 | | | Imputed Interest | 63,156 | | | Present Value | $ | 291,556 | |
(in thousands)The components of lease cost related to the operating leases were as follows: | | | | | | | | | | At August 31, | (in millions) | 2021 | 2020 | Operating lease cost1 | $ | 42.8 | | $ | 43.0 | | Variable lease cost2 | $ | 14.6 | | $ | 17.9 | |
1.Operating lease costs included costs associated with fixed lease payments and index-based variable payments that qualified for lease accounting under ASC 842, Leases and complied with the practical expedients and exceptions elected by us. 2.Variable lease costs were not included in the measurement of lease liabilities. These costs primarily included variable non-lease costs and leases that qualified for the short-term lease exception. Our variable non-lease costs included costs that were not fixed at the lease commencement date and are not dependent on an index or rate. These costs relate to utilities, real estate taxes, insurance and maintenance. The following table summarizes our lease term and discount rate assumptions related to the operating leases recorded on the Consolidated Balance Sheets: | | | | | | | | | | At August 31, | | 2021 | 2020 | Weighted average remaining lease term (in years) | 9.4 | 10.1 | Weighted average discount rate (IBR) | 4.3 | % | 4.2 | % |
The following table summarizes supplemental cash flow information related to our operating leases: | | | | | | | | | | At August 31, | (in millions) | 2021 | 2020 | | Cash paid for amounts included in the measurement of lease liabilities | $ | 42.1 | | $ | 39.7 | | | Lease ROU assets obtained in exchange for lease liabilities | $ | 5.7 | | $ | 43.7 | |
13. DEBT Our debt obligations consisted of the following: | | | | | | | | | | | | | (in thousands) | At August 31, | | 2021 | | 2020 | | 2019 Revolving Credit Facility | $ | 575,000 | | | $ | 575,000 | | | 2019 Revolving Credit Facility debt issuance costs | (465) | | | (646) | | | Long-term debt | $ | 574,535 | | | $ | 574,354 | |
2019 Credit Agreement On March 29, 2019, we entered into a credit agreement, as the borrower, with PNC Bank, National Association ("PNC"), as the administrative agent and lender (the "2019 Credit Agreement"). The 2019 Credit Agreement provides for a $750.0 million revolving credit facility (the "2019 Revolving Credit Facility"). We may request borrowings under the 2019 Revolving Credit Facility until its maturity date of March 29, 2024. The 2019 Credit Agreement also allows us, 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. We borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn. We are 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 31, 2021. The principal balance is payable in full on the maturity date. Borrowings under the 2019 Revolving Credit Facility 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 2021 and 2020, we recorded interest expense on our outstanding debt, including the amortization of debt issuance costs, net of the effects of the interest rate swap agreement of $8.1 million and $28.0$12.9 million, respectively. Including the effects of the interest rate swap agreement, the year-to-date weighted average interest rate on amounts outstanding under our 2019 Revolving Credit Facility was 1.38% and 2.20% as of August 31, 2021 and August 31, 2020, respectively. Refer to Note 6, Derivative Instruments for further discussion on the interest rate swap agreement. Interest on the loan outstanding under the 2019 Revolving Credit Facility is payable quarterly, in arrears, and on the maturity date. During fiscal years 2019,2018 we incurred approximately $0.9 million in debt issuance costs related to the 2019 Credit Agreement. These costs were capitalized as debt issuance costs and 2017, respectively.13. COMMON STOCK AND EARNINGS PER SHARE
On May 17,2019, FactSet's Boardare amortized into interest expense ratably over the term of Directors approvedthe 2019 Credit Agreement.
The 2019 Credit Agreement contains covenants and requirements restricting certain of our activities, which are usual and customary for this type of loan. In addition, the 2019 Credit Agreement requires that we maintain a 12.5% increaseconsolidated net leverage ratio, as measured by total net funded debt/EBITDA (as defined in the regular quarterly dividend2019 Credit Agreement) below a specified level as of the end of each fiscal quarter. We were in compliance with all covenants and requirements within the 2019 Credit Agreement as of August 31, 2021. 14. COMMITMENTS AND CONTINGENCIES Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the balance sheet as liabilities. We record liabilities for commitments when incurred (i.e., when the goods or services are received). Purchase Commitments with Suppliers and Vendors Purchase obligations represent payments due in future periods in respect of commitments to our various data vendors as well as commitments to purchase goods and services. These purchase commitments are agreements that are enforceable and legally binding on us, and they specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. As of August 31, 2021 and 2020, we had total purchase commitments with suppliers of $191.9 million and $226.0 million, respectively. We also have contractual obligations related to our lease liabilities and outstanding debt. Refer to Note 12, Leases and Note 13, Debt for information regarding lease commitments and outstanding debt obligations, respectively.
Letters of Credit From time to time, we are required to obtain letters of credit in the ordinary course of business. As of August 31, 2021 we had approximately $2.8 million of standby letters of credit outstanding. These standby letters of credit utilize the same covenants included in the 2019 Credit Agreement. Refer to Note 13, Debt for more information on these covenants. Contingencies Income Taxes Uncertain income tax positions are accounted for in accordance with applicable accounting guidance, refer to Note 11, Income Taxes for further details. We are currently under audit by tax authorities and have reserved for potential adjustments to our provision for income taxes that may result from $0.64examinations by, or any negotiated settlements with, these tax authorities. We believe that the final outcome of these examinations or settlements will not have a material effect on our results of operations nor our cash flows. 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 we determine the liabilities are no longer necessary. If our estimates of the federal, state, and foreign income tax liabilities are less than the ultimate assessment, additional expense would result. Legal Matters We accrue non-income-tax liabilities for contingencies when management believes that a loss is probable, and the amounts can be reasonably estimated. Contingent gains are recognized only when realized. We are engaged in various legal proceedings, claims and litigation that have arisen in the ordinary course of business, including employment matters, commercial and intellectual property litigation. The outcome of all the matters against us are subject to $0.72 per share.future resolution, including the uncertainties of litigation. Based on information available at August 31, 2021, our management believes that the ultimate outcome of these unresolved matters against us, individually or in the aggregate, will not have a material adverse effect on our consolidated financial position, our results of operations or our cash flows. Sales Tax Matters On August 8, 2019, we received a Notice of Intent to Assess (the "First Notice") additional sales taxes, interest and underpayment penalties from the Commonwealth of Massachusetts Department of Revenue (the "Commonwealth") relating to the tax periods from January 1, 2006 through December 31, 2013. On July 20, 2021, we received a Notice of Intent to Assess (the "Second Notice", cumulatively with the First Notice, the "Notices") additional sales taxes, interest and underpayment penalties from the Commonwealth relating to the tax periods from January 1, 2014 through December 31, 2018. Based upon the Notices, it is the Commonwealth's intention to assess sales tax, interest and underpayment penalties on previously recorded sales transactions. We have filed an appeal to the Notices and intend to contest any such assessment, if assessed. We continue to cooperate with the Commonwealth's inquiry with respect to the Notices. On August 10, 2021, we received a letter (the “Letter”) from the Commonwealth relating to the tax periods from January 1, 2019 through June 30, 2021, requesting additional sales information to determine if a notice of intent to assess should be issued to FactSet with respect to these tax periods. Based upon a preliminary review of the Letter, we believe the Commonwealth might seek to assess sales tax, interest and underpayment penalties on previously recorded sales transactions. We are cooperating with the Commonwealth's inquiry with respect to the Letter. Due to the uncertainty surrounding the assessment process for both the Notices and Letter, we are unable to reasonably estimate the ultimate outcome of these matters and, as such, have not recorded a liability for any of these matters as of August 31, 2021. We believe that we will ultimately prevail if we are presented with a formal assessment for any of these matters; however, if we do not prevail, the amount of any assessment could have a material impact on our consolidated financial position, results of operations and cash flows. Indemnifications As permitted or required under Delaware law and to the maximum extent allowable under that law, we have certain obligations to indemnify our current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at our 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 FactSet, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments we could be required to make under these indemnification obligations is unlimited; however, we have a director and officer insurance policy that we believe mitigates our exposure and may enable us
to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification obligations is immaterial. 15. STOCKHOLDERS’ EQUITY Shares of common stock outstanding were as follows: | | Years ended August 31, | | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | Balance, beginning of year (September 1) | | | 38,193 | | | | 39,023 | | | | 40,038 | | Common stock issued for employee stock plans | | | 839 | | | | 712 | | | | 693 | | Repurchase of common stock from employees(1) | | | (32 | ) | | | (8 | ) | | | (50 | ) | Repurchase of common stock under the share repurchase program | | | (882 | ) | | | (1,534 | ) | | | (1,555 | ) | Repurchase of common stock under accelerated share repurchase agreement | | | — | | | | — | | | | (103 | ) | Balance, end of year (August 31) | | | 38,118 | | | | 38,193 | | | | 39,023 | |
| (1)
| For fiscal 2019,2018 | | | | | | | | | | | | | | | | | | | (in thousands) | Years ended August 31, | | 2021 | | 2020 | | 2019 | | Balance, beginning of year at September 1, 2020, 2019 and 2018, respectively | 38,030 | | | 38,118 | | | 38,193 | | | Common stock issued for employee stock plans | 395 | | | 663 | | | 839 | | Repurchase of common stock from employees(1) | (13) | | | (12) | | | (32) | | | Repurchase of common stock under the share repurchase program | (797) | | | (739) | | | (882) | | | Balance, end of year at August 31, 2021, 2020, and 2019 respectively | 37,615 | | | 38,030 | | | 38,118 | |
(1)For fiscal years 2021, 2020 and 2019, we repurchased 12,932, 11,945 and2017, the Company repurchased 31,644 8,070 and 49,771 shares, or $4.3 million, $3.5 million and $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) | | Net Income (Numerator) | | | Weighted Average Common Shares (Denominator) | | | Per Share Amount | | For the year ended August 31, 2019 | | | | | | | | | | | | | Basic EPS | | | | | | | | | | | | | Income available to common stockholders | | $ | 352,790 | | | | 38,144 | | | $ | 9.25 | | Diluted EPS | | | | | | | | | | | | | 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 | | | | | | | | | | | | | Basic EPS | | | | | | | | | | | | | Income available to common stockholders | | $ | 267,085 | | | | 38,733 | | | $ | 6.90 | | Diluted EPS | | | | | | | | | | | | | Dilutive effect of stock options and restricted stock | | | | | | | 644 | | | | | | Income available to common stockholders plus assumed conversions | | $ | 267,085 | | | | 39,377 | | | $ | 6.78 | | For the year ended August 31, 2017 | | | | | | | | | | | | | Basic EPS | | | | | | | | | | | | | Income available to common stockholders | | $ | 258,259 | | | | 39,444 | | | $ | 6.55 | | Diluted EPS | | | | | | | | | | | | | Dilutive effect of stock options and restricted stock | | | | | | | 198 | | | | | | Income available to common stockholders plus assumed conversions | | $ | 258,259 | | | | 39,642 | | | $ | 6.51 | |
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 0 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 0 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.
14. STOCKHOLDERS’ EQUITY
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 0 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.
Common Stock
At August 31,2019 and 2018, there were 150,000,000 shares of common stock, ($0.01 par value per share) authorized,respectively, primarily to satisfy tax withholding obligations due upon the vesting of which 40,104,192 and 39,264,849 shares were issued, respectively. The authorizedstock-based awards.
Share Repurchase Program Under our share repurchase program, we may repurchase shares of our 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 timetime-to-time in the open market and privately negotiated transactions, subject to market conditions. During fiscal 2019,For the Companyyear ended August 31, 2021, we repurchased 882,4450.8 million shares for $213.1$264.7 million compared to 1,534,398with 0.7 million shares for $302.4$199.6 million in fiscal 2018.
for the year ended August 31, 2020. On June 24, 2019, theMarch 23, 2021, our Board of Directors of FactSet approved a $210.0$205.6 million expansion of theincrease to our existing share repurchase program. Subsequent to this expansion, $238.6As of August 31, 2021, a total of $199.9 million remainsremained authorized for future share repurchases as of August 31,2019. There is no defined number of shares to be repurchased over a specified timeframe through the life of the share repurchaseunder this program. It is expected that share repurchases will be paid using existing and future cash generated by operations. Restricted stock awards entitle the holderholders to receive shares of common stock as the awards vest over time. During fiscal 2019,For the year ended August 31, 2021, 34,607 shares of previously granted restricted stock awards of 85,401 shares vested and were included in common stock outstanding as of August 31,2019 2021 (recorded net of 31,64412,932 shares repurchased from employees at a cost of $7.2$4.3 million to cover their cost of taxes upon vesting of the restricted stock). During fiscal 2018, 26,599For the year ended August 31, 2020, 32,996 shares of previously granted restricted stock awards vested and were included in common stock outstanding as of August 31,2018 2020 (recorded net of 8,07011,945 shares repurchased from employees at a cost of $1.5$3.5 million to cover their cost of taxes upon vesting of the restricted stock).
Our Board of Directors declared the following dividends on our common stock duringfor the periods presented:Year Ended | | Dividends per Share of Common Stock | | | Record Date | | Total amount (in thousands) | | | Payment Date | Fiscal 2019 | | | | | | | | | | | | | 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 30, 2019 | | $ | 27,445 | | | September 19, 2019 | | | | | | | | | | | | | | | Fiscal 2018 | | | | | | | | | | | | | First Quarter | | $ | 0.56 | | | November 30, 2017 | | $ | 21,902 | | | December 19, 2017 | Second Quarter | | $ | 0.56 | | | February 28, 2018 | | $ | 21,799 | | | March 20, 2018 | Third Quarter | | $ | 0.64 | | | May 31, 2018 | | $ | 24,566 | | | June 19, 2018 | Fourth Quarter | | $ | 0.64 | | | August 31, 2018 | | $ | 24,443 | | | September 18, 2018 |
All the abovefull years ended August 31, 2021 and August 31, 2020 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended | | Dividends per
Share of
Common Stock | | Record Date | | Total amount (in thousands) | | Payment Date | | Fiscal 2021 | | | | | | | | | | First Quarter | | $ | 0.77 | | | November 30, 2020 | | $ | 29,266 | | | December 17, 2020 | | Second Quarter | | $ | 0.77 | | | February 26, 2021 | | $ | 29,141 | | | March 18, 2021 | | Third Quarter | | $ | 0.82 | | | May 31, 2021 | | $ | 30,972 | | | June 17, 2021 | | Fourth Quarter | | $ | 0.82 | | | August 31, 2021 | | $ | 30,845 | | | September 16, 2021 | | | | | | | | | | | Fiscal 2020 | | | | | | | | | | 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 | | $ | 29,188 | | | June 18, 2020 | | Fourth Quarter | | $ | 0.77 | | | August 31, 2020 | | $ | 29,283 | | | September 17, 2020 |
Future cash dividends were paid from existing cash resources. Future dividend payments will depend on the Company’sour earnings, capital requirements, financial condition and other factors considered relevant by the Companyus and isare subject to final determination by the Company’sour Board of Directors. On May 5, 2021, our Board of Directors approved a 6.5% increase in the regular quarterly dividend from $0.77 to $0.82 per share. 15. EMPLOYEE STOCK OPTION AND RETIREMENT PLANS
Stock Options Awards
Accumulated Other Comprehensive Loss The FactSet Research Systems Inc. Stock Optioncomponents of AOCL are as follows: | | | | | | | | | | | | | (in thousands) | August 31, 2021 | | August 31, 2020 | | Accumulated unrealized losses on cash flow hedges, net of tax | $ | (2,095) | | | $ | (1,591) | | | Accumulated foreign currency translation adjustments | (36,867) | | | (37,702) | | | Total AOCL | $ | (38,962) | | | $ | (39,293) | |
16. EARNINGS PER SHARE A reconciliation of the weighted average shares outstanding used in the basic and Award Plan, as amended and restated (the “Long Term Incentive Plan” or “LTIP”diluted earnings per share ("EPS") provides for the grantcomputations. | | | | | | | | | | | | | Twelve Months Ended | | August 31, | | (in thousands, except per share data)) | 2021 | 2020 | 2019 | | Numerator | | | | | Net income used for calculating basic and diluted income per share | $ | 399,590 | | $ | 372,938 | | $ | 352,790 | | | Denominator | | | | | Weighted average common shares used in the calculation of basic income per share | 37,856 | | 37,936 | | 38,144 | | | Common stock equivalents associated with stock-based compensation plan | 714 | | 710 | | 729 | | | Shares used in the calculation of diluted income per share | 38,570 | | 38,646 | | 38,873 | | | Basic income per share | $ | 10.56 | | $ | 9.83 | | $ | 9.25 | | | Diluted income per share | $ | 10.36 | | $ | 9.65 | | $ | 9.08 | |
Dilutive potential common shares consist of stock options and restrictedunvested performance-based awards. There were 1,750 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 yearsexcluded from the datecalculation 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 | | | 3,364 | | | $ | 129.54 | | Granted – non performance-based | | | 713 | | | $ | 152.89 | | Granted – performance-based | | | 291 | | | $ | 166.29 | | Granted – non-employee Directors grant | | | 24 | | | $ | 170.24 | | Exercised | | | (487 | ) | | $ | 86.17 | | Forfeited | | | (539 | ) | | $ | 160.31 | | Balance at 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 | | Balance at 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 | | Balance at August 31, 2019 | | | 2,524 | | | $ | 168.50 | |
Stock Options Outstanding and Exercisable
The following table summarizes ranges of outstanding and exercisable optionsdiluted EPS as of August 31,2019 (in thousands, except per share data 2021 and 2020, because their inclusion would have been anti-dilutive.
Performance-based awards are omitted from the weighted average remaining yearscalculation of contractual life):| | | | | | Outstanding | | | Exercisable | | Range of Exercise Prices Per Share | | | Number Outstanding | | | Weighted Average Remaining Years of Contractual Life | | | Weighted Average Exercise Price Per Share | | | Aggregate Intrinsic Value | | | Number Exercisable | | | Weighted Average Exercise Price Per Share | | | Aggregate Intrinsic Value | | | $87.26 | - | $92.22 | | | | 184 | | | | 2.98 | | | $ | 91.86 | | | $ | 33,175 | | | | 184 | | | $ | 91.86 | | | $ | 33,175 | | | $94.84 | - | $110.31 | | | | 88 | | | | 2.89 | | | $ | 99.70 | | | $ | 15,102 | | | | 88 | | | $ | 99.70 | | | $ | 15,102 | | | $131.31 | - | $148.52 | | | | 280 | | | | 5.01 | | | $ | 134.18 | | | $ | 38,636 | | | | 156 | | | $ | 136.38 | | | $ | 21,134 | | | $150.81 | - | $152.28 | | | | 470 | | | | 7.12 | | | $ | 152.25 | | | $ | 56,307 | | | | 150 | | | $ | 152.25 | | | $ | 18,007 | | | $159.14 | - | $170.24 | | | | 299 | | | | 6.09 | | | $ | 164.99 | | | $ | 32,050 | | | | 98 | | | $ | 164.19 | | | $ | 10,612 | | | $171.22 | - | $175.20 | | | | 254 | | | | 6.21 | | | $ | 175.04 | | | $ | 24,715 | | | | 124 | | | $ | 175.04 | | | $ | 11,989 | | | $189.98 | - | $200.20 | | | | 475 | | | | 8.21 | | | $ | 190.73 | | | $ | 38,637 | | | | 73 | | | $ | 190.45 | | | $ | 5,985 | | | $200.99 | - | $286.74 | | | | 474 | | | | 9.18 | | | $ | 223.79 | | | $ | 22,883 | | | | 1 | | | $ | 221.88 | | | $ | 71 | | Total Fiscal 2019 | | | | 2,524 | | | | | | | | | | | $ | 261,505 | | | | 874 | | | | | | | $ | 116,075 | |
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 | | | | | Number of Shares | | | Weighted Average Exercise Price Per Share | | | Number of Shares | | | Weighted Average Exercise Price Per Share | | Outstanding at fiscal year end | | | 3,143 | | | $ | 153.05 | | | | 3,366 | | | $ | 139.29 | | Exercisable at fiscal year end | | | 1,022 | | | $ | 126.27 | | | | 918 | | | $ | 105.14 | |
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, therediluted EPS until it isno 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,has been met at the options were forfeited, and 0 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 employeesend 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.
reporting period. As of August 31,2019, a total 2021, there were 68,990 performance-based awards excluded from the calculation of 123,794 sharesdiluted EPS. As of restricted stock and restricted stock unitsAugust 31, 2020 there were unvested and outstanding, which results in unamortized stock-based compensation35,666 performance-based awards excluded from the calculation of $21.8 million to be recognized as stock-based compensation expense over the remaining vesting period of 3.1 years.
diluted EPS.
A summary of restricted 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, 2016 | | | 262 | | | | 126.27 | | Granted (restricted stock and stock units) | | | 62 | | | | 158.26 | | Vested(1) | | | (132 | ) | | | 123.28 | | Canceled/forfeited | | | (10 | ) | | | 130.32 | | Balance at August 31, 2017 | | | 182 | | | | 138.62 | | Granted (restricted stock and stock units) | | | 3 | | | | 189.28 | | Vested(2) | | | (27 | ) | | | 155.95 | | Canceled/forfeited | | | (15 | ) | | | 116.29 | | Balance at August 31, 2018 | | | 143 | | | | 139.34 | | Granted (restricted stock and stock units) | | | 73 | | | | 239.03 | | Vested(3) | | | (85 | ) | | | 125.04 | | Canceled/forfeited | | | (7 | ) | | | 181.32 | | Balance at August 31, 2019 | | | 124 | | | | 205.47 | |
| (1)
| 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.
|
| (2)
| The26,599restricted stock awards that vested during fiscal 2018 were comprised of:9,765 of awards relating to restricted stock granted on October 16, 2015and8,600 of awards relating to restricted stock granted onJune 30, 2017 whichvestat a rate of20% annually upon the anniversary date of the grant, respectively.Additionally, 8,234 awards vested related to other grants.
|
| (3)
| 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 | | | 1,491 | | | | 66 | | Granted – non performance-based options | | | (713 | ) | | | — | | Granted – performance-based options | | | (291 | ) | | | — | | Granted – non-employee Directors grant | | | — | | | | (24 | ) | Restricted stock awards granted(1) | | | (156 | ) | | | — | | Share-based awards canceled/forfeited(2) | | | 566 | | | | — | | 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 grant | | | — | | | | (19 | ) | Restricted stock awards granted(1) | | | (9 | ) | | | — | | Share-based awards canceled/forfeited(2) | | | 252 | | | | 9 | | Balance at August 31, 2018 | | | 6,298 | | | | 282 | | Granted – non performance-based options | | | (481 | ) | | | (20 | ) | Restricted stock awards granted(1) | | | (183 | ) | | | — | | Share-based awards canceled/forfeited(2) | | | 433 | | | | 2 | | Balance at August 31, 2019 | | | 6,067 | | | | 264 | |
| (1)
| Each restricted stock award granted is equivalent to 2.5 shares granted under the Company’sOption Plan.
|
| (2)
| Under the Company’sOptionPlan, 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.
16.17. STOCK-BASED COMPENSATION
The Company
We recognized total stock-based compensation expense of $32.4$45.1 million, $31.5$36.6 million and $34.2$32.4 million in fiscal 2019,20182021, 2020 and 2017,2019, respectively. As of August 31,2019, $80.4 2021, $89.8 million of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted average period of 3.02.9 years. There was 0 no stock-based compensation capitalized as of August 31,2019 2021 and 2018,2020, 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, 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 | | | | | Granted – non-performance-based | 418 | | $ | 317.17 | | | | | | | | | | Granted – non-employee Directors grant | 12 | | $ | 318.20 | | | | | Exercised | (322) | | $ | 166.36 | | | | | Forfeited | (85) | | $ | 237.23 | | | | | Outstanding as of August 31, 2021 | 2,277 | | $ | 214.89 | | $ | 161.9 | | 6.4 | | Options vested and exercisable as of August 31, 2021 | 1,019 | | $ | 170.25 | | $ | 214.0 | | 4.9 | | Options expected to vest as of August 31, 2021 | 1,148 | | $ | 248.91 | | $ | 150.8 | | 7.6 |
The aggregate intrinsic value represents the difference between our closing stock price as of August 31, 2021 of $380.22 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 2021, 2020 and 2019 was $54.3 million, $85.0 million and $73.0 million, respectively.
Employee Stock Option Awards During the twelve months ended August 31, 2021, we granted 417,546 stock options under the FactSet Research Systems Inc. Stock Option and Award Plan as Amended and Restated (the "LTIP") with a weighted average exercise price of $317.17 to existing employees of FactSet, using the lattice-binomial option-pricing model. The majority of the stock options granted during the twelve months ended August 31, 2021 are related to the annual employee grant on November 9, 2020 under the LTIP. The stock option awards granted on November 9, 2020 vest 20% annually on the anniversary date of the grant and are fully vested after five years, expiring ten years from the date of grant. Employee Stock Option Fair Value Determinations The Company utilizes
We utilize the lattice-binomial option-pricing model (“("binomial model”model") to estimate the fair value of new employee stock option grants. The binomial model is affected by the Company’sour stock price, as well as, assumptions regarding several variables, which include,nclude, but are not limited to the Company’sour 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. Q12019
| 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.
| Q22019
| 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.
| Q32019
| 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.
| Q42019
| 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.
| Q12018
| 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.
| Q22018
| 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.
| Q32018
| There were 0 employee stock options granted during the three months ended May 31, 2018.
| Q42018
| 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.
| Q12017
| 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.
| Q22017
| 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.
| Q32017
| 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.
| Q42017
| 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 2019,20182021, 2020 and 20172019 was determined using the binomial model with the following weighted average assumptions: | | 2019 | | | 2018 | | | 2017 | | Term structure of risk-free interest rate | | 1.28% | — | 3.14% | | | | 1.28% | — | 2.41% | | | | 0.07% | — | 2.09% | | Expected life (years) | | 7.1 | — | 7.1 | | | | 7.4 | — | 7.4 | | | | 7.4 | — | 8.1 | | Term structure of volatility | | 18% | — | 29% | | | | 19% | — | 29% | | | | 21% | — | 30% | | Dividend yield | | | 1.15% | | | | | | 1.32% | | | | | | 1.18% | | | Weighted average estimated fair value | | | $57.12 | | | | | | $48.39 | | | | | | $40.68 | | | Weighted average exercise price | | | $224.35 | | | | | | $190.42 | | | | | | $156.77 | | | Fair value as a percentage of exercise price | | | 25.5% | | | | | | 25.4% | | | | | | 25.9% | | |
(Weighted average assumptions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | | Term structure of risk-free interest rate | 0.04 | % | — | 1.67% | | 0.10 | % | — | 1.79% | | 1.28 | % | — | 3.14% | | Expected life (years) | 7.1 | — | 7.1 | | 7.2 | — | 7.2 | | 7.1 | — | 7.1 | | Term structure of volatility | 26 | % | — | 27% | | 25 | % | — | 25% | | 18 | % | — | 29% | | Dividend yield | 0.12% | | 1.09% | | 1.15% | | Weighted average estimated fair value | $78.31 | | $60.33 | | $57.12 | | Weighted average exercise price | $317.17 | | $256.43 | | $224.35 | | Fair value as a percentage of exercise price | 24.7% | | 23.5% | | 25.5% |
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’sour 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’sour stock and the Company’sour assessment that a combination of implied volatility and historical volatility is best representative of future stock price trends. The Company usesWe use historical data to estimate option exercises and employee termination within the valuation model. The dividend yield assumption is based on the Company’sour 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.us. Non-Employee DirectorDirectors' Stock Option Fair Value DeterminationsAwards The FactSet Research Systems Inc. Non-Employee Directors'Directors’ Stock Option and Award Plan as Amended and Restated (the "Director Plan"“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 31,2019, 2021, shares available for future grant under the Director Plan was 263,956. The expiration date of the237,749. Non-Employee Director Plan is December 19, 2027.The Company utilizesStock Option Fair Value Determinations
We utilize 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’sour stock price, as well as, assumptions regarding several variables, which include, but are not limited to, the Company’sour 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. Fiscal 2019
On January 15, 2021, January 15, 2020 and January 15, 2019FactSet, we granted 12,137, 16,080, and 20,576 stockstock options, respectively, to the Company’sour non-employee Directors. These options have aDirectors using the weighted average estimated fair value of $42.77 per share, using the Black-Scholes option-pricing model withvalues, based on the following weighted average assumptions:Risk-free interest rate
| | | 2.51 | %
| Expected life (years)
| | | 5.4 | | Expected volatility
| | | 20.5 | % | Dividend yield
| | | 1.17 | %
|
Fiscal 2018
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, usingassumptions used in the Black-Scholes option-pricing model with the following weightedmodel:
(Weighted average assumptions:Risk-free interest rate
| | | 2.34 | %
| Expected life (years)
| | | 5.4 | | Expected volatility
| | | 19.7 | % | Dividend yield
| | | 1.16 | % |
Fiscal 2017
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
| | | 1.95 | %
| Expected life (years)
| | | 5.4 | | Expected volatility
| | | 22.7 | %
| Dividend yield
| | | 1.24 | %
|
assumptions) | | | | | | | | | | | | | Years ended August 31, | | 2021 | 2020 | 2019 | | Fair value | $ | 82.01 | | $ | 54.74 | | $ | 42.77 | | | Risk-free interest rate | 0.77 | % | 1.64 % | 2.51 | % | | Expected life (years) | 6.9 | 5.4 | 5.4 | | Expected volatility | 27.2 | % | 22.0 | % | 20.5 | % | | Dividend yield | 0.93 | % | 1.11 % | 1.17 | % |
Restricted Stock Fair Value DeterminationsUnits Our LTIP provides for the grant of share-based awards, including awards of restricted stock units ("RSUs") and performance share units ("PSUs"; RSUs and PSUs, collectively, "Restricted Stock Awards"). The Restricted stockStock Awards are subject to continued employment over a specified period. The Restricted Stock Awards granted to employees entitlesentitle the holderholders to shares of common stock as the award vestsRestricted Stock Awards vest over time, but not to dividends declared on the underlying shares, while the restricted stock subject to the Restricted Stock Awards is unvested. Vesting of the shares underlying the PSUs are also subject to achieving certain specified performance levels during the measurement period subsequent to the date of grant. The grant date fair value of restricted stock awardsRestricted Stock Awards is measured by reducing the grant date price of FactSet’s shareour 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 restricted stock awardsRestricted Stock Awards is amortized over the vesting period. As of August 31, 2021, a total of 196,621 shares underlying Restricted Stock Awards were unvested and outstanding, which results in unamortized stock-based compensation of $37.8 million to be recognized as stock-based compensation expense over the remaining vesting period of 2.6 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, 2018 | 143 | | $ | 139.34 | | Granted - RSUs(1) | 73 | | $ | 239.03 | | | Vested - RSUs | (85) | | $ | 125.04 | | | Forfeited | (7) | | $ | 181.32 | | | Balance at August 31, 2019 | 124 | | $ | 205.47 | | Granted - Restricted Stock Awards(1) (2) | 74 | | $ | 252.17 | | | Vested - RSUs | (33) | | $ | 197.37 | | | Forfeited | (19) | | $ | 198.53 | | | Balance at August 31, 2020 | 146 | | $ | 231.55 | | Granted - Restricted Stock Awards(1)(2) | 99 | | $ | 312.86 | | | Vested - Restricted Stock Awards | (35) | | $ | 208.67 | | | Forfeited | (13) | | $ | 267.23 | | | Balance at August 31, 2021 | 197 | | $ | 274.1 | |
(1)Each Restricted Stock Award granted is equivalent to 2.5 shares granted under the LTIP. (2)During the fiscal 2019,year ended August 31, 2021 we granted 62,960 RSUs and 36,424 PSUs, During the fiscal year ended August 31, 2020 we granted 36,709 RSUs and 36,888 PSUs.
Performance-based Equity Awards Performance-based equity awards require management to make assumptions regarding the likelihood of achieving our performance targets. The number of performance-based awards that vest will be predicated on us achieving performance levels during the measurement period subsequent to the date of grant. Dependent on the financial performance levels attained, a percentage of the performance-based awards will vest to the grantees. However, there were 73,047 restrictedis 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, 2018 | 6,298 | | 282 | | | | | | Granted – non-performance-based options | (481) | | — | | | | | | Granted – non-employee Directors options | — | | (20) | | Granted – RSUs(1) | (183) | | — | | Forfeited - Share-based awards(2) | 433 | | 2 | | | Balance at August 31, 2019 | 6,067 | | 264 | | | Granted – non-performance-based options | (424) | | — | | | Granted – non-employee Directors options | — | | (16) | | Granted – RSUs(1) | (93) | | — | | | Granted – PSUs(1) | (91) | | — | | Forfeited – Share-based awards(2) | 167 | | 2 | | | Balance at August 31, 2020 | 5,626 | | 250 | | | Granted – non-performance-based options | (418) | | — | | | Granted – non-employee Directors options | — | | (12) | | Granted – RSUs(1) | (157) | | — | | Granted – PSUs(1) | (91) | | — | | Forfeited – Share-based awards(2) | 120 | | — | | | Balance at August 31, 2021 | 5,080 | | 238 | |
(1)Each Restricted Stock Award granted is equivalent to 2.5 shares granted under the LTIP. (2)Under the LTIP, 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 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.Q12019
| 41,102 shares of restricted stock were granted at a weighted average estimated fair value of $212.66 per share.
| Q22019
| 51 shares of restricted stock were granted at a weighted average estimated fair value of $210.67 per share.
| Q32019
| 265 shares of restricted stock were granted at a weighted average estimated fair value of $255.95 per share.
| Q42019
| 31,629 shares of restricted stock were granted at a weighted average estimated fair value of $273.19 per share.
| Q12018
| 961 shares of restricted stock were granted at a weighted average estimated fair value of $182.17 per share.
| Q22018
| NaN restricted stock granted.
| Q32018
| NaN restricted stock granted.
| Q42018
| 2,536 shares of restricted stock were granted at a weighted average estimated fair value of $191.97 per share.
| Q12017
| 5,084 shares of restricted stock were granted at a weighted average estimated fair value of $151.63 per share.
| Q22017
| 7,843 shares of restricted stock were granted at a weighted average estimated fair value of $161.31 per share.
| Q32017
| NaN restricted stock granted.
| Q42017
| 49,473 shares of restricted stock were granted at a weighted average estimated fair value of $158.46 per share.
|
may be purchased by eligible employees under the FactSet Research Systems Inc. Employee Stock Purchase Plan, Fair Value Determinations 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 our 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 2019,2021, employees purchased 38,848 shares at a weighted average price of $273.59 compared with 42,606 shares at a weighted average price of $234.41 in fiscal 2020 and 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 2017.2019. Stock-based compensation expense recorded during fiscal 2019,20182021, 2020 and 20172019 relating to the employee stock purchase planESPP was $2.0 million, $1.6$2.1 million and $2.1$2.0 million, respectively.
At August 31, 2021, the ESPP had 138,956 shares reserved for future issuance.
We use the Black-Scholes model to calculate the estimated fair value for the employee stock purchase plan.ESPP shares. The weighted average estimated fair value of employee stock purchase plan grantsthe ESPP shares during fiscal years 2019,20182021, 2020 and 2017,2019, was $41.06, $31.83$54.00, $50.69 and $28.16$41.06 per share, respectively, with the following weighted average assumptions: | | | 2019 | | | 2018 | | | 2017 | | Risk-free interest rate | | | 2.33 | % | | | 1.55 | % | | | 0.69 | % | Expected life (months) | | | 3 | | | | 3 | | | | 3 | | Expected volatility | | | 10.89 | % | | | 10.19 | % | | | 8.60 | % | Dividend yield | | | 1.12 | % | | | 1.27 | % | | | 1.25 | % |
Accuracy
(Weighted average assumptions) | | | | | | | | | | | | | | | | | | | 2021 | | 2020 | | 2019 | | Risk-free interest rate | 0.26 | % | | 0.95 | % | | 2.33 | % | | Expected life (months) | 3 | | 3 | | 3 | | Expected volatility | 11.69 | % | | 20.04 | % | | 10.89 | % | | Dividend yield | 1.00 | % | | 1.08 | % | | 1.12 | % |
18. EMPLOYEE BENEFIT PLANS Defined Contribution Plan We established our 401(k) Plan in fiscal 1993. The 401(k) Plan is a defined contribution plan covering all full-time, U.S. employees of Fair Value EstimatesThe CompanyFactSet and is responsible for determiningsubject to the assumptions used in estimatingprovisions of the fair valueEmployee Retirement Income Security Act of its share-based payment awards. The Company’s determination1974 and the Internal Revenue Code of fair value1986 ("IRC"). Each year, participants may contribute up to 60% of share-based payment awards on the date of grant using an option-pricing model is affectedtheir eligible annual compensation, subject to annual limitations established by the Company’s stock price,IRC. We matched 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 FactSet. We contributed $11.6 million, $11.3 million, and $10.9 million in matching contributions to employee 401(k) accounts during fiscal 2021, 2020 and 2019, respectively.
19. SEGMENT INFORMATION Operating segments are defined 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 termcomponents 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 optionsan enterprise that have no vesting or hedging restrictionsthe following characteristics: (i) they engage in business activities from which they may earn revenue and incur expense, (ii) their operating results are regularly reviewed by the chief operating decision maker ("CODM") for resource allocation decisions and performance assessment, and (iii) their discrete financial information is available. At FactSet, our Chief Executive Officer functions as our CODM. Our operating segments are consistent with our reportable segments and are fully transferable.17. INCOME TAXES
Income tax expensehow we, including our CODM, manage our business and the geographic markets in which we serve. Our internal financial reporting structure is based on taxable income determined3 segments: the Americas; EMEA; and Asia Pacific. Within each of the segments, we primarily deliver insight and information through four workflow solutions: Research; Analytics & Trading; Content & Technology Solutions ("CTS"); and Wealth. Commencing with the our 2022 fiscal year, we have reorganized our workflows into three solutions: Research & Advisory; Analytics & Trading; and CTS, to better align our products and go-to-market strategy. These workflow solutions provide global financial and economic information to asset 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 accordanceEurope, the Middle East, and Africa. The Asia Pacific segment serves our clients in Asia and Australia. Segment revenue reflects sales to clients based in these respective geographic locations. Each segment records expenses related to its individual operations with current enacted lawsthe exception of expenditures associated with our data centers, third-party data costs and tax rates. Deferred income taxescorporate headquarters charges, which are recorded forby the temporary differences between the financial statementAmericas segment and tax bases of assets and liabilities using currently enacted tax rates.Provision for Income Taxes
The provision for income taxes is as follows:
| | Years ended August 31, | | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | U.S. operations | | $ | 288,860 | | | $ | 199,654 | | | $ | 218,650 | | Non-U.S. operations | | | 133,105 | | | | 152,184 | | | | 125,662 | | Income before income taxes | | $ | 421,965 | | | $ | 351,838 | | | $ | 344,312 | | | | | | | | | | | | | | | | U.S. operations | | $ | 55,824 | | | $ | 65,778 | | | $ | 65,403 | | Non-U.S. operations | | | 13,351 | | | | 18,975 | | | | 20,650 | | Total provision for income taxes | | $ | 69,175 | | | $ | 84,753 | | | $ | 86,053 | | Effective tax rate | | | 16.4 | % | | | 24.1 | % | | | 25.0 | % |
The components of the provision for income taxes consist of the following:
| | Years ended August 31, | | | (in thousands) | | 2019 | | | 2018 | | | 2017 | | Current | | | | | | | | | | | | | U.S. federal | | $ | 35,688 | | | $ | 58,835 | | | $ | 58,057 | | U.S. state and local | | | 18,389 | | | | 5,159 | | | | 5,659 | | Non-U.S. | | | 17,376 | | | | 22,669 | | | | 17,458 | | Total current taxes | | $ | 71,453 | | | $ | 86,663 | | | $ | 81,174 | | | | | | | | | | | | | | | | Deferred | | | | | | | | | | | | | U.S. federal | | $ | 1,813 | | | $ | 2,079 | | | $ | 4,320 | | U.S. state and local | | | (217 | ) | | | (295 | ) | | | (77 | ) | Non-U.S. | | | (3,874 | ) | | | (3,694 | ) | | | 636 | | Total deferred taxes | | $ | (2,278 | ) | | $ | (1,910 | ) | | $ | 4,879 | | Total provision for income taxes | | $ | 69,175 | | | $ | 84,753 | | | $ | 86,053 | |
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:
| | | Years ended August 31, | | | (expressed as a percentage of income before income taxes) | | 2019 | | | 2018 | | | 2017 | | | Tax at U.S. Federal statutory tax rate | | | 21.0 | % | | | 25.7 | % | | | 35.0 | % | | Increase (decrease) in taxes resulting from: | | | | | | | | | | | | | | State and local taxes, net of U.S. federal income tax benefit | | | 4.0 | | | | 2.9 | | | | 1.8 | | | Foreign income at other than U.S. rates | | | (1.4 | ) | | | (3.2 | ) | | | (7.0 | ) | (3) | Foreign derived intangible income deduction | | | (1.7 | ) | | | — | | | | — | | | Domestic production activities deduction | | | — | | | | (1.6 | ) | | | (2.1 | ) | | Income tax benefits from R&D tax credits | | | (3.5 | ) | | | (3.7 | ) | | | (3.3 | ) | | Income tax benefits from foreign tax credits | | | — | | | | — | | | | (0.3 | ) | | Share-based payments(1) | | | (3.2 | ) | | | (2.7 | ) | | | — | | | One-time transition tax from TCJA | | | (0.4 | ) | | | 6.6 | | (2) | | — | | | Other, net | | | 1.6 | | | | 0.1 | | | | 0.9 | | | Effective tax rate | | | 16.4 | % | | | 24.1 | % | | | 25.0 | % | |
| (1)
| During the first quarter of fiscal 2018, FactSet adoptedanaccounting standardthat requiresall excess tax benefits or deficiencies related to share-based paymentsto bereported within the consolidated statement of incomethat 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.
|
| (2)
| The enactment of the TCJA resulted in a one-time transition tax expense of $23.2 million during the second quarter of fiscal 2018.
|
| (3)
| Includesa 200 basispoint benefit as a result ofFactSet’sglobal 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 attributableare not allocated to the enactmentother segments. The content collection centers, located in India, the Philippines, and Latvia, benefit all our segments and the expenses incurred at these locations are allocated to each segment based on a percentage of revenue.
The following tables reflect the TCJA. results of operations of our segments: | | | | | | | | | | | | | | | | (in thousands) | | | | | | Year Ended August 31, 2021 | Americas | EMEA | Asia Pacific | Total | | Revenue | $ | 1,008,046 | | $ | 427,700 | | $ | 155,699 | | $ | 1,591,445 | | | Operating income | $ | 218,180 | | $ | 159,704 | | $ | 96,157 | | $ | 474,041 | | | Depreciation and amortization | $ | 39,415 | | $ | 14,847 | | $ | 10,214 | | $ | 64,476 | | | Stock-based compensation | $ | 35,113 | | $ | 8,401 | | $ | 1,551 | | $ | 45,065 | | | Capital expenditures | $ | 38,146 | | $ | 1,424 | | $ | 21,755 | | $ | 61,325 | |
| | | | | | | | | | | | | | | | Year Ended August 31, 2020 | Americas | EMEA | Asia Pacific | Total | | Revenue | $ | 943,649 | | $ | 406,498 | | $ | 143,964 | | $ | 1,494,111 | | | Operating income | $ | 182,037 | | $ | 165,317 | | $ | 92,306 | | $ | 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 | EMEA | Asia Pacific | Total | | Revenue | $ | 885,854 | | $ | 420,884 | | $ | 128,613 | | $ | 1,435,351 | | | Operating income | $ | 171,237 | | $ | 191,230 | | $ | 75,568 | | $ | 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 | |
Segment Total Assets The TCJA imposed a one-time transition tax expense, which resulted in a $23.2 million impact tofollowing table reflects the income tax provisiontotal assets for fiscal 2018, without a comparable impact in fiscal 2019. This transition tax impact was revised during fiscal 2019, resulting in a net benefitour segments: | | | | | | | | | | As of August 31, | | (in thousands) | 2021 | 2020 | | Segment Assets | | | | Americas | $ | 1,144,693 | | $ | 1,111,600 | | | EMEA | 842,652 | | 757,524 | | | Asia Pacific | 237,595 | | 214,264 | | | Total assets | $ | 2,224,940 | | $ | 2,083,388 | |
Geographic Information The following tables reflect our revenues and long-lived assets, split geographically by our country 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 returnsdomicile (the United States) and other discrete items for fiscal 2019.Duecountries where major subsidiaries are domiciled.
Geographic Revenue The following table sets forth revenue by geography, attributed 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.Deferred Tax Assets and Liabilities
The significant components of deferred tax assets that recorded within the Consolidated Balance Sheets were as follows:
| | At August 31, | | | (in thousands) | | 2019 | | | 2018 | | Deferred tax assets: | | | | | | | | | Receivable reserve | | $ | 1,517 | | | $ | 599 | | Depreciation on property, equipment and leasehold improvements | | | 2,858 | | | | 1,032 | | Deferred rent | | | 9,454 | | | | 7,711 | | Stock-based compensation | | | 13,755 | | | | 14,827 | | Purchased intangible assets, including acquired technology | | | (27,116 | ) | | | (24,059 | ) | Other | | | 7,103 | | | | 9,606 | | Total deferred tax assets | | $ | 7,571 | | | $ | 9,716 | |
The significant components of deferred tax liabilities recorded within the Consolidated Balance Sheets were as follows:
| | At August 31, | | | (in thousands | | 2019 | | | 2018 | | Deferred tax liabilities: | | | | | | | | | Stock-based compensation | | $ | (1,067 | ) | | $ | (946 | ) | Purchased intangible assets, including acquired technology | | | 17,188 | | | | 22,429 | | Other | | | 270 | | | | (293 | ) | Total deferred tax liabilities | | $ | 16,391 | | | $ | 21,190 | |
Unrecognized Tax Positions
Applicable accounting guidance prescribes a comprehensive model for the financial statement recognition, measurement, classification and disclosure of uncertain tax positions that a company has taken or expects to take on a tax return. FactSet recognizes the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained based on its technical merits of the tax position. Otherwise, no benefit or expense can be recognized in the consolidated financial statements. The tax benefits recognized are measuredcountries based on the largest benefit that has a greater than 50% likelihoodlocation of being realized upon effective settlement with a taxing authority. 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 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. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. The Company does not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next 12 months.
client: | | | | | | | | | | | | | | | | | | | (in thousands) | Years ended August 31, | | 2021 | | 2020 | | 2019 | | Revenues | | | | | | | United States | $ | 952,423 | | | $ | 898,609 | | | $ | 846,362 | | | United Kingdom | 190,044 | | | 179,966 | | | 166,944 | | | Other European Countries | 237,656 | | | 226,532 | | | 253,940 | | | All Other Countries | 211,322 | | | 189,004 | | | 168,105 | | | Total revenue | $ | 1,591,445 | | | $ | 1,494,111 | | | $ | 1,435,351 | |
Geographic Long-Lived Assets FactSet classifies the liability for unrecognized tax benefits as Taxes Payable (non-current) and to the extent that the Company anticipates payment of cash within one year, the benefit will be classified as Taxes Payable (current). Additionally, the Company accrues interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. 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.
The following table summarizes the changes in the balancesets forth long-lived assets by geographic area. Long-lived assets consist of gross unrecognized tax benefits: (in thousands) | | | | | Unrecognized income tax benefits at August 31, 2016 | | $ | 8,782 | | Additions based on tax positions related to the current year | | | 3,896 | | Additions for tax positions of prior years | | | 628 | | Statute of limitations lapse | | | (1,822 | ) | Unrecognized income tax benefits at August 31, 2017 | | $ | 11,484 | | Additions based on tax positions related to the current year | | | 2,954 | | Additions for tax positions of prior years | | | 531 | | Statute of limitations lapse | | | (3,146 | ) | Reductions from settlements with Taxing Authorities | | | (2,600 | ) | Unrecognized income tax benefits at August 31, 2018 | | $ | 9,223 | | Additions based on tax positions related to the current year | | | 3,133 | | Additions for tax positions of prior years | | | 507 | | Statute of limitations lapse | | | (1,979 | ) | Reductions from settlements with Taxing Authorities | | | — | | Unrecognized income tax benefits at August 31, 2019 | | $ | 10,884 | |
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, | | 2021 | | 2020 | | Long-lived Assets | | | | | United States | $ | 179,864 | | | $ | 205,929 | | | Philippines | 80,320 | | | 53,124 | | | India | 36,902 | | | 42,923 | | | United Kingdom | 30,976 | | | 32,184 | | | All Other Countries | 42,379 | | | 47,871 | | | Total long-lived assets | $ | 370,441 | | | $ | 382,031 | |
20. RISKS AND CONCENTRATIONS OF CREDIT RISK Financial Risk Management Foreign Currency Exchange Risk In the normal course of business, the Company’s tax filingswe are subjectexposed 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 yearscurrency exchange risk as indicated below:Major Tax Jurisdictions
| Open Tax Years
| U.S.
| | | | Federal
| 2016
| through
| 2018
| State (various)
| 2016
| through
| 2018
| | | | | Europe
| | | | United Kingdom
| 2017
| through
| 2018
| France
| 2017
| through
| 2018
| Germany
| 2016
| through
| 2018
|
18. DEBT
FactSet’s debt obligations consisted of the following:
| | At August 31, | | | (in thousands) | | 2019 | | | 2018 | | 2017 Revolving Credit Facility | | $ | — | | | $ | 575,000 | | 2019 Revolving Credit Facility (maturity date of March 29, 2024) | | $ | 575,000 | | | $ | — | |
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. 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. 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.
FactSet borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility, resulting in $175.0 million available to be withdrawn. FactSet is required to pay a commitment fee using a pricing grid currently at 0.10% based on the daily amount by which the available balance in the 2019 Revolving Credit Facility exceeds the borrowed amount. All outstanding loan amounts are reported as Long-term debt within the consolidated balance sheets at August 31,2019. 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. Interest on the loan outstanding is payable quarterly, in arrears, and on the maturity date.
During fiscal 2019, FactSet incurred approximately $0.9 million in debt issuance costs related to the 2019 Credit Agreement. These costs were capitalized as loan origination fees and are amortized into interest expense ratably over the term of the 2019 Credit Agreement.
The 2019 Credit Agreement contains covenants and requirements restricting certain FactSet activities, which are usual and customary for this type of loan. 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 31,2019.
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. The total principal amount of the debt outstanding at the time of retirement was $575.0 million and there were no prepayment penalties.
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%. Interest on the loan outstanding was payable quarterly in arrears and on the maturity date. The principal balance was also payable in full on the maturity date. There were no prepayment penalties when the Company elected to prepay the outstanding loan amounts on March 29, 2019.
19. COMMITMENTS AND CONTINGENCIES
Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the balance sheet as liabilities. 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 | | 2020 | | $ | 41,414 | | 2021 | | | 40,051 | | 2022 | | | 36,011 | | 2023 | | | 33,890 | | 2024 | | | 33,072 | | Thereafter | | | 215,523 | | Total | | $ | 399,961 | |
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 31,2019. 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: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; 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.
Contingencies
Income Taxes
Uncertain income tax positions are accounted for in accordance with applicable accounting guidance, refer to Note 17 Income Taxes for further details. FactSet is currently under audit by tax authorities and has reserved for potential adjustments to its provision for income taxes that may result from examinations by, or any negotiated settlements with, these tax authorities. The Company believes that the final outcome of these examinations or settlements will not have a material effect on its results of operations. 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
FactSet accrues non income-tax liabilities for contingencies when management believes that a loss is probable, and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. The Company is engaged in various legal proceedings, claims and litigation that have arisen in the ordinary course of business, including employment matters, commercial and intellectual property litigation. 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.
Sales TaxMatters
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. 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 31,2019. 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. The maximum potential amount of future payments FactSet could be required to make under these indemnification obligations is unlimited; however, FactSet has a director and officer insurance policy that it believes mitigates FactSet's exposure and may enable FactSet to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification obligations is immaterial.
20. RISKS AND CONCENTRATIONS OF CREDIT RISK
Financial Risk Management
Foreign Currency Exchange Risk
The Companywe conducts business outside the U.S. in several currencies including the British Pound Sterling, Euro, Indian Rupee, and Philippine Peso, British Pound Sterling, and Japanese Yen. The financial statements of these foreign subsidiaries are translatedPeso. Changes in the exchange rates for such currencies into U.S. dollars using period-end ratescan affect our revenues, earnings, and the carrying values of exchange forour assets and liabilities and average rates for the period for revenues and expenses. in our consolidated balance sheet, either positively or negatively.
To manage the exposures related to the effects of foreign exchange rate fluctuations, the Company utilizeswe utilize 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 We do 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.institutions. Further, the Company’sour policy is to deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties. FactSet’sOur 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.
Cash and Cash Equivalentsand Investments The fair market value of FactSet’sour cash and cash equivalents and investments at August 31,2019 2021 was $385.6$717.8 million. The Company’sOur 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 consistWe are exposed to interest rate risk through fluctuations 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)interest rates on the Company’s Consolidated Balance Sheets as the mutual funds can be liquidated at our discretion and the certificates of depositinvestments. As we 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, itsour financial exposure to fluctuations in interest rates is expected to remain low. The Company does not believe that the value or liquidity Refer to Note 3, Summary of itsSignificant Accounting Policies for more information on our cash and cash equivalents and investments have been significantly impacted by current market events.equivalents. As of August 31,2019, 2021, we had long term debt outstanding under the fair value2019 Revolving Credit Facility with a principal balance of FactSet’s long-term$575.0 million. The debt was $575.0 million, which approximated its carrying amount. The application ofbears interest on the outstanding principle at a floating interest rate equal to the daily LIBOR rate plus a spread, using a debt leverage pricing grid, approximates the current marketgrid. The variable 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 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 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.balance. Assuming all terms of the Company’sour outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one-monthone-month LIBOR rate would result in a $1.4$0.7 million change in itsour annual interest expense. Refer to Note 13, Debt for additional information regarding our outstanding debt obligations. Current market events have not required the Companyus to modify materially or change itsour financial risk management strategies with respect to itsour exposures to foreign currency exchange risk and interest rate risk.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents. We are exposed to credit risk for cash and cash equivalents held in financial institutions in the event of a default, to the extent that such amounts are maintained primarily with fivein excess of applicable insurance limits. We have not experienced any losses from maintaining cash accounts in excess of such limits. We do not believe our concentration of cash and cash equivalents present a significant credit risk as the counterparties to the instruments consist of multiple high-quality, credit-worthy financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and Accounts Receivable Our accounts receivable are maintained with financial institutions, with reputable credit, and therefore, bear minimal credit risk. The Company seekssubject to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring thecollection risk profiles of these counterparties.Accounts Receivable
Accounts receivableas they are unsecured and are derived from revenue earned from clients located around the globe. FactSet does We do not require collateral from its clients but performs credit evaluations on an ongoing basis. The Company maintainsour clients. We maintain reserves for potential write-offs and evaluatesevaluate the adequacy of the reserves periodically. These losses have historically been within expectations. No single client represented 10% or more than 3% of FactSet'sour total subscription revenue in any fiscal yearperiod 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 31,2018. As of August 31,2019 2021 and 2018,2020, the receivable reserve was $10.5$6.4 million and $3.5$8.0 million, respectively.
Derivative Instruments As a result of the
Our use of derivative instruments FactSet is exposedexposes us to counterparty credit risk. The Company has incorporated counterparty credit risk intoto the fair valueextent counterparties may be unable to meet the terms of its derivative assets and its owntheir agreements. To mitigate credit risk, into the value of the Company’s derivative liabilities, when applicable. For derivative instruments, the Company calculates credit risk from observable data relatedwe limit counterparties 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 largecredit-worthy financial institutions and regularly reviews itsdistribute contracts among these institutions to reduce the concentration of credit exposure balances as well as the creditworthiness of the counterparties. For the Company's liabilities, as CDS spread information is risk. We do not available for FactSet, the Company's credit risk is determined based on using a simple average of CDS spreads for peer companies. The Company does not expect any losses as a result of default by our counterparties.
Concentration of Other Risk
Data Content Providers Certain
We integrate data sets that FactSet relies onfrom various third-party sources into our hosted propriety data and analytics platform, which our clients access to perform their analyses. As certain data sources have a limited number of suppliers, although the Company makeswe make every effort to assure that, where reasonable, alternative sources are available. FactSet is We are not dependent on any onethird-partyindividual third-party data supplier in order to meet the needs of its clients. FactSet combines theour clients, with only two 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 representedsuppliers representing more than 10% of FactSet'sour total data costs during fiscal 2019, except for 1 vendor, whichthe year ended August 31, 2021. 21. SUBSEQUENT EVENTS As previously announced, on October 12, 2021, we completed our acquisition of Cobalt Software, Inc. (“Cobalt”), and its subsidiaries, for approximately $51.0 million, subject to certain post-closing adjustments. Cobalt is a supplierleading portfolio monitoring solutions provider for the private capital industry. The acquisition of risk modelsCobaltadvances our strategy to scale our data and portfolio optimizer data to FactSetworkflow solutions and represented 11%expands our private market offering. Results of FactSet’s data costsOperations from Cobalt will be recognized based on geographic business activities in fiscal 2019.21. UNAUDITED QUARTERLY FINANCIAL DATA
The following table presents selected unaudited financial information for eachaccordance with how our operating segments are currently aligned. We expect the majority of the quarterly periods in the years ended August 31,2019Cobalt purchase price to be allocated to goodwill and 2018. The results for any quarter are not necessarily indicativeacquired intangible assets.
Table 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) | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | | Revenue | | $ | 351,640 | | | $ | 354,895 | | | $ | 364,533 | | | $ | 364,283 | | Cost of services | | $ | 166,776 | | | $ | 165,108 | | | $ | 163,832 | | | $ | 167,730 | | Selling, general and administrative | | $ | 84,325 | | | $ | 81,099 | | | $ | 83,461 | | | $ | 84,985 | | 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 | |
Fiscal 2018 (in thousands, except per share data) | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | | Revenue | | $ | 329,141 | | | $ | 335,231 | | | $ | 339,911 | | | $ | 345,861 | | Cost of services | | $ | 161,524 | | | $ | 163,232 | | | $ | 165,073 | | | $ | 169,467 | | Selling, general and administrative | | $ | 78,519 | | | $ | 76,514 | | | $ | 81,573 | | | $ | 88,038 | | Operating income | | $ | 89,098 | | | $ | 95,485 | | | $ | 93,265 | | | $ | 88,356 | | Net income | | $ | 70,379 | | | $ | 53,137 | | | $ | 74,746 | | | $ | 68,823 | | Diluted EPS(1) | | $ | 1.77 | | | $ | 1.33 | | | $ | 1.91 | | | $ | 1.77 | | Diluted weighted average common shares | | | 39,680 | | | | 39,846 | | | | 39,104 | | | | 38,879 | |
| (1)
| Diluted earnings per common share is calculated independently for each of the periods presented. Accordingly, the sum ofthe quarterly EPSamounts may not equal the total for thefiscalyear.
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our
Our management, including theour principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the annual period covered by this report. Based on that evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) are effective to ensure that information required to be disclosedas of the end of the annual period covered by us in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.this report. Changes in Internal Control over Financial Reporting There have been no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during theour fourth quarter of fiscal 20192021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting See Item 8. Management’s Report on Internal Control over Financial Reporting under Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. Report of Independent Registered Public Accounting Firm See Item 8. Report of Independent Registered Public Accounting Firm under Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. ITEM 9B. OTHER INFORMATION
Part III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required to be furnished by this item relating to our directors and nominees, relating to compliance with Section 16(a) of the Securities Act of 1934, and relating to our Audit Committee is included under the captions “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement dated October 30, 2019, and all such informationItem 10. is incorporated herein by reference.reference to our Notice of Annual Meeting of Stockholders and Proxy Statement to be filed within 120 days of August 31, 2021 (the "Proxy Statement"). Pursuant to General Instruction G(3) of Form 10-K, the information required by this item relating to our executive officers is included under the caption “Executivein Item 1. Executive Officers of the Registrant” in Part IRegistrant of this Annual Report on Form 10-K.The Company has adopted a Code of Business Conduct and Ethics that applies to all employees, including the Company’s principal executive officer, principal financial officer and principal accounting officer, all other officers and the Company’s directors. A copy of this code is available on the Company’s website at https://investor.factset.com on the Leadership and Corporate Governance page. The Company intends to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website at the address and general location specified above.
The Corporate Governance Guidelines and the charters of the committees of our Board of Directors, including the Audit Committee, Compensation and Talent Committee and Nominating and Corporate Governance Committee are also available on our website at https://investor.factset.com on the Leadership and Corporate Governance page. The guidelines, charters and code of ethics are also available in print free of charge to any stockholder who submits a written request to our Investor Relations department at our corporate headquarters at 601 Merritt 7, Norwalk, CT 06851 prior to January 1, 2020 and 45 Glover Avenue Norwalk, CT 06850.
ITEM 11. EXECUTIVE COMPENSATION The information required to be furnished by this item relating to compensation is included under the captions “Executive Compensation,” “Compensation Discussion and Analysis,” “Compensation and Talent Committee Report,” “Director Compensation Program,” including “Equity Compensation,” and “Director Compensation Table” of the definitive Proxy Statement dated October 30, 2019, and all such informationItem 11. is incorporated herein by reference.reference to our Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required to be furnished by this item relating to security ownership of certain beneficial owners and management is included under the caption “Security Ownership of Certain Beneficial Owners and Management”, in the definitive Proxy Statement dated October 30, 2019, and such informationItem 12. is incorporated herein by reference.reference to our Proxy Statement.Equity Compensation Plan Information The following table summarizes as of August 31, 2019,2021, the number of outstanding equity awards granted to employees and non-employee directors, as well as the number of equity awards remaining available for future issuance, under FactSet’sour equity compensation plans: (In thousands, except per share data) | | Plan category | | (a) Number of securities to be issued upon exercise of outstanding options and restricted stock vesting | | | | (b) Weighted-average exercise price of outstanding options | | | (c) Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a)) | | Equity compensation plans approved by security holders | | | 2,648 | (1) | | | $ | 168.50 | (2) | | | 6,551 | (3) | Equity compensation plans not approved by security holders | | | — | | | | | — | | | | — | | Total | | | 2,648 | (1) | | | $ | 168.50 | (2) | | | 6,551 | (3) |
| (1)
| Includes shares of FactSet common stock subject to outstanding restricted stock that will entitle each holder to the issuance of one share of common stock as they vest.
|
| (2)
| Calculated without taking into account shares of FactSet common stock subject to outstanding restricted stock that will become issuable as they vest, without any cash consideration or other payment required for such shares.
|
| (3)
| Includes 263,956 shares available for future issuance under the FactSet Research Systems Inc. Non-Employee Directors’ Stock Option and Award Plan, as Amended and Restatedand 220,410shares available forpurchaseunder theFactSet Research Systems Inc.2008 Employee Stock Purchase Plan,asAmended and Restated.
|
| | | | | | | | | | | | | | | | | | | | | | (In thousands, except per share data) | | Plan category |
Number of securities
to be issued upon exercise
of outstanding options, warrants and rights
(a) | | Weighted-average
exercise price of
outstanding options, warrants and rights
(b) | | Number of securities remaining
available for future issuances under
equity compensation plans (excluding
securities reflected in column (a))
(c) | | | Equity compensation plans approved by security holders | 2,474 | | (1) | $ | 214.89 | | (2) | 5,456 | | (3) | | Equity compensation plans not approved by security holders | — | | | — | | | — | | | | Total | 2,474 | | (1) | $ | 214.89 | | (2) | 5,456 | | (3) |
(1)Includes 2,277 shares issuable upon exercise of outstanding options, 128 shares issuable upon vesting of awards of restricted stock units and 69 shares issuable upon the conversion of outstanding performance share units. (2)Weighted average exercise price of outstanding options only. (3)Includes 5,079,693 shares available for future issuance under the FactSet Research Systems Inc. Stock Option and Award Plan, as Amended and Restated, 237,749 shares available for future issuance under the FactSet Research Systems Inc. Non-Employee Directors’ Stock Option and Award Plan, as Amended and Restated,and 138,956shares available forpurchaseunder theFactSet Research Systems Inc.2008 Employee Stock Purchase Plan,asAmended and Restated.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required to be furnished by this item relating to review, approval or ratification of transactions with related persons is included under the caption “Certain Relationships and Related Transactions” and all the information required by this item relating to director independence is included under the caption “Corporate Governance” contained in the definitive Proxy Statement dated October 30, 2019, all of which informationItem 13. is incorporated herein by reference.reference to our Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required to be furnished by this item is included under the caption “Proposal 2: Ratification of Independent Registered Public Accounting Firm” in the definitive Proxy Statement dated October 30, 2019, all of which informationItem 14. is incorporated herein by reference.reference to our Proxy Statement.
Part IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a)Documents filed as part of this Annual Report on Form 10-K: 1.Financial Statements The information required by this item is included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K which is incorporated herein. 2.Financial Statements Schedule Schedule II – Valuation and Qualifying Accounts Years ended August 31, 2021, 2020 and 2019 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | Receivable reserve
and billing adjustments | Balance at Beginning of Year | | Charged to Expense/ Against Revenue(1) | | Write-offs,
Net of Recoveries | | Balance at
End of Year | | 2021 | $ | 7,987 | | | $ | 918 | | | $ | (2,474) | | | $ | 6,431 | | | 2020 | $ | 10,511 | | | $ | 754 | | | $ | (3,278) | | | $ | 7,987 | | | 2019 | $ | 3,490 | | | $ | 11,474 | | | $ | (4,453) | | | $ | 10,511 | |
(1) Additions to the receivable reserve for doubtful accounts are charged to bad debt expense. Additions to the receivable reserve for billing adjustments are charged against revenue. Additional financial statement schedules are omitted since they are either not required, not applicable, or the information is otherwise included. 3.Exhibits The information required by this Item is set forth below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incorporated by Reference | Exhibit
Number | | Exhibit
Description | | Form | | File No. | | Exhibit No. | | Filing Date | | Filed
Herewith | | | | | S-1/A | | 333-04238 | | 3.1 | | 6/26/1996 | | | | | | | 10-K | | 333-22319 | | 3.12 | | 11/20/2001 | | | | | | | 8-K | | 001-11869 | | 3.1 | | 12/16/2011 | | | | | | | 8-K | | 001-11869 | | 3.1 | | 9/6/2018 | | | | | | | 8-K | | 001-11869 | | 3.1 | | 10/1/2021 | | | | | | | S-1/A | | 333-04238 | | 4.1 | | 6/26/1996 | | | | | | | DEF-14A | | 001-11869 | | Exhibit A | | 11/10/2004 | | | | | | | DEFR-14A | | 001-11869 | | Appendix A | | 12/6/2010 | | | | | | | 8-K | | 001-11869 | | 10.1 | | 12/21/2017 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DEF-14A | | 001-11869 | | Appendix A | | 10/30/2008 | | | | | | | 8-K | | 001-11869 | | 10.2 | | 12/21/2017 | | | | | | | 10-Q | | 001-11869 | | 10.1 | | 4/9/2018 | | | | | | | 8-K | | 001-11869 | | 10.1 | | 3/29/2019 | | | | | | | 8-K | | 001-11869 | | 10.1 | | 9/25/2020 | | | | | | | 8-K | | 001-11869 | | 10.1 | | 3/5/2020 | | | | | | | 8-K | | 001-11869 | | 10.2 | | 3/5/2020 | | | | | | | | | | | | | | | X | | | | | | | | | | | | | X | | | | | | | | | | | | | X | | | | | | | | | | | | | X | | | | | | | | | | | | | X | | | | | | | | | | | | | X | | 101.INS | | XBRL Instance Document | | | | | | | | | | X | | 101.SCH | | XBRL Taxonomy Extension Schema | | | | | | | | | | X | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase | | | | | | | | | | X | | 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | X | | 101.LAB | | XBRL Taxonomy Extension Label Linkbase | | | | | | | | | | X |
(a)
| Documents filed as part of this Report on Form 10-K:
|
| 1.
| Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | | | | | | | | | | X | | 104 | | The information required by this item is includedCover page Interactive Data File (formatted as Inline XBRL and contained in Item 8, Financial Statements and Supplementary Data, which is incorporated herein. |
| Exhibit 101 | 2.
| Financial Statements Schedule
| | | | | | | | X | | | | | | Schedule II – Valuation and Qualifying Accounts | | | | | | Years ended August 31,2019,2018 and 2017 (in thousands): |
Receivable Reserve and Billing Adjustments | | Balance at Beginning of Year | | | Charged to Expense/ Against Revenue(1) | | | Write-offs, Net of Recoveries | | | Balance at End of Year | | 2019 | | $ | 3,490 | | | $ | 11,474 | | | $ | (4,453 | ) | | $ | 10,511 | | 2018 | | $ | 2,738 | | | $ | 4,737 | | | $ | (3,985 | ) | | $ | 3,490 | | 2017 | | $ | 1,521 | | | $ | 3,381 | | | $ | (2,164 | ) | | $ | 2,738 | |
| (1)
| Additions to the receivable reserve for doubtful accounts are charged to bad debt expense. Additions to the receivable reserve for billing adjustments are charged against revenue.
|
| Additional financial statement schedules are omitted since they are either not required, not applicable, or the information is otherwise included.
|
(1)Indicates a management contract or compensatory plan or arrangement | | The information required by this Item is set forth below. |
(2)Confidential treatment has been granted for portions of this exhibit.
10.4 | | FactSet Research Systems Inc. 2008 Non-Employee Directors’ Stock Option Plan(1) | | DEF-14A | | 001-11869 | | Appendix A | | 10/30/2008 | | | 10.5 | | FactSet Research Systems Inc. Non-Employee Directors’ Stock Option and Award Plan, as Amended and Restated(1) | | 8-K | | 001-11869 | | 10.2 | | 12/21/2017 | | | 10.6 | | Lease, dated February 14, 2018, between FactSet Research Systems Inc. and 45 Glover Partners, LLC(2) | | 10-Q | | 001-11869 | | 10.1 | | 4/9/2018 | | | 10.7 | | Credit Agreement with PNC Bank, National Association, Bank of America, N.A. and HSBC Bank USA, National Association as of March 29, 2019 | | 8-K | | 001-11869 | | 10.1 | | 3/29/2019 | | | 10.8 | | Separation Agreement and General Release of Claims with John W. Wiseman as of April 22, 2019(1) | | 10-Q | | 001-11869 | | 10.1 | | 7/10/2019 | | | 21 | | Subsidiaries of FactSet Research Systems Inc. | | | | | | | | | | X | 23 | | Consent of Ernst & Young LLP | | | | | | | | | | X | 31.1 | | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | | | | | | | | | | X | 31.2 | | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | | | | | | | | | | X | 32.1 | | Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | X | 32.2 | | Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | | | X | 101.INS | | Inline XBRL Instance Document | | | | | | | | | | X | 101.SCH | | Inline XBRL Taxonomy Extension Schema | | | | | | | | | | X | 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase | | | | | | | | | | X | 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | X | 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase | | | | | | | | | | X | 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase | | | | | | | | | | X | | 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | | | X |
(1)
| Indicates a management contract or compensatory plan or arrangement
|
(2)
| Confidential treatment has been granted for portions of this exhibit.
|
ITEM 16. FORM 10-K SUMMARY
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | FACTSET RESEARCH SYSTEMS INC. | | | (Registrant) | | | | | Date: October 30, 2019 22, 2021 | /s/ F. PHILIP SNOW | | | F. Philip Snow | | | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.Name
| | Title
| | Date
| | | | | | | | | | | Name | | Title | | Date | | /s/ F. PHILIP SNOW | | Chief Executive Officer and Director | | October 30, 2019 22, 2021 | F. Philip Snow | | (Principal Executive Officer) | | | | | | | | /s/ HELEN L. SHAN LINDA S. HUBER | | Executive Vice President, and Chief Financial Officer | | October 30, 2019 22, 2021 | Helen L. Shan
Linda S. Huber | | (Principal Financial Officer) | | | | | | | | /s/ GREGORY T. MOSKOFF | | Senior Vice President, Controller and Chief Accounting Officer | | October 30, 2019 22, 2021 | Gregory T. Moskoff | | (Principal Accounting Officer) | | | | | | | | /s/ PHILIP A. HADLEY
| | Chairman
| | October 30, 2019
| Philip A. Hadley
| | | | | | | | | | /s/ ROBIN A. ABRAMS | | Director
Chair | | October 30, 2019 22, 2021 | Robin A. Abrams | | | | | | | | | | /s/ SCOTT A. BILLEADEAU SIEW KAI CHOY | | Director | | October 30, 2019 22, 2021 | Scott A. Billeadeau
Siew Kai Choy | | | | | | | | | | /s/ MALCOLM FRANK | | Director | | October 30, 2019 22, 2021 | Malcolm Frank | | | | | | | | | | /s/ SHEILA B. JORDAN | | Director | | October 30, 2019 22, 2021 | Sheila B. Jordan | | | | | | | | | | /s/ JAMES J. MCGONIGLE | | Director | | October 30, 2019 22, 2021 | James J. McGonigle | | | | | | | | | | /s/ LEE SHAVEL | | Director | | October 22, 2021 | | Lee Shavel | | | | | | | | | | | /s/ LAURIE SIEGEL | | Director | | October 30, 2019 22, 2021 | Laurie Siegel | | | | | | | | | | /s/ JOSEPH R. ZIMMEL | | Director | | October 30, 2019 22, 2021 | Joseph R. Zimmel | | | | | | | | | |
102
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