UNITED STATES

SECURITIES AND ~~EXCHANG~~EXCHANGEECOMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November 30, 2018~~May 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission File Number: 1-11869

FACTSET RESEARCH SYSTEMS INC.

(Exact name of registrant as specified in its charter)

Delaware

13-3362547

(State or other jurisdiction of

incorporation)

(I.R.S. Employer

Identification No.)

601 Merritt 7, Norwalk, Connecticut	06851
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code:(203) 810-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated filer” “smaller~~" "accelerated filer," "smaller reporting ~~company”~~company," and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act.

Largeacceleratedfiler ☒ Acceleratedfiler ☒☐ ~~Accelerated~~ Non-acceleratedfiler☐ ~~Non accelerated filer~~ ☐ Smallerreportingcompany ☐☐Emerging ~~Growth Company~~growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ ☐No No ☒

The number of shares outstanding of the registrant’s common stock, $.01 par value, as of ~~December 31, 2018~~June 28, 2019 was ~~38,035,470.~~38,255,947.

Title of each class

Trading Symbols(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value

FDS

New York Stock Exchange

Nasdaq Global Select Market

��

FactSet Research Systems Inc.

Form 10-Q

For the Quarter Ended~~November 30, 201~~8May 31, 2019

Index

			Page
Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Income for the three and nine months ended ~~November 30,~~May 31, 2019 and 2018 ~~and 2017~~	3

	Consolidated Statements of Comprehensive Income for the three and nine months ended ~~November 30,~~May 31, 2019 and 2018 ~~and 2017~~	4

	Consolidated Balance Sheets at ~~November 30, 2018~~May 31, 2019 and August 31, 2018	5

	Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~November 30,~~May 31, 2019 and 2018 ~~and 2017~~	6

	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended ~~November 30, 2018 and 2017~~May 31, 2019	7

	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended May 31, 2018	8

	Notes to the Consolidated Financial Statements	8 9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28 33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41 49

Item 4.	Controls and Procedures	42 50

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	43 51

Item 1A.	Risk Factors	43 51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43 51

Item 3.	Defaults Upon Senior Securities	43 51

Item 4.	Mine Safety Disclosures	43 51

Item 5.	Other Information	43 51

Item 6.	Exhibits	44 52

	Signatures	45
			53

For additional information about FactSet Research Systems Inc. and access to its Annual Reports to Stockholders and Securities and Exchange Commission filings, free of charge, please visit FactSet’s website (~~http~~s:https://~~investor.factset.com~~)investor.factset.com). Any information on or linked from the website is not incorporated by reference into this Quarterly Report on Form 10-Q.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF INCOME – Unaudited

	Three Months Ended November 30,						Three Months Ended May 31,				Nine Months Ended May 31,
(In thousands, except per share data)	2018			2017			2019		2018		2019		2018
Revenue	$	351,640		$	329,141
Revenues							$	364,533	$	339,911	$	1,071,068	$	1,004,283
Operating expenses
Cost of services		166,776			161,524			163,832		165,073		495,716		489,829
Selling, general and administrative		84,325			78,519			83,461		81,573		248,885		236,606
Total operating expenses		251,101			240,043			247,293		246,646		744,601		726,435

Operating income		100,539			89,098			117,240		93,265		326,467		277,848
Other (expense) income
Interest (expense), net of interest income		(4,596	)		(2,919	)
Other expense
Interest expense, net of interest income								3,856		3,754		12,791		9,945
Income before income taxes		95,943			86,179			113,384		89,511		313,676		267,903

Provision for income taxes		11,647			15,800			21,119		14,765		52,413		69,641
Net income	$	84,296		$	70,379		$	92,265	$	74,746	$	261,263	$	198,262

Basic earnings per common share	$	2.21		$	1.80		$	2.41	$	1.94	$	6.85	$	5.10
Diluted earnings per common share	$	2.17		$	1.77		$	2.37	$	1.91	$	6.73	$	5.01

Basic weighted average common shares		38,106			39,085			38,223		38,594		38,128		38,890
Diluted weighted average common shares		38,809			39,680			38,993		39,104		38,807		39,543

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

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – Unaudited

	Three Months Ended November 30,						Three Months Ended May 31,						Nine Months Ended May 31,
(In thousands)	2018			2017			2019			2018			2019			2018
Net income	$	84,296		$	70,379		$	92,265		$	74,746		$	261,263		$	198,262

Other comprehensive income (loss), net of tax
Net unrealized gain (loss) on cash flow hedges*		1,038			(476	)
Other comprehensive (loss) income, net of tax
Net unrealized (loss) gain on cash flow hedges*								(160	)		(2,361	)		1,405			(4,105	)
Foreign currency translation adjustments		(9,504	)		8,466			(11,326	)		(20,126	)		(15,804	)		(2,260	)
Other comprehensive (loss) income		(8,466	)		7,990			(11,486	)		(22,487	)		(14,399	)		(6,365	)
Comprehensive income	$	75,830		$	78,369		$	80,779		$	52,259		$	246,864		$	191,897

*For the three months ended ~~November 30, 2018, the~~ ~~unrealized gain on cash flow hedges disclosed above was net of tax expense~~of $588~~. For the three months ended November 30, 2017,~~May 31, 2019, the unrealized loss on cash flow hedges was net of a tax ~~benefits~~benefit of ~~$288~~.$65. For the nine months ended May 31, 2019, the unrealized gain on cash flow hedges was net of a tax expense of $702. For the three and nine months ended May 31, 2018, the unrealized loss on cash flow hedges was net of a tax benefit of $976 and $2,166, respectively.

The accompanying notes are an integral part of theseconsolidated financial statements.

Fa~~ctSet~~FactSet Research Systems Inc.

CONSOLIDATEDBALANCE SHEETS– Unaudited

	November 30, 2018			August 31, 2018
(In thousands, except share data)	(Unaudited)						May 31, 2019			August 31, 2018
ASSETS
Cash and cash equivalents	$	170,378		$	208,623		$	323,960		$	208,623
Investments		27,470			29,259			26,355			29,259
Accounts receivable, net of reserves of $4,518 at November 30, 2018 and $3,490 at August 31, 2018		159,890			156,639
Accounts receivable, net of reserves of $5,254 at May 31, 2019 and $3,490 at August 31, 2018								153,461			156,639
Prepaid taxes		—			6,274			10,365			6,274
Prepaid expenses and other current assets		33,445			30,121			35,030			30,121
Total current assets		391,183			430,916			549,171			430,916

Property, equipment and leasehold improvements, net		101,566			100,545			105,287			100,545
Goodwill		694,897			701,833			690,956			701,833
Intangible assets, net		141,037			148,935			129,205			148,935
Deferred taxes		9,443			9,716			5,997			9,716
Other assets		27,801			27,502			31,285			27,502
TOTAL ASSETS	$	1,365,927		$	1,419,447		$	1,511,901		$	1,419,447

LIABILITIES
Accounts payable and accrued expenses	$	61,271		$	72,059		$	67,174		$	72,059
Accrued compensation		22,268			66,479			42,515			66,479
Deferred fees		40,808			49,700			50,509			49,700
Taxes payable		8,403			8,453			3,820			8,453
Dividends payable		24,372			24,443			27,506			24,443
Total current liabilities		157,122			221,134			191,524			221,134

Long-term debt		574,812			574,775			574,129			574,775
Deferred taxes		20,709			21,190			19,006			21,190
Deferred fees		9,480			7,833			11,750			7,833
Taxes payable		26,525			29,626			24,323			29,626
Deferred rent and other non-current liabilities		36,070			38,989			36,760			38,989
TOTAL LIABILITIES	$	824,718		$	893,547		$	857,492		$	893,547
Commitments and contingencies (see Note 17)

STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued	$	—		$	—		$	—		$	—
Common stock, $.01 par value, 150,000,000 shares authorized, 39,447,491 and 39,264,849 shares issued; 38,080,878 and 38,192,586 shares outstanding at November 30, 2018 and August 31, 2018, respectively		394			393
Common stock, $.01 par value, 150,000,000 shares authorized, 39,982,823 and 39,264,849 shares issued, 38,217,763 and 38,192,586 shares outstanding at May 31, 2019 and August 31, 2018, respectively								400			393
Additional paid-in capital		694,078			667,531			781,705			667,531
Treasury stock, at cost: 1,366,613 and 1,072,263 shares at November 30, 2018 and August 31, 2018, respectively		(278,146	)		(213,428	)
Treasury stock, at cost: 1,765,060 and 1,072,263 shares at May 31, 2019 and August 31, 2018, respectively								(371,722	)		(213,428	)
Retained earnings		184,071			122,843			309,147			122,843
Accumulated other comprehensive loss		(59,188	)		(51,439	)		(65,121	)		(51,439	)
TOTAL STOCKHOLDERS’ EQUITY	$	541,209		$	525,900		$	654,409		$	525,900

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,365,927		$	1,419,447		$	1,511,901		$	1,419,447

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

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS–Unaudited

	Nine Months Ended May 31,
(in thousands)	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	261,263		$	198,262
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		43,943			42,848
Stock-based compensation expense		24,135			23,241
Deferred income taxes		1,294			848
Loss on sale of assets		195			18
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable, net of reserves		3,112			3,067
Accounts payable and accrued expenses		(4,783	)		3,423
Accrued compensation		(23,672	)		(20,629	)
Deferred fees		4,826			13,027
Taxes payable, net of prepaid taxes		(2,232	)		25,928
Other, net		(2,757	)		(10,691	)
Net cash provided by operating activities		305,324			279,342

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments		(8,180	)		(9,608	)
Proceeds from maturity or sale of investments		11,543			9,872
Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions		(32,906	)		(18,375	)
Net cash used in investing activities		(29,543	)		(18,111	)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividend payments		(75,769	)		(65,037	)
Repurchases of common stock		(158,294	)		(235,869	)
Repayment of debt		(575,000	)		—
Proceeds from debt		575,000			—
Other financing activities		(901	)		2,218
Proceeds from employee stock plans		78,926			57,529
Net cash used by financing activities		(156,038	)		(241,159	)

Effect of exchange rate changes on cash and cash equivalents		(4,406	)		(1,742	)
Net increase in cash and cash equivalents		115,337			18,330
Cash and cash equivalents at beginning of period		208,623			194,731
Cash and cash equivalents at end of period	$	323,960		$	213,061

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

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY- Unaudited

For the three months ended May 31, 2019

	Common Stock				Additional Paid-in		Treasury Stock					Retained			Accumulated Other Comprehensive			Total Stockholders’
(in thousands, except share data)	Shares		Par Value		Capital		Shares		Amount			Earnings			Loss			Equity
Balance as of February 28, 2019		39,690,225	$	397	$	732,538		1,590,060	$	(324,167	)	$	244,388		$	(53,635	)	$	599,521
Net income													92,265						92,265
Other comprehensive (loss) income																(11,486	)		(11,486	)
Common stock issued for employee stock plans		292,598		3		41,172													41,175
Vesting of restricted stock																			—
Repurchases of common stock								175,000		(47,555	)								(47,555	)
Stock-based compensation expense						7,995													7,995
Dividends declared													(27,506	)					(27,506	)
Balance as of May 31, 2019		39,982,823	$	400	$	781,705		1,765,060	$	(371,722	)	$	309,147		$	(65,121	)	$	654,409

For the nine months ended May 31, 2019

	Common Stock				Additional Paid-in		Treasury Stock					Retained			Accumulated Other Comprehensive			Total Stockholders’
(in thousands, except share data)	Shares		Par Value		Capital		Shares		Amount			Earnings			Loss			Equity
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													261,263						261,263
Other comprehensive (loss) income																(14,399	)		(14,399	)
Common stock issued for employee stock plans		642,444		7		90,039													90,046
Vesting of restricted stock		75,530						27,852		(6,155	)								(6,155	)
Repurchases of common stock								664,945		(152,139	)								(152,139	)
Stock-based compensation expense						24,135													24,135
Dividends declared													(76,263	)					(76,263	)
Cumulative effect of adoption of accounting standards*													1,304			717			2,021
Balance as of May 31, 2019		39,982,823	$	400	$	781,705		1,765,060	$	(371,722	)	$	309,147		$	(65,121	)	$	654,409

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

~~FactSet Research Systems Inc.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~–~~Unaudited~~

Three Months Ended
November 30,

(in thousands)

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES

Net income
$ 84,296 $ 70,379
Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization
14,241 14,286
Stock-based compensation expense
8,435 7,481
Deferred income taxes
(689 ) 875
Loss on sale of assets
181 17
Changes in assets and liabilities, net of effects of acquisitions

Accounts receivable, net of reserves
(3,583 ) 3,511
Accounts payable and accrued expenses
(10,522 ) 8,604
Accrued compensation
(44,051 ) (40,384 )
Deferred fees
(7,250 ) (3,531 )
Taxes payable, net of prepaid taxes
7,489 7,401
Prepaid expenses and other assets
(957 ) (6,716 )
Deferred rent and other non-current liabilities
(1,126 ) (845 )
Other working capital accounts, net
(144 ) 65
Net cash provided by operating activities
46,320 61,143

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments
(4,356 ) (6,942 )
Proceeds from maturity of investments
6,573 7,409
Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions
(9,526 ) (5,912 )
Net cash used in investing activities
(7,309 ) (5,445 )

CASH FLOWS FROM FINANCING ACTIVITIES

Dividend payments
(24,252 ) (21,682 )
Repurchases of common stock
(64,718 ) (31,706 )
Other financing activities
— 442
Proceeds from employee stock plans
13,965 22,132
Net cash used by financing activities
(75,005 ) (30,814 )

Effect of exchange rate changes on cash and cash equivalents
(2,251 ) 2,318
Net (decrease) increase in cash and cash equivalents
(38,245 ) 27,202
Cash and cash equivalents at beginning of period
208,623 194,731
Cash and cash equivalents at end of period
$ 170,378 $ 221,933

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

FactSet Research Systems Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY- Unaudited

For the three months ended ~~November 30,~~May 31, 2018 ~~and November 30, 2017~~

(in thousands,	Common Stock				Additional Paid-in		Treasury Stock					Retained			Accumulated Other Comprehensive			Total Stockholders’
except per share data)	Shares		Par Value		Capital		Shares		Par Value			Earnings			Loss			Equity
Balance as of August 31, 2018		39,264,849	$	393	$	667,531		1,072,263	$	(213,428	)	$	122,843		$	(51,439	)	$	525,900
																					Common Stock				Additional Paid-in		Treasury Stock Shares Amount					Retained			Accumulated Other Comprehensive			Total Stockholders’
(in thousands, except share data)																					Shares		Par Value		Capital		Shares		Amount			Earnings			Loss			Equity
Balance as of February 28, 2018																						39,047,153	$	390	$	625,394		120,000	$	(23,379	)	$	28,283		$	(18,598	)	$	612,090
Net income													84,296						84,296														74,746						74,746
Other comprehensive (loss) income																(8,466	)		(8,466	)																(22,487	)		(22,487	)
Common stock issued for employee stock plans		130,031		1		18,112													18,113			77,204		1		9,691													9,692
Vesting of restricted stock		52,611						19,350		(4,277	)								(4,277	)		224																	—
Repurchases of common stock								275,000		(60,441	)								(60,441	)								620,000		(121,963	)								(121,963	)
Stock-based compensation expense						8,435													8,435							7,821													7,821
Dividends declared													(24,372	)					(24,372	)													(24,566	)					(24,566	)
Cumulative effect of adoption of accounting standards*													1,304			717			2,021
Balance as of November 30, 2018		39,447,491	$	394	$	694,078		1,366,613	$	(278,146	)	$	184,071		$	(59,188	)	$	541,209
Retirement of treasury shares																																							—
Balance as of May 31, 2018																						39,124,581	$	391	$	642,906		740,000	$	(145,342	)	$	78,463		$	(41,085	)	$	535,333

*~~Includes~~For the ~~cumulative effect of adoption of accounting standards primarily due to both~~ ~~the~~ ~~adoption of the new revenue recognition standard (ASC 606) resulting in a~~ ~~cumulative increase to retained earnings related to certain fulfillment costs and the~~ ~~accounting standard update~~ ~~related to the U.S. Tax Cuts and Jobs Act (“TCJA”)~~ ~~providing for the~~ ~~reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects. See~~ N~~otes 3 and 4 for additional information.~~nine months ended May 31, 2018

(in thousands,	Common Stock				Additional Paid-in		Treasury Stock					Retained			Accumulated Other Comprehensive			Total Stockholders’
except per share data)	Shares		Par Value		Capital		Shares		Par Value			Earnings			Loss			Equity
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
																					Common Stock						Additional Paid-in			Treasury Stock						Retained			Accumulated Other Comprehensive			Total Stockholders’
(in thousands, except share data)																					Shares			Par Value			Capital			Shares			Amount			Earnings			Loss			Equity
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													70,379						70,379																		198,262						198,262
Other comprehensive (loss) income																7,990			7,990																					(6,365	)		(6,365	)
Common stock issued for employee stock plans		245,016		3		26,280													26,283			557,075			6			64,634			106			(19	)								64,621
Vesting of restricted stock		11,278						4,220		(752	)								(752	)		15,063									5,563			(1,014	)								(1,014	)
Repurchases of common stock								165,026		(30,954	)								(30,954	)											1,204,920			(234,836	)								(234,836	)
Stock-based compensation expense						7,481													7,481									23,241															23,241
Dividends declared													(21,901	)					(21,901	)																	(68,267	)					(68,267	)
Balance as of November 30, 2017		52,101,426	$	521	$	775,509		12,991,346	$	(1,638,384	)	$	1,507,301		$	(26,730	)	$	618,217
Retirement of treasury shares																						(13,292,689	)		(133	)		(186,717	)		(13,292,689	)		1,697,205			(1,510,355	)					—
Balance as of May 31, 2018																						39,124,581		$	391		$	642,906			740,000		$	(145,342	)	$	78,463		$	(41,085	)	$	535,333

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FactSet Research Systems Inc.

~~November 30, 2018~~May 31, 2019

(Unaudited)

1. ORGANIZATION AND NATUREOF BUSINESS

FactSet Research Systems Inc. (the ~~“Company”~~"Company" or ~~“FactSet”~~"FactSet") is a global provider of integrated financial information, analytical applications and industry-leading service for the global investment community. These ~~professionals~~clients include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, FactSet offers proprietary and third-party content through desktop, web, mobile, and off-platform solutions. The Company’s broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. With recent acquisitions, FactSet has continued to expand its solutions across the investment lifecycle from idea generation to performance and client reporting. The Company delivers insight and information to investment professionals through key ~~workflows~~workflow solutions including Research, Analytics, Wealth, and Content and Technology Solutions ~~(“CTS”~~("CTS"). The Company’s revenue is primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, research management, and trade execution.

2. BASIS OF PRESENTATION

FactSet conducts business globally and is managed on a geographic basis. The accompanying unaudited consolidated financial statements and notes of FactSet and its ~~wholly owned~~wholly-owned subsidiaries included in this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles in the United States ~~(“GAAP”~~("GAAP"). for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for annual financial statements. The accompanying consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All intercompany activity and balances have been ~~eliminated from the consolidated financial statements.~~ eliminated.

In the opinion of management, the accompanying unaudited consolidated financial statements include all normal recurring adjustments, transactions or events discretely impacting the interim periods considered necessary to present fairly the Company’s financial position, results of operations, equity and cash flows. The information in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2018, filed with the Securities and Exchange Commission ~~(“SEC”~~("SEC") on October 30, 2018.

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.

33.. RECENTACCOUNTING PRONOUNCEMENTS

As of ~~November 30, 2018, The~~May 31, 2019, the Company 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 first ~~three~~nine months of fiscal 2019 that had a material impact on the consolidated financial statements.

New Accounting Standards or Updates Recently Adopted

Revenue Recognition

In May 2014 and July 2015, the FASB issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with clients and superseded most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The new guidance also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients.

The standard allows two methods of adoption: i) retrospectively to each prior period presented (“("full retrospective ~~method”~~method"), or ii) retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption (“("modified retrospective ~~method”~~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 revenues 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 ~~updated~~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. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2020, with early adoption in fiscal 2019 permitted. The Company is currently evaluating the impact of this accounting standard update, including the transition method, but expects the adoption to have a material impact to its balance sheet. However, it does not expect the adoption to have a material impact on the statements of income, comprehensive income or cash flows. Refer to Note 17 Commitments and Contingencies for information regarding the Company’s undiscounted future lease commitments.

Goodwill Impairment Test

In January 2017, the FASB issued an accounting standard update which removes the requirement for companies to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted for any impairment tests performed after January 1, 2017 and is not expected to have a material impact on the consolidated financial statements.

Hedge Accounting Simplification

In August 2017, the FASB issued an accounting standard update to reduce the complexity of and simplify the application of hedge accounting. The guidance refines and expands hedge accounting for both financial and nonfinancial risk components, eliminates the need to separately measure and report hedge ineffectiveness, and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. This guidance will be effective for the Company beginning in the first quarter of fiscal 2020, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update but it is not expected to have a material impact on the consolidated financial statements.

No other new accounting pronouncements issued or effective as of ~~November 30, 2018~~May 31, 2019 have had or are expected to have an impact on the Company’s consolidated financial statements.

4.REVENUE RECOGNITION

In May 2014 and July 2015, the FASB issued accounting standard updates which clarified principles for recognizing revenue arising from contracts with customers (ASC 606) and superseded most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue standard 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 applies a five-step model for revenue measurement and recognition and also requires increased disclosures including the nature, amount, timing, and uncertainty of revenue and cash flows related to contracts with clients.

The Company adopted the standard at the beginning of the first quarter of fiscal 2019, using the modified retrospective method of adoption and applied the guidance to those contracts that were not completed as of August 31, 2018. Under the modified retrospective method of adoption, the cumulative effect of applying the new standard is recorded at the date of initial application, with no restatement of the comparative prior periods presented. The Company assessed its revenue contracts with clients under the new standards and determined that the adoption did not materially change the timing or amount of revenue recognized.

The Company derives most of its revenues by providing client access to its hosted proprietary data and analytics platform which can include various combinations of products and services available over the contractual term. The hosted platform is a subscription-based service that consists primarily of providing access to products and services including workstations, analytics, enterprise data, research management, and trade execution. The Company determined that the subscription-based service represents a single performance obligation covering a series of distinct products and services that are substantially the same and that have the same pattern of transfer to the client. The Company determined 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 applies an input time-based measure of progress as the client is simultaneously receiving and consuming the benefits of the platform. The Company records revenue for its contracts using the over-time revenue recognition model as a client is invoiced or performance in satisfied, which is comparable with how revenue is recognized today. FactSet does not consider payment terms a performance obligation for customers with contractual terms that are one year or less and has elected the practical expedient.

In FactSet’s assessment of contracts with clients, the Company did identify a small portion of contracts with certain fulfillment costs, which include up-front costs to allow for the delivery of services and products that are expected to be recovered. In connection with the adoption of the new standard, these fulfillment costs ~~will be~~are recognized as an asset and amortized consistent with the associated revenue for providing the services, which prior to adoption ~~was~~were expensed. As a result, during the first quarter of fiscal 2019, FactSet recorded an opening cumulative increase to Retained earnings of $2.5 million, or $2.0 million net of tax, with an offsetting increase related to the current asset portion in Prepaid expenses and other current assets and the non-current asset portion in Other assets based on the term of the license period. Prospectively, fulfillment costs will continue to be recognized in the same accounts used for the adoption impact, which include the Prepaid expenses and other current assets account for the current portion and Other assets for the non-current portion, based on the term of the license period. The differences between the Company’s reported operating results for the three months and nine months ended ~~November 30, 2018,~~May 31, 2019, which reflect the application of the new standard on the Company’s contracts, and the results that would have been reported as if the accounting was performed pursuant to the accounting standards previously in effect, were not material. There are no significant ~~judgements~~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 is entitled to receive corresponds directly with the value of performance obligations completed to date, and therefore, the Company does not disclose the value of the remaining unsatisfied performance obligations.

Disaggregated Revenue

The Company disaggregates revenue from contracts with clients by demographic region which include U.S., Europe and Asia Pacific. FactSet believes these geographic regions are reflective of how the Company manages the business and the demographic markets in which it serves. The geographic regions best depict the nature, amount, timing and uncertainty of revenues and cash flows related to contracts with clients. Refer to Note 8 Segment Information for further information on revenues by geographic region.

The following table presents this disaggregation of revenue by geography:

	Three months ended November 30,				Three Months Ended May 31,				Nine Months Ended May 31,
(in thousands)	2018		2017		2019		2018		2019		2018
U.S.	$	222,203	$	208,768	$	226,961	$	210,308	$	672,479	$	627,976
Europe		97,765		91,727		102,499		98,856		299,197		286,789
Asia Pacific		31,672		28,646		35,073		30,747		99,392		89,518
Total Revenue	$	351,640	$	329,141	$	364,533	$	339,911	$	1,071,068	$	1,004,283

5.FAIRVALUE MEASURES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the ~~“exit price”~~"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.

Fair Value Hierarchy

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 assessment of the significance of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels. The Company has categorized its cash equivalents, investments and derivatives within the fair value hierarchy as follows:

Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets and liabilities include the Company’s corporate money market funds that are classified as cash equivalents.

Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; 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’s mutual funds, certificates of deposit, and derivative instruments are classified as Level 2.

Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. There were no Level 3 assets or liabilities held by the Company as of ~~November 30, 2018~~May 31, 2019 or August 31, 2018.

(a)(a) Assets and Liabilities Measured atFair Value on a Recurring Basis

The following tables ~~shows~~show by level within the fair value hierarchy the Company’s assets and liabilities that are measured at fair value on a recurring basis at ~~November 30, 2018~~May 31, 2019 and August 31, ~~2018:~~

2018. The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

	Fair Value Measurements at November 30, 2018								Fair Value Measurements at May 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Corporate money market funds ⁽¹⁾	$	22,001	$	—	$	—	$	22,001	$	100,249	$	—	$	—	$	100,249
Mutual funds ⁽²⁾		—		19,067		—		19,067		—		19,111		—		19,111
Certificates of deposit ⁽³⁾		—		8,403		—		8,403
Derivative instruments ⁽⁴⁾		—		108		—		108
Certificates of deposit ⁽³⁾										—		7,244		—		7,244
Derivative instruments ⁽⁴⁾										—		294		—		294
Total assets measured at fair value	$	22,001	$	27,578	$	—	$	49,579	$	100,249	$	26,649	$	—	$	126,898


Liabilities
Derivative instruments ⁽⁴⁾	$	—	$	2,428	$	—	$	2,428	$	—	$	2,131	$	—	$	2,131
Total liabilities measured at fair value	$	—	$	2,428	$	—	$	2,428	$	—	$	2,131	$	—	$	2,131

	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 funds are readily convertible into ~~cash and the~~cash. The net asset value of each fund on the last day of the quarter is used to determine its fair ~~value. As~~value, as such, the Company’s corporate money market funds are classified as Level 1 and included in Cash and cash equivalents withintheconsolidated balance s~~heets.~~sheets.

⁽²⁾

The Company’s mutual funds have a fair value based on the fair value of the underlying investments held by the mutual funds,allocated to each share of the mutual fund using a net asset value approach. The fair value of the underlying investments is based on observable inputs. As such, the Company’s mutual funds are classified as Level 2 and are ~~classified~~ includedas I~~nvestments~~Investments (short-term) on the consolidated balance s~~heets.~~sheets.

⁽³⁾

The Company’s certificates of deposit held for investmentare ~~not debt securities, classified as Level 2 and are~~ valued at amortized cost, which approximates fair ~~value.~~valueand, therefore,areclassified as Level 2.These certificates of depositare not debt securities andhave original maturities greater than three months, but less than one year and, as such, are classified as ~~Inves~~~~tments~~Investments (short-term) within the consolidated balance s~~heets.~~sheets.

⁽⁴⁾

The Company utilizes the income approach to measure fair value for its derivative instruments (~~foreign~~(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.

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

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

Certain assets, including Goodwill and Intangible assets, and liabilities, are measured at fair value on a non-recurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances such as when they are deemed to be other-than-temporarily impaired. The fair values of these non-financial assets and liabilities are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparable information, and discounted cash flow projections. An impairment charge is recorded when the cost exceeds its fair value, based upon the results of such valuations. During the ~~three~~nine months ended ~~November 30, 2018,~~May 31, 2019, no fair value adjustments or material fair value measurements were required for the Company’s non-financial assets or liabilities.

(c) Assets and Liabilities Measured at Fair Value for Disclosure PurposesO~~nly~~Only

As of ~~November 30, 2018,~~May 31, 2019, and August 31, 2018, the fair value of the Company’s Long-term debt was $575.0 million, which approximated its carrying amount given the application of a floating interest rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid. ~~The fair value of~~As the ~~Company’s long-term debt was determined~~interest rate is a variable rate, adjusted based on ~~quoted~~ market ~~prices~~conditions, it approximates the current market rate for ~~debt~~similar instruments available to companies with ~~a similar~~comparable credit quality and maturity, and ~~thus~~therefore, the Long-term debt is categorized as Level 2 in the fair value hierarchy.

6.6. DERIVATIVE INSTRUMENTS

Cash Flow Hedges

FactSet conducts business outside the U.S. in several currencies including the Euro, British Pound Sterling, ~~Euro,~~ Indian Rupee, ~~Japanese Yen~~ and Philippine Peso. As such, it is exposed to movements in foreign currency exchange rates compared to the U.S. dollar. The Company utilizes derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency. The Company does not enter into foreign currency forward contracts for trading or speculative purposes. See Note 17, Commitments and Contingencies – Concentrations of Credit Risk, for further discussion on counterparty credit risk.

In designing a specific hedging approach, FactSet considered several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. The changes in fair value for these foreign currency forward contracts are initially reported as a component of accumulated other comprehensive loss ~~(“AOCL”~~("AOCL") and subsequently reclassified into operating expenses when the ~~hedged exposure affects earnings.~~hedge is settled. There was no discontinuance of cash flow hedges during the first ~~three~~nine months of fiscal 2019 and 2018, and as such, no corresponding gains or losses related to changes in the value of the Company’s contracts were reclassified into earnings prior to settlement.

As of ~~November 30, 2018,~~May 31, 2019, FactSet maintained the following foreign currency forward contracts to hedge its exposures:

●•

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

●•

Indian Rupee – foreign currency forward contracts to hedge approximately 75% of its Indian Rupee exposure through the ~~third~~fourth quarter of fiscal 2019, 50% of its exposure from the ~~fourth~~first quarter of fiscal ~~2019~~2020 through the ~~end of the second~~third quarter of fiscal 2020, and 25% of its exposure ~~from the third quarter of fiscal 2020 through the end of~~during the fourth quarter of fiscal 2020.

●•

Euro – foreign currency forward contracts to hedge approximately ~~50%~~75% of its Euro exposure through the first quarter of fiscal 2020, 50% of its exposure during the second quarter of fiscal 2020, and 25% of its exposure during the third quarter of fiscal ~~2019.~~2020.

●•

British Pound Sterling – foreign currency forward contracts to hedge approximately 50% of its British Pound Sterling exposure through the third quarter of fiscal ~~2019.~~2020.

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

	Gross Notional Value				Fair Value (Liability) Asset
Currency Hedged (in thousands, in U.S. dollars)	November 30, 2018		August 31, 2018		November 30, 2018			August 31, 2018

Currency Hedged											Gross Notional Value				Fair Value Asset (Liability)
(in thousands, in U.S. dollars)											May 31, 2019		August 31, 2018		May 31, 2019			August 31, 2018
Philippine Peso	$	45,000	$	52,000	$	(5	)	$	(1,230	)	$	32,000	$	52,000	$	294		$	(1,230	)
Indian Rupee		43,080		50,780		(733	)		(1,490	)		26,830		50,780		(1,008	)		(1,490	)
Euro		17,181		26,312		(862	)		(503	)		44,748		26,312		(431	)		(503	)
British Pound Sterling		12,381		18,995		(720	)		(723	)		27,173		18,995		(692	)		(723	)
Total	$	117,642	$	148,087	$	(2,320	)	$	(3,946	)	$	130,751	$	148,087	$	(1,837	)	$	(3,946	)

As of ~~November 30, 2018,~~May 31, 2019, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos with U.S. dollars was ~~PHP 2.4~~₱1.7 billion. The gross notional value of foreign currency forward contracts to purchase Indian Rupees with U.S. dollars was ~~Rs. 3.0~~₨1.8 billion. The gross notional value of foreign currency forward contracts to purchase ~~Euros with~~ U.S. dollars with Euros was ~~€ 14.3~~€39.3 million. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with British Pound Sterling ~~with U.S. dollars~~ was ~~£ 9.1~~£20.8 million.

~~Counterparty Credit Risk~~

As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. The Company has incorporated counterparty credit risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities, when applicable. The Company calculates credit risk from observable data related to credit default swaps (“CDS”) as quoted by publicly available information. Counterparty risk is represented by CDS spreads related to the senior secured debt of the respective bank with whom the Company has executed these derivative transactions. As CDS spread information is not available for FactSet, the Company’s credit risk is determined based on using a simple average of CDS spreads for peer companies. To mitigate counterparty credit risk, the Company enters into contracts with large financial institutions and regularly reviews its credit exposure balances as well as the creditworthiness of the counterparties. The Company does not expect any losses as a result of default of its counterparties.

Fair Value of Derivative Instruments

The following table provides a summary of the fair value amounts of derivative instruments:

Designation of Derivatives (in thousands)	Balance Sheet Location	November 30, 2018		August 31, 2018		Balance Sheet Location	May 31, 2019		August 31, 2018
Derivatives designated as hedging instruments	Assets: Foreign Currency Forward Contracts					Assets: Foreign Currency Forward Contracts
	Prepaid expenses and other current assets	$	108	$	90	Prepaid expenses and other current assets	$	278	$	90
						Other Assets	$	16	$	—
	Liabilities: Foreign Currency Forward Contracts
	Accounts payable and accrued expenses	$	1,742	$	1,731	Liabilities: Foreign Currency Forward Contracts
	Deferred rent and other non-current liabilities	$	686	$	2,305	Accounts payable and accrued expenses	$	2,105	$	1,731
						Deferred rent and other non-current liabilities	$	26	$	2,305

All derivatives were designated as hedging instruments as of ~~November 30, 2018~~May 31, 2019 and August 31, 2018.

Derivatives in Cash Flow Hedging Relationships

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended ~~November 30,~~May 31, 2019 and 2018, ~~and 2017,~~ respectively:

(in thousands)

Gain (Loss) Recognized

in AOCL on Derivatives
(Effective Portion)

Location of (Loss) Gain
Reclassified from AOCL into Income

(Loss) Gain Reclassified
from AOCL into Income
(Effective Portion)

(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

2018

2017

(Effective Portion)

2018

2017

2019

2018

into Income

(Effective Portion)

2019

2018

Foreign currency forward contracts

1,943

)

SG&A

(399

)

763

(822

)

(2,296

)

SG&A

(597

)

1,041

The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the nine months ended May 31, 2019 and 2018, respectively:

(in thousands)

Gain (Loss) 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

into Income

(Effective Portion)

2019

2018

Foreign currency forward contracts

1,442

(3,640

)

SG&A

(1,381

)

2,631

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 was included in the assessment of hedge effectiveness. As of ~~November 30, 2018,~~May 31, 2019, the Company estimates that ~~$1.6~~$1.8 million of net derivative losses related to its cash flow hedges included in AOCL will be reclassified into earnings within the next 12 months.

Offsetting of Derivative Instruments

FactSet’s master netting and other similar arrangements with its respective counterparties allow for net settlement under certain conditions. As of ~~November 30, 2018,~~May 31, 2019, and August 31, 2018, there were no material amounts recorded net ~~settlements recorded~~ on the consolidated balance sheets.

7.7. OTHER COMPREHENSIVE ~~INCOME (~~LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of ~~other~~Other comprehensive ~~(loss) income~~loss for the three months ended ~~November 30,~~May 31, 2019 and 2018 ~~and 2017~~ are as follows:

	May 31, 2019						May 31, 2018
(in thousands)	Pre-tax			Net of tax			Pre-tax			Net of tax
Foreign currency translation adjustments	$	(11,326	)	$	(11,326	)	$	(20,126	)	$	(20,126	)
Net unrealized loss on cash flow hedges recognized in AOCL		(225	)		(160	)		(3,337	)		(2,361	)
Other comprehensive income	$	(11,551	)	$	(11,486	)	$	(23,463	)	$	(22,487	)

The components of Other comprehensive loss for the nine months ended May 31, 2019 and 2018 are as follows:

November 30, 2018

November 30, 2017

(in thousands)

Pre-tax

Net of tax

Pre-tax

Net of
tax

Foreign currency translation adjustments
$ (9,504 ) $ (9,504 ) $ 8,466 $ 8,466
Net unrealized gain (loss) on cash flow hedges recognized in AOCL
1,626 1,038 (764 ) (476 )
Other comprehensive (loss) income
$ (7,878 ) $ (8,466 ) $ 7,702 $ 7,990

	May 31, 2019						May 31, 2018
(in thousands)	Pre-tax			Net of tax			Pre-tax			Net of tax
Foreign currency translation adjustments	$	(15,804	)	$	(15,804	)	$	(2,260	)	$	(2,260	)
Net unrealized gain (loss) on cash flow hedges recognized in AOCL		2,107			1,405			(6,271	)		(4,105	)
Other comprehensive loss	$	(13,697	)	$	(14,399	)	$	(8,531	)	$	(6,365	)

The components of AOCL are as follows:

(in thousands)	May 31, 2019			August 31, 2018
Accumulated unrealized losses on cash flow hedges, net of tax	$	(1,365	)	$	(3,486	)
Accumulated foreign currency translation adjustments		(63,756	)		(47,953	)
Total accumulated other comprehensive loss	$	(65,121	)	$	(51,439	)

(in thousands)

November 30, 2018

August 31, 2018

Accumulated unrealized (gain) losses on cash flow hedges, net of tax
$ (1,732 ) $ (3,486 )
Accumulated foreign currency translation adjustments
(57,457 ) (47,953 )
Total accumulated other comprehensive loss
$ (59,189 ) $ (51,439 )

88. SEGMENT~~. SEGMENT~~ INFORMATION

Operating segments are defined as (i) components of an enterprise that engage in business activities from which they may earn revenue and incur expense, (ii) with operating results that are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for which discrete financial information is available. Executive management, along with the CEO, constitute FactSet’s chief operating decision making group ~~(“CODMG”~~("CODMG"). Executive management consists of certain executives who directly report to the CEO, consisting of the Chief Financial Officer, Chief Technology and Product Officer, Global Head of Sales and Client Solutions, General Counsel, Chief Human Resources Officer and Head of Analytics & Trading. The CODMG reviews financial information at the operating segment level and is responsible for making decisions about resources allocated amongst the operating segments based on actual results.

The Company’s operating segments are aligned with how the Company, including its CODMG, manages the business and the demographic markets in which it serves. The Company’s internal financial reporting structure is based on three segments: the U.S., Europe and Asia Pacific. The Company believes this alignment helps to better manage the business and view the markets it serves, which are centered on providing integrated global financial and economic information. Sales, consulting, data collection, product development and software engineering are the primary functional groups within the U.S., Europe and Asia Pacific segments. These functional groups provide global financial and economic information to investment managers, investment banks and other financial services professionals.

The U.S. segment serves investment professionals including financial institutions throughout the Americas. The ~~European~~Europe and Asia Pacific segments serve investment professionals located throughout Europe and Asia Pacific, respectively. Segment revenue reflects direct sales to clients based on their respective geographic locations. Each segment records compensation expense ~~including~~(including stock-based ~~compensation,~~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. Of the total $694.9 million of goodwill reported by the Company at November 30, 2018, 58% was recorded in the U.S. segment, 41% in the European segment and the remaining 1% in the Asia Pacific segment.

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) For the three months ended November 30, 2018	U.S.		Europe		Asia Pacific		Total
(in thousands)
For the three months ended May 31, 2019									U.S.		Europe		Asia Pacific		Total
Revenue from clients	$	222,203	$	97,765	$	31,672	$	351,640	$	226,961	$	102,499	$	35,073	$	364,533
Segment operating income		43,841		39,089		17,609		100,539	$	51,012	$	44,793	$	21,435	$	117,240
Total assets		719,961		536,042		109,924		1,365,927	$	820,078	$	569,609	$	122,214	$	1,511,901
Capital expenditures		4,105		1,263		4,158		9,526	$	8,664	$	439	$	2,321	$	11,424

For the three months ended November 30, 2017	U.S.		Europe		Asia Pacific		Total
For the three months ended May 31, 2018									U.S.		Europe		Asia Pacific		Total
Revenue from clients	$	208,768	$	91,727	$	28,646	$	329,141	$	210,308	$	98,856	$	30,747	$	339,911
Segment operating income		40,771		32,970		15,357		89,098	$	37,986	$	37,381	$	17,898	$	93,265
Total assets		719,491		603,848		107,263		1,430,602	$	728,517	$	572,867	$	105,788	$	1,407,172
Capital expenditures		3,545		1,524		843		5,912	$	2,830	$	537	$	2,633	$	6,000

(in thousands)
For the nine months ended May 31, 2019	U.S.		Europe		Asia Pacific		Total
Revenue from clients	$	672,479	$	299,197	$	99,392	$	1,071,068
Segment operating income	$	140,549	$	127,130	$	58,788	$	326,467
Capital expenditures	$	20,022	$	2,136	$	10,748	$	32,906

For the nine months ended May 31, 2018	U.S.		Europe		Asia Pacific		Total
Revenue from clients	$	627,976	$	286,789	$	89,518	$	1,004,283
Segment operating income	$	117,285	$	107,344	$	53,219	$	277,848
Capital expenditures	$	10,104	$	2,816	$	5,455	$	18,375

9.9. GOODWILL

Changes in the carrying amount of goodwill by segment for the ~~three~~nine months ended ~~November 30, 2018~~May 31, 2019 are as follows:

(in thousands)	U.S.		Europe			Asia Pacific			Total
(in thousands)												U.S.		Europe			Asia Pacific		Total
Balance at August 31, 2018	$	386,195	$	312,694		$	2,944		$	701,833		$	386,195	$	312,694		$	2,944	$	701,833
Foreign currency translations		—		(6,867	)		(69	)		(6,936	)		—		(10,940	)		63		(10,877	)
Balance at November 30, 2018	$	386,195	$	305,827		$	2,875		$	694,897
Balance at May 31, 2019												$	386,195	$	301,754		$	3,007	$	690,956

Goodwill is not amortized as it is estimated to have an indefinite life. At least annually, the Company is required to test goodwill at the reporting unit level for potential impairment, and, if impaired, write down to fair value based on the present value of discounted cash flows. The Company’s reporting units evaluated for potential impairment were the U.S., Europe and Asia Pacific, which reflect the level of internal reporting the Company uses to manage its business and operations. The three reporting units are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries within each operating segment. The Company performed its annual goodwill impairment test during the fourth quarter of fiscal 2018, consistent with the timing of previous years, at which time it was determined that there was no impairment, with the fair value of each of the Company’s reporting units significantly exceeding carrying value.

10.10. INTANGIBLE ASSETS

FactSet’s identifiable intangible assets consist of acquired content databases, client relationships, software technology, non-compete agreements and trade names resulting from previous acquisitions, which have been fully integrated into the Company’s operations. The weighted average useful life of FactSet’s acquired identifiable intangible assets at ~~November 30, 2018~~May 31, 2019 was ~~12.2~~12.4 years. The Company amortizes intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization. There have been no changes to the estimate of the remaining useful lives during the first ~~three~~nine months of fiscal 2019. ~~Amortizable~~If indicators of impairment are present, amortizable intangible assets are tested for impairment ~~if indicators of impairment are present, based on~~comparing the carrying value to undiscounted cash flows and, if impaired, written down to fair value based on discounted cash flows. No impairment of intangible assets has been identified during any of the periods presented. The intangible assets have no assigned residual values.

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

At November 30, 2018 (in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At May 31, 2019
(in thousands)							Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Data content	$	33,327	$	20,991	$	12,336	$	32,922	$	21,537	$	11,385
Client relationships		97,512		30,866		66,646		96,713		34,118		62,595
Software technology		105,613		47,301		58,312		106,085		53,813		52,272
Non-compete agreements		4,825		2,581		2,244		4,815		2,977		1,838
Trade names		4,040		2,541		1,499		4,021		2,906		1,115
Total	$	245,317	$	104,280	$	141,037	$	244,556	$	115,351	$	129,205

At August 31, 2018 (in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
At August 31, 2018
(in thousands)							Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Data content	$	33,992	$	20,990	$	13,002	$	33,992	$	20,990	$	13,002
Client relationships		98,882		29,387		69,495		98,882		29,387		69,495
Software technology		106,505		44,231		62,274		106,505		44,231		62,274
Non-compete agreements		4,840		2,381		2,459		4,840		2,381		2,459
Trade names		4,070		2,365		1,705		4,070		2,365		1,705
Total	$	248,289	$	99,354	$	148,935	$	248,289	$	99,354	$	148,935

Amortization expense recorded for intangible assets was ~~$5.9~~$6.0 million and $6.2 million for the three months ended ~~November 30,~~May 31, 2019 and 2018, respectively. Amortization expense recorded for intangible assets was $17.7 million and ~~2017,~~$18.6 million for the nine months ended May 31, 2019 and 2018, respectively. As of ~~November 30, 2018,~~May 31, 2019, estimated intangible asset amortization expense for each of the next five years and thereafter is as follows:

Fiscal Year (in thousands)	Estimated Amortization Expense		Estimated Amortization Expense
2019 (remaining nine months)	$	17,818
2019 (remaining three months)			$	5,866
2020		22,921		22,871
2021		21,018		21,529
2022		18,500		18,759
2023		13,752		13,670
Thereafter		47,028		46,510
Total	$	141,037	$	129,205

11.11. COMMON STOCK AND EARNINGS PER SHARE

On ~~November 13, 2018,~~May 17, 2019, FactSet’s Board of Directors approved a regular quarterly dividend of ~~$0.64~~$0.72 per share. The cash dividend of ~~$24.4~~$27.5 million was paid on ~~December~~June 18, ~~2018~~2019 to common stockholders of record at the close of business on ~~November 30, 2018.~~May 31, 2019.

Shares of common stock outstanding were as follows:

	Three Months ended November 30,						Nine Months Ended May 31,
(in thousands)	2018			2017
Balance, beginning of year (September 1)		38,192			39,023
(in thousands)							2019			2018
Balance, beginning of year at September 1, 2018 and 2017, respectively								38,192			39,023
Common stock issued for employee stock plans		183			256			719			572
Repurchase of common stock from employees⁽¹⁾		(19	)		(4	)		(28	)		(5	)
Repurchase of common stock under the share repurchase program		(275	)		(165	)		(665	)		(1,205	)
Balance at November 30, 2018 and 2017, respectively		38,081			39,110
Balance at May 31, 2019 and 2018, respectively								38,218			38,385

⁽¹⁾

For the ~~three~~nine months ended ~~November~~ ~~30, 201~~May 31, 20198and ~~and~~ ~~201~~7,2018, the Companyrepurchased127,852~~9,350~~and ~~and~~ 5,5634,~~220~~shares, or $~~4.3~~$6.2 million and$0.81.0 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”~~("EPS") computations is as follows:

(in thousands, except per share data)	Net Income (Numerator)		Weighted Average Common Shares (Denominator)		Per Share Amount		Net Income (Numerator)		Weighted Average Common Shares (Denominator)		Per Share Amount
For the three months ended November 30, 2018
For the three months ended May 31, 2019
Basic EPS
Income available to common stockholders	$	84,296		38,106	$	2.21	$	92,265		38,223	$	2.41
Diluted EPS
Dilutive effect of stock options and restricted stock				703						770
Income available to common stockholders plus assumed conversions	$	84,296		38,809	$	2.17	$	92,265		38,993	$	2.37
For the three months ended November 30, 2017
For the three months ended May 31, 2018
Basic EPS
Income available to common stockholders	$	70,379		39,085	$	1.80	$	74,746		38,594	$	1.94
Diluted EPS
Dilutive effect of stock options and restricted stock				595						510
Income available to common stockholders plus assumed conversions	$	70,379		39,680	$	1.77	$	74,746		39,104	$	1.91
For the nine months ended May 31, 2019
Basic EPS
Income available to common stockholders							$	261,263		38,128	$	6.85
Diluted EPS
Dilutive effect of stock options and restricted stock										679
Income available to common stockholders plus assumed conversions							$	261,263		38,807	$	6.73
For the nine months ended May 31, 2018
Basic EPS
Income available to common stockholders							$	198,262		38,890	$	5.10
Diluted EPS
Dilutive effect of stock options and restricted stock										653
Income available to common stockholders plus assumed conversions							$	198,262		39,543	$	5.01

Dilutive potential common shares consist of stock options and unvested restricted stock awards. There were 1,810 stock options excluded from the calculation of diluted EPS for the three and nine months ended May 31, 2019, because their inclusion would have been anti-dilutive. There were no stock options or unvested restricted stock awards excluded from the calculation of diluted EPS for the three and nine months ended ~~November 30,~~May 31, 2018. ~~There were 552,389 stock options excluded from the calculation of diluted EPS for the three months ended November 30, 2017, because their inclusion would have been anti-dilutive.~~

Performance-based stock options are omitted from the calculation of diluted EPS until the performance criteria is probable of being achieved. ~~At November 30, 2018~~For the three and ~~November 30, 2017,~~nine months ended May 31, 2019, the number of performance-based stock option grants excluded from the calculation of diluted EPS was ~~206,417~~206,417. For the three and ~~332,338, respectively.~~nine months ended May 31, 2018, the number of performance-based stock option grants excluded from the calculation of diluted EPS was 249,443.

112.2. S~~TOCK~~~~HOLDERS’ E~~~~QUITY~~STOCKHOLDERS’ EQUITY

Preferred Stock

At ~~November 30, 2018~~May 31, 2019 and August 31, 2018, there were 10,000,000 shares of preferred stock ($0.01 par value per share) authorized, of which no shares were issued and outstanding. FactSet’s Board of Directors may from time to time authorize the issuance of one or more series of preferred stock and, in connection with the creation of such series, determine the characteristics of each such series including, without limitation, the preference and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of the series.

Common Stock

At ~~November 30, 2018~~May 31, 2019 and August 31, 2018, there were 150,000,000 shares of common stock ($~~.01~~0.01 par value per share) authorized, of which ~~39,447,491~~39,982,823 and 39,264,849 shares were issued, respectively. The authorized shares of common stock are issuable for any proper corporate purpose, including future stock splits, stock dividends, acquisitions, raising equity capital or to adopt additional employee benefit plans.

Treasury Stock

On January 31, 2018, FactSet retired 13,292,689 shares of treasury stock. These retired shares are now included in the Company’s pool of authorized but unissued shares. The retired treasury stock was initially recorded using the cost method and had a carrying value of $1.7 billion at January 31, 2018. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct its par value from common stock ($0.1 million), reduce additional paid-in capital ~~(“APIC”~~("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 ~~November 30, 2018,~~May 31, 2019, and August 31, 2018, there were ~~1,366,613~~1,765,060 and 1,072,263 shares of treasury stock (at cost) ~~outstanding.~~outstanding, respectively.

Share Repurchase Program

Repurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions. For the three months ended ~~November 30,~~May 31, 2019 and 2018, ~~and 2017,~~ the Company repurchased ~~275,000~~175,000 shares for ~~$60.4~~$47.6 million and ~~164,920~~620,000 shares for ~~$30.9~~$122.0 million, respectively. For the nine months ended May 31, 2019 and 2018, the Company repurchased 664,945 shares for $152.1 million and 1,204,920 shares for $234.8 million, respectively. As of ~~November 30, 2018, $181.3~~May 31, 2019, $89.6 million remains authorized for future share repurchases. No minimum number of shares to be repurchased has been fixed. There is no timeframe to complete the repurchase program and it is expected that share repurchases will be paid using existing and future cash generated by operations.

On June 24, 2019, the Board of Directors of FactSet approved a $210.0 million expansion of the existing share repurchase program. Subsequent to this expansion, $299.6 million is available for future repurchases.

Restricted Stock

Restricted stock awards entitle the holder to shares of common stock as the awards vest over time. During the first ~~three~~nine months of fiscal 2019, previously granted restricted stock awards of ~~52,611~~75,530 shares vested and were included in common stock outstanding as of ~~November 30, 2018~~May 31, 2019 (recorded net of ~~19,350~~27,852 shares repurchased from employees at a cost of ~~$4.3~~$6.2 million to cover their cost of taxes upon vesting of the restricted stock). During the same comparable period a year ago, ~~11,278~~15,063 shares of previously granted restricted stock awards vested and were included in common stock outstanding as of ~~November 30, 2017~~May 31, 2018 (recorded net of ~~4,220~~5,563 shares repurchased from employees at a cost of ~~$0.8~~$1.0 million to cover their cost of taxes upon vesting of the restricted stock).

Dividends

The Company’s Board of Directors declared the following dividends for the first ~~quarter~~nine months of fiscal 2019 and 2018 respectively:

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

Fiscal 2018

First Quarter
$ 0.56
November 30, 2017
$ 21,901
December 19, 2017

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

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

All the above cash dividends were paid from existing cash resources. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Company and is subject to final determination by the Company’s Board of Directors.

13.13. EMPLOYEE STOCK OPTION AND RETIREMENT PLANS

Stock Option Awards

The FactSet Research Systems Inc. Stock Option and Award Plan, as Amended and Restated (the ~~“Long~~"Long Term Incentive ~~Plan”~~Plan" or ~~“LTIP”~~"LTIP") provides for the grant of share-based awards, including stock options and restricted stock awards to employees of FactSet. The expiration date of the Long Term Incentive Plan is December 19, 2027. Stock options granted under the LTIP expire not more than ten years from the date of grant and the majority vest ratably over a period of five years. Options become vested and exercisable provided the employee continues employment with the Company through the applicable vesting date and remain exercisable until expiration or cancellation. Options are not transferable or assignable other than by will or the laws of descent and distribution. During the grantee’s lifetime, the options may be exercised only by the grantee.

Stock Option Activity

During the first ~~three~~nine months of fiscal 2019, FactSet granted ~~454,598~~463,033 stock options with a weighted average exercise price of ~~$221.93~~$221.97 to existing employees of the Company.

A summary of stock option activity for the ~~three~~nine months ended ~~November 30, 2018~~May 31, 2019 is as follows:

(in thousands, except per share data)	Number of Stock Options Outstanding			Weighted Average Exercise Price Per Share		Number of Stock Options Outstanding			Weighted Average Exercise Price Per Share
Balance at August 31, 2018		3,143		$	153.05		3,143		$	153.05
Granted – non-performance-based		455			221.93
Granted – non-performance-based employee grant							455			221.93
Exercised		(117	)		132.81		(117	)		132.81
Forfeited		(24	)		169.47		(24	)		169.47
Balance at November 30, 2018		3,457		$	162.68		3,457		$	162.68
Granted – non-performance-based employee grant							6			207.84
Granted – non-employee Directors’ grant							21			207.88
Exercised							(207	)		136.30
Forfeited							(61	)		152.19
Balance at February 28, 2019							3,216		$	164.42
Granted – non-performance-based employee grant							2			267.02
Exercised							(279	)		137.82
Forfeited							(73	)		168.42
Balance at May 31, 2019							2,866		$	167.00

The total number of in-the-money options exercisable as of ~~November 30, 2018~~May 31, 2019 was ~~1.2~~0.9 million with a weighted average exercise price of ~~$137.58.~~$138.85. The aggregate intrinsic value of in-the-money stock options exercisable at ~~November 30, 2018~~May 31, 2019 and August 31, 2018 was ~~$120.0~~$131.2 million and $105.3 million, respectively. The aggregate intrinsic value represents the difference between the Company’s closing stock price as of ~~November 30, 2018~~May 31, 2019 of ~~$234.49,~~$278.20 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 the three months ended ~~November 30,~~May 31, 2019 and 2018 ~~and 2017~~ was ~~$10.8~~$32.1 million and ~~$18.0~~$5.2 million, respectively. The total pre-tax intrinsic value of stock options exercised during the nine months ended May 31, 2019 and 2018 was $58.4 million and $40.3 million, respectively.

Performance-basedEquity Awards

Performance-based equity awards, whether in the form of stock options or restricted stock, require management to make assumptions regarding the likelihood of achieving Company performance targets. The number of performance-based awards that vest will be predicated on the Company achieving performance levels during the measurement period subsequent to the date of grant. Dependent on the financial performance levels attained by FactSet, a percentage of the performance-based awards will vest to the grantees. However, there is no current guarantee that such awards will vest in whole or in part.

~~The following summarizes material performance-based awards outstanding as of November 30, 2018.~~

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 ~~will~~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 ~~are~~were achieved by March 31, 2019. ~~The option holders must also remain employed~~In the third quarter of fiscal 2019, it was determined that the performance criteria were not achieved by ~~FactSet for~~March 31, 2019, and, as such, the options ~~to be eligible to vest. As of November 30, 2018, FactSet does not believe these growth targets are probable of being achieved,~~were forfeited and ~~as such,~~ no stock-based compensation expense ~~is expected to be recognized in connection with these~~was recorded for this performance-based ~~options. A change in~~option grant for the ~~actual financial performance levels achieved by BISAM in future fiscal years could result in the following changes to the current estimate of the vesting percentage~~three and ~~related expense:~~nine months ended May 31, 2019.

Vesting Percentage (in thousands)

Cumulative
Catch-up Adjustment*

Remaining Expense
to be Recognized

0% (current expectation)
$ — $ —
80% $ 2,014 $ 6,870
90% $ 2,265 $ 6,619
100% $ 2,517 $ 6,367

* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of ~~November 30,~~ ~~201~~8.

Restricted Stock Awards

The Company’s Option Plan permits the issuance of restricted stock awards in the form of either restricted shares or restricted stock units. Restricted stock awards are subject to continued employment over a specified period.

Restricted Stock Awards Activity

During the first ~~three~~nine months of fiscal 2019, FactSet granted ~~41,102~~41,418 restricted stock awards to employees of the Company at a weighted average grant date fair value of ~~$212.66.~~$212.94. These restricted stock awards vest over a weighted average period of 5.0 years from grant date.

As of ~~November 30, 2018,~~May 31, 2019, a total of ~~131,140~~104,136 restricted stock awards were unvested and ~~outstanding, which results~~outstanding. This resulted in an unamortized stock-based compensation balance of ~~$17.6~~$14.9 million, towhich will be recognized as stock-based compensation expense over the remaining weighted average vesting period of ~~3.8~~3.4 years.

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		Number Outstanding			Weighted Average Grant Date Fair Value Per Award
Balance at August 31, 2018		143		$	139.34		143		$	139.34
Granted (restricted stock awards)		41		$	212.66
Granted							41		$	212.66
Forfeited		(1	)	$	200.18		(1	)	$	200.18
Vested		(52	)⁽¹⁾	$	113.44		(52	) ⁽¹⁾	$	113.44
Balance at November 30, 2018		131		$	172.48		131		$	172.48
Granted							—		$	—
Forfeited							(1	)	$	184.64
Vested							(23	) ⁽²⁾	$	136.58
Balance at February 28, 2019							107		$	187.62
Granted							—		$	—
Forfeited							(3	)	$	177.29
Vested							—		$	—
Balance at May 31, 2019							104		$	180.09

⁽¹⁾

Themajority of the vestedrestricted stockawardsrelated~~relate~~tod to the final vesting ofawardsgranted~~grant~~edon November 1, 2013,,which cliff vested660% after~~0% after~~ three~~year~~s onyears on November 1, 2016 and 440% after~~0% after~~ five years on November 1, 2018.

(2)

The majority of the vested restricted stock awards related to the final vesting of awards granted on February 9, 2015, which vested 100% on the fouryear anniversary date of the grant.

As of ~~November 30, 2018~~May 31, 2019, and August 31, 2018, the aggregate fair value of unvested restricted stock was ~~$30.8~~$29.0 million and $32.8 million, respectively. Aggregate fair value of unvested restricted stock represents the Company’s closing stock prices ~~of $234.49 and $229.39~~ on ~~November 30, 2018~~May 31, 2019 and August 31, 2018 of $278.20 and $229.39, respectively, multiplied by the number of unvested restricted stock as of that comparable date.

No restricted stock vested during the three months ended May 31, 2019. The total pre-tax fair value of restricted stock that vested during the three months ended ~~November 30,~~May 31, 2018 was less than $0.1 million. The total pre-tax fair value of restricted stock that vested during the nine months ended May 31, 2019 and ~~2017~~2018 was ~~$11.6~~$16.7 million and ~~$2.0~~$2.8 million, ~~in each period,~~ respectively.

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		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		6,298			282
Granted – non-performance-based options		(455	)		—		(455	)		—
Granted – performance-based options		—			—
Restricted stock awards granted⁽¹⁾		(103	)		—		(103	)		—
Share-based awards canceled/forfeited⁽²⁾		25			—		25			—
Balance at November 30, 2018		5,765			282		5,765			282
Granted – non-performance-based options							(6	)		(21	)
Share-based awards canceled/forfeited⁽²⁾							65			3
Balance at February 28, 2019							5,824			264
Granted – non-performance-based options							(2	)		—
Restricted stock awards granted⁽¹⁾							(1	)		—
Share-based awards canceled/forfeited⁽²⁾							80			—
Balance at May 31, 2019							5,901			264

⁽¹⁾

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

⁽²⁾

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

Employee Stock Purchase Plan

Shares of FactSet common stock may be purchased by eligible employees under the ~~Amended and Restated~~ FactSet Research Systems Inc. Employee Stock Purchase Plan, as Amended and Restated (the ~~“ESPP”~~"ESPP") in three-month intervals. The purchase price is equal to 85% of the lesser of the fair market value of the Company’s common stock on the first day or the last day of each three-month offering period. Employee purchases may not exceed 10% of their gross compensation and a $25,000 contribution limit during an offering period.

During the three months ended ~~November 30, 2018,~~May 31, 2019, employees purchased ~~13,095~~13,350 shares at a price of ~~$197.34 as~~$201.54 compared to ~~19,589~~16,312 shares at a price of ~~$134.39~~$170.86 for the three months ended ~~November 30, 2017.~~May 31, 2018. During the nine months ended May 31, 2019, employees purchased 39,069 shares at a weighted average price of $199.43 as compared to 50,706 shares at a weighted average price of $156.88 for the nine months ended May 31, 2018. At ~~November 30, 2018,~~May 31, 2019, the ESPP had ~~255,847~~229,873 shares reserved for future issuance.

Employee Benefit Plans

FactSet sponsors benefit plans for the majority of its domestic and foreign employees. The Company contributed ~~$2.6 million and $2.8~~$3.0 million in employer matching contributions for its U.S. defined contribution plan ~~during~~for both the three months ended ~~November 30,~~May 31, 2019 and 2018. During the nine months ended May 31, 2019 and 2018, the Company contributed $8.2 million and ~~2017,~~$8.5 million in employer matching contributions for its U.S. defined contribution plan, respectively. Contributions to foreign benefit plans were not material to FactSet on either an individual or aggregate basis for any of the periods presented.

14.14. STOCK-BASED COMPENSATION

~~The~~During the three months ended May 31, 2019 and 2018, the Company recognized total stock-based compensation expense of ~~$8.4~~$8.0 million and ~~$7.5~~$7.8 million, ~~during~~respectively. During the ~~three~~nine months ended ~~November 30,~~May 31, 2019 and 2018, the Company recognized total stock-based compensation expense of $24.1 million and ~~2017,~~$23.2 million, respectively. As of ~~November 30, 2018, $95.2~~May 31, 2019, $80.0 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of ~~3.5~~3.1 years. There was no stock-based compensation capitalized ~~as of November 30, 2018~~for the three and nine months ended May 31, 2019 or ~~August 31, 2018, respectively.~~2018.

Employee Stock Option Fair Value Determinations

The Company utilizes the lattice-binomial option-pricing model (“("binomial ~~model”~~model") to estimate the fair value of new employee stock option grants. The ~~Company’s determination of fair value of stock option awards on the date of grant using the~~ binomial model is affected by the Company’s stock price, as well as, assumptions regarding several ~~variables. These~~ variables, which include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise ~~behaviors.~~behaviors, to determine the grant date stock option award fair value.

Q1 2019	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.
Q2 2019	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.
Q3 2019	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.
Q1 2018	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.
Q2 2018	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.
Q3 2018	There were no employee stock options granted during the three months ended May 31, 2018.

The weighted average estimated fair value of employee stock options granted was determined using the binomial model with the following weighted average assumptions:

Three months ended November 30,	2018					2017
Three Months Ended May 31,											2019					2018*
Term structure of risk-free interest rate		1.28%	-	2.41	%		1.28%	-	2.41	%		2.48%	-	3.14	%	—
Expected life (years)			7.1					7.4						7.1		—
Term structure of volatility		18%	-	29	%		19%	-	29	%		18%	-	25	%	—
Dividend yield				1.16	%				1.32	%				1.15	%	—
Weighted average estimated fair value				$56.77					$48.27		$			68.33		—
Weighted average exercise price				$221.93					$189.98		$			267.02		—
Fair value as a percentage of exercise price				25.6	%				25.4	%		��		25.6	%	—

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

Nine Months Ended May 31,	2019					2018
Term structure of risk-free interest rate		1.28%	-	3.14	%		1.28%	-	2.41	%
Expected life (years)				7.1					7.4
Term structure of volatility		18%	-	29	%		19%	-	29	%
Dividend yield				1.15	%				1.32	%
Weighted average estimated fair value	$			56.78		$			48.29
Weighted average exercise price	$			221.97		$			190.04
Fair value as a percentage of exercise price				25.6	%				25.4	%

The risk-free interest rate assumption for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on a combination of historical volatility of the Company’s stock and implied volatilities of publicly traded options to buy FactSet common stock with contractual terms closest to the expected life of options granted to employees. The approach to utilize a mix of historical and implied volatility was based upon the availability of actively traded options on the Company’s stock and the Company’s assessment that a combination of implied volatility and historical volatility is best representative of future stock price trends. The Company uses historical data to estimate option exercises and employee ~~termination~~terminations within the valuation model. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is a derived output of the binomial model. The binomial model estimates employee exercise behavior based on the option’s remaining vested life and the extent to which the option is in-the-money. The binomial model estimates the probability of exercise as a function of these two variables based on the entire history of exercises and cancellations of all past option grants made by the Company.

Non-Employee Director Stock Option FairValue Determinations

The Non-Employee 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. As of ~~November 30, 2018,~~May 31, 2019, shares available for future grant under the Director Plan was ~~282,398.~~263,956. The expiration date of the Director Plan is December 19, 2027.

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

~~There were no~~Fiscal 2019

On January 15, 2019, FactSet granted 20,576 stock options ~~granted~~ to the Company’s non-employee ~~Directors during~~Directors. These options have a weighted average estimated fair value of $42.77 per share, using the ~~first quarter~~Black-Scholes option-pricing model with 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 ~~fiscal 2019 or fiscal 2018, respectively.~~$38.76 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate	2.34	%
Expected life (years)	5.4
Expected volatility	19.7	%
Dividend yield	1.16	%

Restricted StockFair Value Determinations

Restricted stock granted to employees, entitles the holder to shares of common stock as the award vests over time, but not to dividends declared on the underlying shares, while the restricted stock is unvested. The grant date fair value of restricted stock awards is measured by reducing the grant date price of FactSet’s share by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. ~~Restricted~~The expense associated with restricted stock awards ~~are~~is amortized ~~to expense~~ over the vesting period. During the first ~~three~~nine months of fiscal 2019, there were ~~41,102~~41,418 restricted stock awards granted, with a weighted average grant date fair value of ~~$212.66.~~$212.94. During the first ~~three~~nine months of fiscal 2018, FactSet granted 961 restricted stock awards at a weighted average grant date fair value of $182.17.

Employee Stock Purchase Plan Fair Value Determinations

During the three months ended ~~November 30, 2018,~~May 31, 2019, employees purchased ~~13,095~~13,350 shares at a weighted average price of ~~$197.34~~$201.54 as compared to ~~19,589~~16,312 shares at a weighted average price of ~~$134.39~~$170.86 for the three months ended ~~November 30, 2017.~~May 31, 2018. During the nine months ended May 31, 2019, employees purchased 39,069 shares at a weighted average price of $199.43 as compared to 50,706 shares at a weighted average price of $156.88 for the nine months ended May 31, 2018. Stock-based compensation expense ~~recorded during~~related to the ESPP was $0.6 million for both the three months ended ~~November 30, 2018~~May 31, 2019 and ~~2017, relating~~2018. Stock-based compensation expense related to the ESPP was ~~$0.5~~$1.6 million ~~respectively.~~for both the nine months ended May 31, 2019 and 2018.

The weighted average estimated fair value for the shares repurchased under the ESPP was calculated using the Black-Scholes model with the following assumptions:

Three months ended November 30,	2018			2017
Three Months Ended May 31,							2019			2018
Risk-free interest rate		2.27	%		1.11	%		2.43	%		1.81	%
Expected life (months)		3			3			3			3
Expected volatility		8.96	%		7.97	%		10.58	%		10.07	%
Dividend yield		1.10	%		1.42	%		1.21	%		1.26	%
Weighted average estimated fair value	$	38.63		$	25.79		$	40.11		$	34.39

Nine Months Ended May 31,	2019			2018
Risk-free interest rate		2.38	%		1.43	%
Expected life (months)		3			3
Expected volatility		10.65	%		10.38	%
Dividend yield		1.13	%		1.28	%
Weighted average estimated fair value	$	39.73		$	31.25

Accuracy of Fair Value Estimates

The Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding several highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeiture rates and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable.

15.15. 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 the tax bases of assets and liabilities using currently enacted tax rates.

Provision for Income Taxes

The provision for income taxes is as follows:

	Three months ended November 30,						Three Months Ended May 31,						Nine Months Ended May 31,
(in thousands)	2018			2017			2019			2018			2019			2018
Income before income taxes	$	95,943		$	86,179		$	113,384		$	89,511		$	313,676		$	267,903
Provision for income taxes	$	11,647		$	15,800		$	21,119		$	14,765		$	52,413		$	69,641
Effective tax rate		12.1	%		18.3	%		18.6	%		16.5	%		16.7	%		26.0	%

FactSet’s effective tax rate is based on recurring factors and nonrecurring events, including the taxation of foreign income. The Company’s effective tax rate will vary based on, among other things, changes in levels of foreign income, as well as discrete and other nonrecurring events that may not be predictable. ~~The~~FactSet’s effective tax rate is lower ~~effective~~than the applicable U.S. corporate income tax rate for the ~~first quarter of fiscal~~three and nine months ended May 31, 2019 mainly due to R&D tax benefits and tax benefits associated with share-based payments.

The provision for income taxes increased for the three months ended May 31, 2019, compared to the same period a year ~~ago is primarily~~ago. The provision for the three months ended May 31, 2019 included a net $4.5 million income tax expense from finalizing prior years’ tax returns and other discrete items.

The provision for income taxes decreased for the nine months ended May 31, 2019 mainly due to the ~~reduction~~enactment of the Tax Cuts and Jobs Act ("TCJA"). The TCJA imposed a one-time transition tax expense, which resulted in a $23.2 million impact to the income tax provision for the nine months ended May 31, 2018, without a comparable impact for nine months ended May 31, 2019. This transition tax impact was revised, resulting in a net benefit of $3.4 million for the nine months ended May 31, 2019. The TCJA also lowered the statutory U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. Due to the timing of FactSet’s year end, the lower tax rate was fully applicable for the nine months ended May 31, 2019, while being phased in during the same period a year ago. The first ~~quarter~~nine months of fiscal ~~2019 also~~2018 included a ~~$2.3~~remeasurement of the net U.S. deferred tax position resulting in a non-recurring tax charge of $2.2 million ~~revision~~due to the ~~one-time transition tax on accumulated earnings and profits of foreign subsidiaries, initially recorded~~reduction in the statutory federal rate, without a comparable impact during the ~~third quarter of fiscal 2018.~~nine months ended May 31, 2019. The ~~effective~~decrease in the income tax ~~rate is lower than~~provision was partially offset by a net $4.5 million income tax expense for the ~~applicable U.S. federal rate in both periods presented above due~~nine months ended May 31, 2019 related to ~~R&D~~finalizing prior years’ tax ~~benefits~~returns and ~~excess tax benefits associated with share-based payments.~~other discrete items.

~~While the Company~~FactSet has ~~not~~ finalized the accounting for the tax effects of the TCJA ~~FactSet has made a reasonable estimate and will continue~~with respect to ~~refine its calculations, as needed. In addition,~~ the ~~estimates~~one-time transition tax during the second quarter of fiscal 2019. The tax effects of the TCJA may ~~also~~ be affected by changes in interpretations at the federal and state levels, and any additional regulatory guidance that may be issued.

Deferred Tax Assets and Liabilities

The significant components of Deferred tax assets recorded within the consolidated balance sheets were as follows:

(in thousands)	November 30, 2018			August 31, 2018			May 31, 2019			August 31, 2018
Deferred tax assets:
Receivable reserve	$	583		$	599		$	757		$	599
Depreciation on property, equipment and leasehold improvements		2,050			1,032			4,000			1,032
Deferred rent		7,462			7,711			7,576			7,711
Stock-based compensation		15,341			14,827			12,938			14,827
Purchased intangible assets, including acquired technology		(24,643	)		(24,059	)		(26,370	)		(24,059	)
Other		8,650			9,606			7,096			9,606
Total deferred tax assets	$	9,443		$	9,716		$	5,997		$	9,716

The significant components of Deferred tax liabilities recorded within the consolidated balance sheets were as follows:

(in thousands)	November 30, 2018			August 31, 2018			May 31, 2019			August 31, 2018
Deferred tax liabilities:
Stock-based compensation	$	(1,007	)	$	(946	)	$	(1,020	)	$	(946	)
Purchased intangible assets, including acquired technology		21,030			22,429			19,096			22,429
Other		686			(293	)		930			(293	)
Total deferred tax liabilities	$	20,709		$	21,190		$	19,006		$	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. A company can 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. 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 fifty percent likelihood of being realized upon ultimate settlement. Additionally, companies are required to accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws.

As of ~~November 30, 2018,~~May 31, 2019, the Company had gross unrecognized tax benefits totaling ~~$9.8~~$10.1 million recorded as non-current ~~taxes~~Taxes payable within the consolidated balance sheet. This amount includes ~~$1.2~~$1.0 million of accrued interest. When applicable, the Company adjusts the previously recorded tax expense to reflect examination results when the position is ultimately settled. The Company regularly engages in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. 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. Any changes in accounting estimates resulting from new developments with respect to uncertain tax positions will be recorded as appropriate. The Company does not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next 12 months.

The following table summarizes the changes in the balance of gross unrecognized tax benefits during the first ~~three~~nine months of fiscal 2019:

(in thousands)	(in thousands)			(in thousands)
Unrecognized income tax benefits at August 31, 2018		$	9,223		$	9,223
Additions based on tax positions related to the current year			497			490
Additions for tax positions of prior years			110			388
Unrecognized income tax benefits at November 30, 2018		$	9,830
Unrecognized income tax benefits at May 31, 2019					$	10,101

In the normal course of business, the Company’s tax filings are subject to audit by federal, state and foreign tax authorities. At ~~November 30, 2018,~~May 31, 2019, the Company remained subject to examination in the following major tax jurisdictions for the tax years as indicated below:

~~Major Tax Jurisdictions~~		~~Open Tax Years~~
~~U.S.~~
~~Federal~~		~~2015 through 2018~~
~~State (various)~~		~~2015 through 2018~~
~~Europe~~
~~United Kingdom~~		~~2015 through 2018~~
~~France~~		~~2016 through 2018~~
~~Germany~~		~~2017 through 2018~~

Major Tax Jurisdictions	Open Tax Years
U.S.
Federal	2016	through	2018
State (various)	2016	through	2018
Europe
United Kingdom	2017	through	2018
France	2016	through	2018
Germany	2016	through	2018

116.6. DEBT

FactSet’s debt obligations consisted of the following:

(in thousands)	November 30, 2018		August 31, 2018		May 31, 2019		August 31, 2018
2017 Revolving Credit Facility (maturity date of March 17, 2020)	$	575,000	$	575,000
2017 Revolving Credit Facility					$	—	$	575,000
2019 Revolving Credit Facility (maturity date of March 29, 2024)					$	575,000	$	—

On March ~~17, 2017,~~29, 2019, the Company entered into athe 2019 Credit Agreement (the ~~“2017~~"2019 Credit ~~Agreement”~~Agreement") between FactSet, as the borrower, and PNC Bank, National Association ~~(“PNC”~~("PNC"), as the administrative agent and lender. The ~~2017~~2019 Credit Agreement provides for a ~~$575.0~~$750.0 million revolving credit facility (the ~~“2017~~"2019 Revolving Credit ~~Facility”~~Facility"). FactSet may request borrowings under the ~~2017~~2019 Revolving Credit Facility until its maturity date of March ~~17, 2020.~~29, 2024. The ~~2017~~2019 Credit Agreement also allows FactSet, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount of up to ~~$225.0~~$500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million.

Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus ~~1.00%~~a spread using a debt leverage pricing grid, currently at 0.875%. FactSet borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility. Interest on the loan outstanding is payable quarterly, in arrears, and on the maturity date. ~~There are no prepayment penalties if the Company elects to prepay the outstanding loan amounts prior to the scheduled maturity date.~~ The principal balance is payable in full on the maturity date. 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.

~~In conjunction with FactSet’s entrance into~~On March 29, 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 ~~Company borrowed~~borrower, and PNC as the lender. The total principal amount of the debt outstanding at the time of retirement was $575.0 million ~~in the form of a LIBOR rate loan under the 2017 Revolving Credit Facility. Proceeds from the 2017 Revolving Credit Facility~~and there were ~~also used to fund FactSet’s acquisition of BISAM.~~no prepayment penalties.

All outstanding loan amounts are reported as Long-term debt within the consolidated balance sheet at ~~November 30, 2018.~~May 31, 2019. For the three months ended ~~November 30,~~May 31, 2019 and 2018, ~~and 2017,~~ the Company recorded interest expense of ~~$4.7~~$5.2 million and ~~$3.4~~$4.3 million on its outstanding debt amounts, respectively. ~~The principal balance is payable~~For the nine months ended May 31, 2019 and 2018, the Company recorded interest expense of $15.1 million and $11.3 million on its outstanding debt amounts, respectively. During the three months ended May 31, 2019, FactSet incurred approximately $0.9 million in ~~full on~~debt issuance costs related to the ~~maturity date. As~~2019 Credit Agreement. These costs were capitalized as loan origination fees and are amortized into interest expense ratably over the term of ~~November 30, 2018, no commitment fee was owed by FactSet since it borrowed~~ the ~~full amount under the 2017~~2019 Credit Agreement.

The ~~2017~~2019 Credit Agreement ~~contained~~contains covenants and requirements restricting certain FactSet activities, which are usual and customary for this type of loan. In addition, the ~~2017~~2019 Credit Agreement ~~required~~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 ofand requirements within the ~~2017~~2019 Credit Agreement as of ~~November 30, 2018.~~May 31, 2019.

17.17. 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

As of November 30, 2018, the Company leased approximately 202,000 square feet of existing office space for its headquarters at 601 Merritt 7, Norwalk, Connecticut. On February 14, 2018, the Company entered a new lease to relocate its corporate headquarters to 45 Glover Avenue in Norwalk, Connecticut. The new location will comprise approximately 173,000 square feet of office space. The Company will take possession of the newly leased property on January 1, 2019, for fit-out purposes. The Company will continue to occupy its existing headquarters space until the new headquarters property is ready for occupancy, currently estimated to be in the second quarter of fiscal 2020.

Including new lease agreements executed during ~~fiscal~~the nine months ended May 31, 2019, the Company’s worldwide leased office space increased to approximately ~~1,750,000~~1,846,000 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 ~~rent~~occupancy expense (a component of Selling, General & Administrative ~~“SG&A”~~"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 ~~November 30, 2018, including the fully executed lease for its new headquarters in Norwalk, Connecticut~~May 31, 2019 are as follows:

(in thousands) Years ended August 31,	Minimum Lease Payments		Minimum Lease Payments

2019 (remaining nine months)	$	30,377
2019 (remaining three months)			$	10,353
2020		37,996		40,927
2021		35,504		39,286
2022		32,862		36,127
2023		30,574		34,021
Thereafter		230,189		250,102
Total	$	397,502	$	410,816

For the three months ended ~~November 30,~~May 31, 2019 and 2018, ~~and November 30, 2017,~~ rent expense (including operating costs) for all operating leases amounted to ~~$13.4~~$15.5 million and ~~$13.0~~$14.1 million, respectively. For the nine months ended May 31, 2019 and 2018, rent expense (including operating costs) for all operating leases amounted to $43.1 million and $40.6 million, respectively. As of ~~November 30, 2018,~~May 31, 2019, deferred rent reported within the consolidated balance sheet totaled ~~$36.5~~$37.4 million compared to $39.4 million as of August 31, ~~2018, of which $32.4~~2018. Of the deferred rent balance, $33.8 million and ~~$39.4~~$33.6 million were ~~reported~~recorded as a non-current ~~liability~~liabilities within the line item Deferred ~~Rent~~rent and ~~Other Non-Current Liabilities~~other non-current liabilities as of ~~November 30, 2018~~May 31, 2019 and August 31, 2018, respectively.

Approximately ~~$1.1~~$3.3 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 ~~November 30, 2018.~~May 31, 2019. These standby letters of credit contain covenants that, among other things, require the Company to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of ~~November 30, 2018,~~May 31, 2019, 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~~for 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, 2018, the Company had total purchase commitments with suppliers of $79.0 million. There were no material changes in the Company’s purchase commitments during the first ~~three~~nine months of fiscal 2019.

Contingencies

Income Taxes

Uncertain income tax positions are accounted for in accordance with applicable accounting guidance, ~~(see~~refer to Note ~~15).~~15 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 ~~November 30, 2018,~~May 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 Tax Matters

In the third quarter of fiscal 2018, FactSet received a letter from the Massachusetts Department of Revenue relating to prior tax periods. The letter requested additional sales information to determine if a ~~notice~~Notice of ~~intent~~Intention to ~~assess~~Assess should be issued to FactSet. The Company continues to cooperate with the Commonwealth in providing any requested information. Based upon a preliminary review of the Massachusetts request, the Company believes the ~~state~~Commonwealth might assess sales tax, and underpayment penalties and interest, on previously recorded sales transactions. Due to the uncertainty surrounding the assessment process, the Company is unable to reasonably estimate the ultimate outcome of this matter and, as such, has not recorded a liability as of ~~November 30, 2018.~~May 31, 2019. While FactSet believes that it will ultimately prevail if the Company is presented with a formal ~~assessment and is required to pay it,~~assessment; if FactSet does not prevail, then 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.

Concentrations of Credit Risk

Cash equivalents

Cash and cash equivalents are maintained primarily with five financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and are maintained with financial institutions, with reputable credit, and therefore, bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.

Accounts Receivable

Accounts receivable are unsecured and derived from revenue earned from clients located around the globe. The Company maintains reserves for potential write-offs and evaluates the adequacy of the reserves periodically. ~~These losses have historically been within expectations.~~ No single client represented 10% or more of FactSet’s total revenue in any period presented. At ~~November 30, 2018,~~May 31, 2019, the Company’s largest individual client accounted for ~~approximately 2.5%~~less than 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 ~~November 30, 2018,~~May 31, 2019, the receivable reserve was ~~$4.5~~$5.3 million compared to ~~a reserve of~~ $3.5 million as of August 31, 2018.

Derivative Instruments

As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. ~~FactSet~~The Company has incorporated counterparty credit risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities, when applicable. ~~FactSet~~For derivative instruments, the Company calculates credit risk from observable data related to credit default swaps ~~(“CDS”~~("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 ~~FactSet~~the Company has executed these derivative transactions. AsTo mitigate counterparty credit risk, the Company enters into contracts with large financial institutions and regularly reviews its credit exposure balances as well as the creditworthiness of the counterparties. For the Company’s liabilities, as CDS spread information is not available for FactSet, the Company’s credit risk is determined based on using a simple average of CDS spreads for peer companies. To mitigate counterparty credit risk, FactSet enters into contracts with large financial institutions and regularly reviews its credit exposure balances, as well as the creditworthiness of the counterparties. The Company does not expect any losses as a result of default of its counterparties.

Concentrations ofOtherRisk

Data Content Providers

Certain data sets that FactSet relies on have a limited number of suppliers, although the Company makes every effort to assure that, where reasonable, alternative sources are available. FactSet is not dependent on any one third-party data supplier in order to meet the needs of its clients. FactSet combines the data from these commercial databases into its own dedicated single online service, which the client accesses to perform their analysis. No single vendor or data supplier represented more than 10% of FactSet's total data expenses for the ~~three~~nine months ended ~~November 30,~~May 31, 2019 and 2018, ~~and 2017,~~ respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“("MD~~&A”~~&A") is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

Executive Overview

	•	~~Executive Overview~~
	•	~~Key Metrics~~
	•	~~Results of Operations~~
	•	~~Liquidity~~
	•	~~Capital Resources~~
	•	~~Foreign Currency~~
	•	~~Off-Balance Sheet Arrangements~~
	•	~~Share Repurchase Program~~
	•	~~Contractual Obligations~~
	•	~~Dividends~~
	•	~~Significant Accounting Policies and Critical Accounting Estimates~~
	•	~~New Accounting Pronouncements~~
	•	~~Market Trends~~
	•	~~Forward-Looking Factors~~
	•	~~Business Developments~~

Key Metrics

Results of Operations

Liquidity

Capital Resources

Foreign Currency

Off-Balance Sheet Arrangements

Share Repurchase Program

Contractual Obligations

Dividends

Significant Accounting Policies and Critical Accounting Estimates

New Accounting Pronouncements

Market Trends

Forward-Looking Factors

Business Developments

The MD&A should be read in conjunction with our 2018 Form 10-K, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission, and the consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Executive Overview

We are a global provider of integrated financial information, analytical applications and industry-leading service for the global investment community. These ~~professionals~~clients include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, we offer proprietary and third-party content through desktop, web, mobile and off-platform solutions. Our broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. With recent acquisitions, we have continued to expand our solutions across the investment lifecycle from idea generation to performance and client reporting. We deliver insight and information to investment professionals in each of our three segments, which include the U.S., Europe, and Asia Pacific, through our key workflows of Research, Analytics, Wealth, and Content and Technology Solutions ~~(“CTS”~~("CTS"). Our revenue is primarily derived from subscriptions to products and services such as workstations, analytics, enterprise data, research management, and trade execution.

Business Strategy

As a premier financial solutions provider for the global financial community, we provide workflow solutions and leading analytical applications across the investment lifecycle to create an open and scalable platform. We bring the front, middle and back office together to drive productivity and performance throughout the portfolio lifecycle. Our strategy is focused on growing our business ~~throughout~~in each of our three segments which include the U.S., Europe, and Asia Pacific. We believe this geographical strategic alignment helps us better manage our resources and concentrate on markets that demand our products. To execute on our business strategy of broad-based growth across each geographical segment, we continue to look at ways to create value for our clients by offering data, products and analytical applications within our key ~~workflows~~workflow solutions of Research, Analytics, Wealth, and ~~Content and Technology Solutions.~~CTS.

Fiscal ~~201~~20199Third~~First~~Quarter in Review

Revenue in the ~~first~~third quarter of fiscal 2019 was ~~$351.6~~$364.5 million, an increase of ~~6.8%~~7.2% from the prior year comparable period. Revenue growth can be attributed primarily to our Analytics, CTS and Wealth workflows due mainly to increased demand for our analytics, data and technology offerings. As of ~~November 30, 2018,~~May 31, 2019, organic annual subscription value (“("organic ~~ASV”~~ASV") plus professional services totaled ~~$1.42~~$1.45 billion, an increase of ~~6.6%~~5.6% over the prior year comparable period. Revenue and organic ASV plus professional services growth can be attributed to increased demand for our data and technology offerings, primarily in our Wealth workflow through higher enterprise wealth solutions sales and our Content and Technology Solutions (“CTS”) workflow, driven by increased sales of enterprise data feeds.

Operating income grew ~~12.8%~~25.7% and diluted earnings per share ~~(“EPS”~~("EPS") increased ~~22.6%~~24.1% compared to the prior year period. This increase in operating income ~~and diluted EPS~~ was primarily driven by revenue growth of ~~6.8%~~7.2%, a foreign currency benefit from a stronger U.S. dollar which reduced the overall operating expense impact and mainly resulted in a reduction in compensation expense, as well as, decreased travel expenses, partially offset by ~~an increase in operating expenses primarily due to data costs, bad debt expense,~~ computer-related expenses and employee compensation. Additionally, diluted EPS benefited from a decrease in our effective tax rate associated with the TCJA and a decrease in diluted shares outstanding as a result of share repurchases. expenses.

As of ~~November 30, 2018,~~May 31, 2019, employee count was ~~about 9,600,~~9,366, up ~~1.9%~~1.8% in the past 12 months, due primarily to an increase in net new employees of ~~1.3%~~5.0% in the Asia Pacific region, partially offset by a net decrease of 5.2% in the U.S. region. Of our total employees, ~~2,421~~2,279 were located in the U.S., ~~1,251~~1,243 in Europe and ~~5,928~~5,844 in ~~the~~ Asia ~~Pacific region.~~Pacific.

Key Metrics

The following is a review of our key metrics:

	As of and for the Three months ended November 30,							As of and for the Three Months Ended May 31,
(in millions, except client and user counts)	2018		2017		Change
(in thousands, except client and user counts and per share data)								2019		2018		Change
Revenue	$	351.6	$	329.1		6.8	%	$	364,533	$	339,911		7.2	%
Operating income	$	100.5	$	89.1		12.8	%	$	117,240	$	93,265		25.7	%
Net income	$	84.3	$	70.4		19.8	%	$	92,265	$	74,746		23.4	%
Diluted EPS	$	2.17	$	1.77		22.6	%	$	2.37	$	1.91		24.1	%
Organic ASV⁽¹⁾	$	1,400.4	$	1,316.8		6.3	%
Organic ASV + professional services⁽²⁾	$	1,422.5	$	1,334.2		6.6	%
Clients⁽³⁾		5,297		4,809		10.1	%
Clients⁽¹⁾									5,455		4,975		9.6	%
Users		115,209		88,593		30.0	%		122,951		89,506		37.4	%

⁽¹⁾

~~Organic ASV excludes ASV from acquisitions and dispositions comp~~~~leted within the last 12 months,~~ ~~the effects of foreign currency~~~~, and professional~~ ~~services~~.

⁽²⁾

~~Professional services fees were $22~~ ~~million and $17~~ ~~million~~ ~~as of November 30, 2018 and 2017, respectively.~~

⁽³⁾

In the first quarter offiscal2019, we changed our client count definition to ~~now~~ include clients from the April 2017 acquisition of FactSet ~~Dig~~~~ital~~Digital Solutions Group ~~(“FDSG”~~("FDSG").The prior year client count was not restated to reflect this change.

The table below provides an unaudited reconciliation of ASV to organic ASV:

As of May 31,

(in millions)

2019

2018
Change
As reported ASV⁽¹⁾
$ 1,423.0 $ 1,356.2
Currency impact to ASV
0.8 (5.9
)

Organic ASV⁽²⁾
$ 1,423.8 $ 1,350.3 5.4
%
(1)
ASV at any given point in time represents the forward-looking revenue for the next 12 months from all subscription services currently being supplied to clients and excludes professional service fees billed in the last 12 months, which are not subscription-based.ASV excludes professional services fees of $23.1 million and $20.1 million as of May 31, 2019 and 2018, respectively.
(2)
Organic ASV excludes ASV from acquisitions and dispositions completed within the last 12 months, the effects of foreign currency, and professional services.
Annual Subscription Value Growth
Organic ASV at any given point in time represents the forward-looking revenue for the next 12 months from all subscription services currently being supplied to clients and excludes ~~professional service fees billed in~~ASV from acquisitions and dispositions completed within the last 12 months, ~~which are not subscription-based.~~the effects of foreign currency, and professional services. With proper notice provided to us, our clients can add to, delete portions of, or terminate service at any time, subject to certain contractual limitations. As of ~~November 30, 2018,~~May 31, 2019, our organic ASV totaled ~~$1.40~~$1.42 billion, up ~~6.3%~~5.4% over the prior year comparable period. Organic ASV plus professional services increased 5.6% to ~~$1.42~~$1.45 billion as of ~~November 30, 2018, up $88.3~~May 31, 2019, compared to the prior year period.
As of May 31, 2019, ASV from the U.S. segment was $887.6 million, an increase of 5.2% from the prior year ~~with a growth rate~~period. ASV from the international operations was $535.4 million as of ~~6.6%.~~ May 31, 2019, an increase of 4.4% over the prior year comparable period. International ASV represents 37.6% of total ASV as of May 31, 2019, down from 37.8% in the prior year.
The increase in organic ASV ~~was driven by growth in~~across our geographic segments as of May 31, 2019, compared to the prior year period, was primarily driven by increased sales from our workflow solutions, mainly in Wealth, CTS, and Analytics and from our annual price increases, partially offset by increased cancellations. ASV growth from the Wealth workflow was mainly driven by increased sales and competitive wins in the market. The growth from the CTS workflow was primarily driven by increased sales in standard data feeds. The growth from the Analytics workflow was primarily due to increased sales of our ~~workflow solutions~~core equity portfolio analytics solutions. The U.S. and international client price increases during the nine months ended May 31, 2019 was an increase comparable with the same period a year ago. ASV growth was partially offset by cancellations across our business due primarily to industry-wide cost pressures and firm consolidations and closures.

ASV increased in the U.S. segment as of May 31, 2019, compared to the prior year period, primarily from our Wealth, CTS and Analytics workflows, due to the ~~Wealth~~increasing demand for our integrated analytics and data products. The ASV increase from our international operations was due to the annual international price increase during the third quarter of fiscal 2019 and continued growth in the Analytics and CTS ~~workflows. Additionally, we have leveraged relationships with existing clients to increase year over year sales through cross-selling~~workflows in Asia Pacific and ~~upselling of our diversified product suite.~~growth in the CTS workflow in Europe.

Buy-side and sell-side ASV growth rates for the ~~first~~third quarter of fiscal 2019 were ~~5.9%~~5.2% and ~~8.6%~~6.8%, respectively. Buy-side clients account for ~~83.9%~~84.2% of ASV, while the remainder is derived from sell-side firms that perform mergers and acquisitions advisory work, capital markets services and equity research.

As of November 30, 2018, organic ASV from U.S. operations was $876.9 million, an increase of 6.3% organically from a year ago. This increase is primarily driven by our Wealth workflow, through higher cross-selling both to existing and new clients. Organic ASV from international operations was $523.5 million, an increase of 6.4% over prior year due to growth in the Analytics and CTS workflows. International organic ASV represents 37.4% of total organic ASV, an increase from 35.5% a year ago.
Client and User Additions
Our total client count was ~~5,297~~5,455 as of ~~November 30, 2018,~~May 31, 2019, representing a net increase of ~~488~~480 or ~~10.1%~~9.6% in the last 12 months. ~~Client count grew by 155 in~~In the ~~last three months due to both the addition~~first quarter of ~~new sell-side and corporate clients, as well as a change in the~~fiscal 2019, we changed our client count ~~methodology~~definition to include clients from the April 2017 acquisition of FDSG. The prior year client count was not restated to reflect this change. During the three months ended May 31, 2019, net client additions increased by 50, primarily driven by an increase in wealth management and corporate clients. As part of our long-term growth strategy, we continue to focus on expanding and cultivating relationships with our ~~current~~ existing client base through sales of workstations, applications, services and content.

As of ~~November 30, 2018,~~May 31, 2019, there were ~~115,209~~122,951 professionals using ~~FactSet.~~FactSet, representing a net increase of 33,445 or 37.4% in the last 12 months primarily driven by Wealth workstation sales. Our user count increased ~~23,312~~888 in the past three months primarily ~~due to Wealth workstation sales. Over the last 12 months, our user count grew~~driven by ~~30.0% primarily due to the~~an increase in ~~Wealth workstation sales mentioned above~~corporate and ~~increased cross-selling across buy-side and sell-side clients, as well as new client acquisitions.~~wealth management users.

Annual client retention as of ~~November 30, 2018~~May 31, 2019 was greater than 95% of ASV and ~~91%~~90% when expressed as a percentage of clients. The ~~U.S. operations minimized~~cancellation rate for the ~~rate~~third quarter of fiscal 2019 was higher than the prior year comparable period. Cancellations were higher mainly from continued industry-wide cost pressure and firm consolidations and closures across all our regions. Despite higher cancellations, ~~and improved client retention in~~ our ~~largest geographic region. Our high~~ retention rate remains high, which reflects the strength of our business strategy and the value of the FactSet products, as the majority of our clients maintain their subscriptions to the FactSet platform year over year. As of ~~November 30, 2018,~~May 31, 2019, our largest individual client accounted for ~~2.5%~~less than 3% of total subscriptions, and annual subscriptions from our ten largest clients did not surpass 15% of total client subscriptions.

Returning Value to Stockholders
On ~~November 13, 2018,~~May 17, 2019, our Board of Directors approved a regular quarterly dividend of ~~$0.64~~$0.72 per share. The cash dividend of ~~$24.4~~$27.5 million was paid on ~~December~~June 18, ~~2018~~2019 to common stockholders of record at the close of business on ~~November 30, 2018.~~May 31, 2019. We repurchased ~~275,000~~175,000 shares for ~~$60.4~~$47.6 million during the ~~first~~third quarter of fiscal 2019 under our existing share repurchase program. Over the last 12 months, we have returned ~~$429.0~~$326.5 million to stockholders in the form of share repurchases and cash dividends, funded by cash generated from operations. As of ~~November 30, 2018, $181.3~~May 31, 2019, $89.6 million ~~remained available~~remains authorized for future share repurchases.

On June 24, 2019, the Board of Directors of FactSet approved a $210.0 million expansion of the existing share repurchase program. Subsequent to this expansion, $299.6 million is available for future repurchases.
C~~apital~~Capital Expenditures
Capital expenditures in the ~~first~~third quarter of fiscal 2019 were ~~$9.5~~$11.4 million, compared ~~with $5.9~~to $6.0 million a year ago. Capital expenditures of ~~$6.4~~$5.6 million, or ~~67%~~49%, ~~was~~were primarily related to corporate infrastructure investments, additional server equipment for our data centers located in New Jersey and Virginia, as well as computers and peripherals for new office space primarily in India. The remainder of our capital expenditures was primarily for the ~~build out~~build-out of office space, with ~~$2.9~~$4.1 million related to the new corporate headquarters in Norwalk, Connecticut and $1.6 million related to new office space in India.

Results of Operations

For an understanding of the significant factors that influenced our performance for the three and nine months ended ~~November 30,~~May 31, 2019 and 2018, ~~and 2017, respectively,~~ the following discussion should be read in conjunction with the consolidated financial statements and related notes presented in this Quarterly Report on Form 10-Q.

Three months ended November 30,

Three Months Ended May 31,

Nine Months Ended May 31,

(in thousands, except per share data)

2018

2017

Change

2019

2018

Change

2019

2018

Change

Revenue
$ 351,640 $ 329,141 6.8 % $ 364,533 $ 339,911 7.2
%
$ 1,071,068 $ 1,004,283 6.7
%
Cost of services
$ 166,776 $ 161,524 3.3 % $ 163,832 $ 165,073 (0.8
)%
$ 495,716 $ 489,829 1.2
%
Selling, general and administrative
$ 84,325 $ 78,519 7.4 % $ 83,461 $ 81,573 2.3
%
$ 248,885 $ 236,606 5.2
%
Operating income
$ 100,539 $ 89,098 12.8 % $ 117,240 $ 93,265 25.7
%
$ 326,467 $ 277,848 17.5
%
Net income
$ 84,296 $ 70,379 19.8 % $ 92,265 $ 74,746 23.4
%
$ 261,263 $ 198,262 31.8
%
Diluted earnings per common share
$ 2.17 $ 1.77 22.6 % $ 2.37 $ 1.91 24.1
%
$ 6.73 $ 5.01 34.3
%
Diluted weighted average common shares
38,809 39,680 38,993 39,104 38,807 39,543

Revenue
Three months ended May 31, 2019 compared to three months ended May 31, 2018
Revenue for the three months ended ~~November 30, 2018~~May 31, 2019 was ~~$351.6~~$364.5 million, increasing ~~6.8%~~7.2% compared to the prior year. Our organic revenue growth rate for the three months ended ~~November 30, 2018~~May 31, 2019 was ~~6.4%~~7.3% compared to the same period a year ago. Organic revenue excludes the effects of acquisitions and dispositions completed in the last 12 months, foreign currency in all periods presented and deferred revenue fair value adjustments from purchase accounting. The increase in revenue was primarily driven by the Analytics, Wealth, and CTS ~~workflows.~~workflows, partially offset by increased cancellations. Revenue growth in the Analytics workflow was primarily due to our core equity portfolio analytics solutions. The Wealth workflow also experienced revenue growth due to higher sales of our workstation product. The growth in the CTS workflow was driven mainly by increased sales of standard data feeds and non-core transaction related revenue. Offsetting these positive growth factors were increased cancellations compared to the prior year period, resulting from continued industry-wide cost pressures and firm consolidations and closures.
Nine months ended May 31, 2019 compared to nine months ended May 31, 2018
Revenue for the nine months ended May 31, 2019 was $1,071.1 million, increasing 6.7% compared to the prior year. Our organic revenue growth rate for the nine months ended May 31, 2019 was 6.5% compared to the same period a year ago. The increase in revenue was primarily driven by the Analytics, CTS and Wealth workflows, as well as, our annual price increase for the majority of our U.S. segment clients, partially offset by increased cancellations. Revenue growth in Analytics was due to an increase in sales of the portfolio analytics products to existing clients. Increased sales in the CTS workflow was driven by standard data feeds and non-core transaction related revenue. Revenue growth in the Wealth workflow was due to higher sales of our workstation product, which also contributed to the growth in our user count. Increased sales in the CTS workflow was driven by enterprise data feeds and continued momentum around new platform offerings including FactSet Data Exploration and Open:FactSet. The Research workflow also experienced revenue growth due to increased workstation sales to buy-side and corporate users. Factors offsetting revenue growth include cancellations. Our overallproduct. Although client retention remained high at 90% over ~~95%.~~the past 12 months, revenue growth was partially offset by increased client cancellations resulting from continued industry-wide cost pressures and firm consolidations and closures compared to the same period a year ago.

Revenue by Geographic Region

Three months ended November 30,

Three Months Ended May 31,

Nine Months Ended May 31,

(in thousands)

2018

2017

Change

2019

2018

Change

2019

2018

Change

U.S.
$ 222,203 $ 208,768 6.4 % $ 226,961 $ 210,308 7.9
%
$ 672,479 $ 627,976 7.1
%
% of revenue
63.2 % 63.4 % 62.3
%
61.9
%
62.8
%
62.5
%

Europe
$ 97,765 $ 91,727 6.6 % $ 102,499 $ 98,856 3.7
%
$ 299,197 $ 286,789 4.3
%
Asia Pacific
31,672 28,646 10.6 % 35,073 30,747 14.1
%
99,392 89,518 11.0
%
International
$ 129,437 $ 120,373 7.5 % $ 137,572 $ 129,603 6.1
%
$ 398,589 $ 376,307 5.9
%
% of revenue
36.8 % 36.6 % 37.7
%
38.1
%
37.2
%
37.5
%

Consolidated
$ 351,640 $ 329,141 6.8 % $ 364,533 $ 339,911 7.2
%
$ 1,071,068 $ 1,004,283 6.7
%
~~Thre~~eThree months ended ~~November 30, 201~~8May 31, 2019 compared to three ~~month~~smonths ended ~~November 30,~~ ~~201~~7May 31, 2018
Revenue from our U.S. segment increased ~~6.4%~~7.9% to ~~$222.2~~$227.0 million during the three months ended ~~November 30, 2018,~~May 31, 2019, compared to ~~$208.8~~$210.3 million from the same period a year ago, primarily due to the Wealth, ~~workflow through higher cross-selling both to existing~~Analytics, and ~~new clients. The U.S. region was able to minimize the rate of cancellations, which resulted in improved client retention in our largest region.~~CTS workflows, partially offset by increased cancellations. Organic revenue in the U.S. increased ~~6.3%~~7.8% compared to the same period a year ago. Revenue from our U.S. operations accounted for ~~63.2%~~62.3% of our consolidated revenue during the ~~first~~third quarter of fiscal 2019, comparable to the prior year period of ~~63.4%~~61.9%.

European revenue increased ~~6.6%~~3.7% to ~~$97.8~~$102.5 million during the three months ended ~~November 30, 2018,~~May 31, 2019, compared to ~~$91.7~~$98.9 million from the same period a year ago. This increase was due to ~~synergies from recent acquisitions with significant operations in European markets, as well as~~ increased sales in the Analytics and CTS ~~workflows. Excluding the effects of acquisitions and dispositions completed in the last 12 months, foreign currency, and deferred revenue fair value adjustments from purchase accounting,~~workflows, partially offset by increased cancellations. The European organic revenue ~~increased 5.4% in~~growth rate was 3.8% for the three months ended ~~November 30, 2018~~May 31, 2019, compared to the same period a year ago. Foreign currency exchange rate fluctuations ~~reduced~~decreased our European revenue growth rate by 1030 basis points.

Asia Pacific revenue increased ~~10.6%~~14.1% to ~~$31.7~~$35.1 million during the three months ended ~~November 30,~~May 31, 2019, compared to $30.7 million from the same period a year ago. This increase was due to increased sales in the Analytics and CTS workflows. Asia Pacific organic revenue increased ~~10.7%, on par with revenue growth,~~14.6% for the three months ended ~~November 30, 2018~~May 31, 2019, compared to the same period a year ago. Foreign currency exchange rate fluctuations ~~reduced~~decreased our Asia Pacific revenue growth rate by 1050 basis points.
Nine months ended May 31, 2019compared tonine months ended May 31, 2018
Revenue from our U.S. segment increased 7.1% to $672.5 million during the nine months ended May 31, 2019, compared to $628.0 million from the same period a year ago. This increase was primarily due to the Wealth, Analytics and CTS workflows, and our annual price increase for the majority of our U.S. segment clients, partially offset by increased cancellations. Organic revenue in the U.S. increased 7.0% compared to the same period a year ago. Revenue from our U.S. operations accounted for 62.8% of our consolidated revenue for the first nine months of fiscal 2019, comparable to the prior year period of 62.5%.
European revenue increased 4.3% to $299.2 million during the nine months ended May 31, 2019, compared to $286.8 million from the same period a year ago. This increase was primarily driven by sales in the Analytics and CTS workflows, partially offset by increased cancellations. European organic revenue increased 3.9% in the nine months ended May 31, 2019, compared to the same period a year ago. Foreign currency exchange rate fluctuations decreased our European revenue growth rate by 30 basis points.
Asia Pacific revenue increased 11.0% to $99.4 million during the nine months ended May 31, 2019 due to increased sales in the Analytics, CTS and Research workflows, partially offset by increased cancellations. Asia Pacific organic revenue increased 11.2% for the nine months ended May 31, 2019, compared to the same period a year ago. Foreign currency exchange rate fluctuations decreased our Asia Pacific revenue growth rate by 20 basis points.
Operating Expenses

Three months ended November 30,

Three Months Ended May 31,

Nine Months Ended May 31,

(in thousands)

2018

2017

Change

2019

2018

Change

2019

2018

Change

Cost of services
$ 166,776 $ 161,524 3.3 % $ 163,832 $ 165,073 (0.8
)%
$ 495,716 $ 489,829 1.2
%
Selling, general and administrative
84,325 78,519 7.4 % 83,461 81,573 2.3
%
248,885 236,606 5.2
%
Total operating expenses
$ 251,101 $ 240,043 4.6 % $ 247,293 $ 246,646 0.3
%
$ 744,601 $ 726,435 2.5
%

Operating Income
$ 100,539 $ 89,098 12.8 % $ 117,240 $ 93,265 25.7
%
$ 326,467 $ 277,848 17.5
%
Operating Margin
28.6 % 27.1 % 32.2
%
27.4
%
30.5
%
27.7
%

Cost of Services

Three months ended ~~November 30, 201~~May 31, 20198compared to three months ended ~~November 30, 201~~7May 31, 2018
For the three months ended ~~November 30, 2018,~~May 31, 2019, cost of services ~~increased 3.3%~~decreased 0.8% to ~~$166.8~~$163.8 million compared to ~~$161.5~~$165.1 million in the same period a year ago, primarily due to a reduction in compensation costs, partially offset by an increase in ~~data costs,~~ computer-related ~~expenses, and employee compensation expense, including stock-based compensation. However, cost~~expenses. Cost of services, when expressed as a percentage of revenue, ~~decreased 170~~was 44.9% during the third quarter of fiscal 2019, a decrease of 360 basis points compared to ~~47.4% during~~ the ~~first~~same period a year ago. This decrease was primarily due to revenue growth outpacing the growth of cost of services on a year over year basis, as well as a decrease in employee compensation and contractor fees, partially offset by an increase in computer-related expenses, when expressed as a percentage of revenue.
Employee compensation, when expressed as a percentage of revenue, decreased 320 basis points in the third quarter of fiscal 2019, compared to the same period a year ago. This decrease isin employee compensation was primarily ~~due to increased revenue growth as well as~~driven by a ~~decrease~~foreign currency benefit from a stronger U.S. dollar, and a shift in ~~costs~~headcount distribution between our segments, partially offset by higher annual base salaries. Although net headcount grew by 169 employees over the past 12 months, with the majority of their compensation included in cost of services, there was a net headcount reduction of 5.2% in our higher cost areas included in the U.S. segment, partially offset by an increase of 5.0% in our lower cost, centers of excellence, in Asia Pacific.

Contractor fees, when expressed as a percentage of revenue, ~~mainly~~decreased 30 basis points due primarily to a shift from external to internal resources associated with implementation projects. Computer-related expenses, as a percentage of revenue, increased 30 basis points primarily driven by increased costs from cloud-based hosting and licensed software arrangements.
Nine months ended May 31, 2019 compared tonine months endedMay 31, 2019
For the nine months ended May 31, 2019, cost of services increased 1.2% to $495.7 million, compared to $489.8 million for the same period a year ago, primarily due to an increase in computer-related expenses and data costs, partially offset by a reduction in compensation expense and contractor fees. Cost of services, expressed as a percentage of revenues, were 46.3% during the first nine months of fiscal 2019, a decrease of 250 basis points over the prior year period. This decrease was primarily due to lower employee compensation costs and contractor fees, partially offset by ~~higher data costs and~~ computer-related ~~expenses.~~expenses, when expressed as a percentage of revenue.

Employee ~~compensation, including stock-based~~ compensation, when expressed as a percentage of revenue, decreased ~~220~~260 basis points infor the first quarter of fiscal 2019 compared to the same period a year ago, driven mainly by realization of benefits from prior year restructuring actions previously disclosed. This decrease was partially offset by the hiring of 179 net new employees over the last 12nine months with the majority of their compensation recorded in cost of services, as well as higher annual base salaries and employee benefit costs including medical expenditures during the first quarter of fiscalended May 31, 2019 compared to the prior year period. This decrease was primarily driven by a foreign currency benefit from a stronger U.S. dollar, a shift in headcount distribution across our segments, with a net headcount increase in Asia Pacific and a reduction in the U.S., partially offset by higher annual base salaries and higher employee benefit costs related to medical expenditures.

~~Data costs,~~Contractor fees, when expressed as a percentage of revenue, ~~increased 70~~decreased 30 basis points due primarily to ~~increased variable data costs~~a shift from external to ~~capture incremental revenue combined~~internal resources associated with ~~data price increases.~~implementation projects. Computer-related expenses, ~~which includes depreciation, maintenance, software and other fees, increased 40 basis points,~~ as a percentage of revenue, increased 40 basis points primarily ~~due to~~driven by increased costs from cloud-based hosting and licensed software arrangements.

Selling, General and Administrative

Three months ended ~~November 30, 201~~8May 31, 2019compared to three months ended ~~November 30, 201~~7May 31, 2018
For the three months ended ~~November 30, 2018,~~May 31, 2019, SG&A expenses increased ~~7.4%~~2.3% to ~~$84.3~~$83.5 million, compared to ~~$78.5~~$81.6 million for the same period a year ago, primarily due to marginal growth across multiple SG&A categories, partially offset by a reduction in travel expenses. SG&A expenses, expressed as a percentage of revenue, were 22.9% during the third quarter of fiscal 2019, a decrease of 110 basis points over the prior year period. When expressed as a percentage of revenue, this decrease was primarily driven by a reduction in employee compensation and travel expenses, partially offset by foreign currency exchange losses on hedging activities.
Employee compensation, when expressed as a percentage of revenue, decreased 50 basis points in the third quarter of fiscal 2019, compared with the same period a year ago. This decrease was primarily driven by a foreign currency benefit from a stronger U.S. dollar, partially offset by higher annual base salaries. Travel expenses decreased 80 basis points as a percentage of revenue, due to an internal focus on cost discipline measures. The foreign currency exchange losses on hedging activities mainly related to losses from the Euro and British Pound Sterling hedge during the three months ended May 31, 2019.
Nine months ended May 31, 2019 compared tonine months endedMay 31, 2018
For the nine months ended May 31, 2019, SG&A expenses increased 5.2% to $248.9 million, compared to $236.6 million in the same period a year ago, primarily due to an increase in compensation expense, bad debt expense, rent expense, professional fees, and ~~compensation expense~~foreign currency exchange losses on hedging activities, partially offset by a reduction in marketing expense. SG&A expenses, expressed as a percentage of revenue, were ~~24.0%~~23.2% during the first ~~quarter~~nine months of fiscal 2019, ~~which was comparable with~~a decrease of 30 basis points over the prior year period. When expressed as a percentage of revenue, ~~employee~~this decrease was primarily driven by a reduction in travel and compensation ~~expense, including stock-based compensation, and marketing~~ expenses, ~~decreased,~~ partially offset by ~~higher~~an increase in bad debt ~~expense and professional fees~~expense.
Travel expenses decreased 30 basis points as a percentage of revenue, compared to the same period a year ~~ago.~~
ago, due to an internal focus on cost discipline measures. Employee ~~compensation, including stock-based~~ compensation, when expressed as a percentage of revenue, decreased 6020 basis points ~~in the first quarter of fiscal 2019 compared~~due primarily to ~~the same period~~ a ~~year ago. The decrease was primarily driven by the realization of benefits~~foreign currency benefit from ~~prior period restructuring actions previously disclosed,~~a stronger U.S. dollar, partially offset by annual base salary increases and higher employee benefit costs ~~including~~related to medical expenditures. Marketing expenses decreased 20 basis points as a percentage of revenue, due to strategic investment decisions surrounding our global marketing initiatives. Professional fees increased 20 basis points as a percentage of revenue due to an increase in consulting services associated with infrastructure investments.

Operating Income and Operating Margin

Three months ended ~~November 30, 201~~8May 31, 2019compared to three months ended ~~November 30, 201~~7May 31, 2018
Operating income increased ~~12.8%~~25.7% to ~~$100.5~~$117.2 million for the three months ended ~~November 30, 2018~~May 31, 2019 compared to ~~$89.1~~$93.3 million in the prior year period. Operating income increased due to ~~increased~~ revenue growth, favorable foreign exchange rates which reduced the overall operating expense impact and mainly resulted in a reduction in compensation expense, as well as, decreased travel expenses, partially offset by ~~higher data costs, bad debt expense,~~an increase in computer-related ~~expenses and employee compensation costs, including stock-based compensation.~~expenses. Operating margin increased to ~~28.6%~~32.2% during the ~~first~~third quarter of fiscal 2019 compared to ~~27.1%~~27.4% in the prior year period. The increase in operating margin on a year over year basis was primarily due to revenue growth outpacing the growth in operating expenses, ~~which related mainly to an increase in data costs, bad debt expense, and computer-related expenses, partially offset by~~ a reduction in employee compensation, ~~including stock-based~~travel expenses, and contractor-related expenses, partially offset by higher computer-related expenses and foreign currency exchange losses on hedging activities, when expressed as a percentage of revenue.

Nine months ended May 31, 2019compared toninemonths endedMay 31, 2018
Operating income increased 17.5% to $326.5 million for the nine months ended May 31, 2019 compared to $277.8 million in the prior year period. Operating income increased due to revenue growth, favorable foreign exchange rates, a reduction in contractor fees and marketing expense, partially offset by an increase in computer-related expenses, bad debt expense, rent expense, professional fees and foreign currency exchange losses on hedging activities. Operating margin increased to 30.5% during the first nine months of fiscal 2019 compared to 27.7% in the prior year period. The increase in operating margin on a year over year basis was primarily due to revenue growth outpacing the growth in operating expenses, a reduction in compensation expense, travel expense and contractor fees, partially offset by higher computer-related expenses and bad debt expense, when expressed as a percentage of revenue.

O~~perating~~Operating Income by Segment

Three months ended November 30,

Three Months Ended May 31,

Nine Months Ended May 31,

(in thousands)

2018

2017

Change

2019

2018

Change

2019

2018

Change

U.S.
$ 43,841 $ 40,771 7.5 % $ 51,012 $ 37,987 34.3
%
$ 140,549 $ 117,285 19.8
%
Europe
39,089 32,970 18.6 % 44,793 37,380 19.8
%
127,130 107,344 18.4
%
Asia Pacific
17,609 15,357 14.7 % 21,435 17,898 19.8
%
58,788 53,219 10.5
%
Total Operating Income
$ 100,539 $ 89,098 12.8 % $ 117,240 $ 93,265 25.7
%
$ 326,467 $ 277,848 17.5
%
Our operating segments are aligned with how we manage the business, the demographic markets we serve, and how the chief operating decision making group ~~(“CODMG”~~("CODMG") assesses performance. Our internal financial reporting structure is based on three reportable segments, the U.S., Europe and Asia Pacific, which we believe helps us better manage the business and view the markets we serve. Sales, consulting, data collection, product development and software engineering are the primary functional groups within each segment. Each segment records compensation expense ~~including~~(including stock-based ~~compensation,~~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 our 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 centers of excellence, located in India and the Philippines, primarily focus on content collection that benefit all our segments. The expenses incurred at these locations are allocated to each segment based on a percentage of revenue.

~~Thre~~eThree months ended ~~November 30, 201~~8May 31, 2019compared to three months ended ~~November 30~~~~, 201~~7May 31, 2018
U.S. operating income increased ~~7.5%~~34.3% to ~~$43.8~~$51.0 million during the three months ended ~~November 30, 2018~~May 31, 2019 compared to ~~$40.8~~$38.0 million in the same period a year ago. The increase in U.S. operating income was primarily due to revenue growth of ~~6.4% and~~7.9%, a reduction into compensation expense and travel expense, partially offset by ~~increased data and~~an increase in computer-related expenses. Employee compensation decreased primarily due to a net reduction in headcount of 5.2% over the ~~realization of benefits from restructuring actions taken in the prior year,~~past 12 months, partially offset by annual base salary ~~increases and higher employee benefit costs including medical expenditures. Data costs increased~~increases. Travel expenses decreased due to ~~increased spend in variable data costs to drive revenue growth.~~a focus on cost discipline measures. Computer-related expenses ~~which includes depreciation, maintenance, software and other fees,~~ increased year over year primarily due to increased costs from cloud-based hosting and licensed software arrangements.

European operating income increased ~~18.6%~~19.8% to ~~$39.1~~$44.8 million during the three months ended ~~November 30, 2018~~May 31, 2019 compared to ~~$33.0~~$37.4 million in the same period a year ago. The increase in European operating income was primarily due to revenue growth of ~~6.6% outpacing the growth of~~3.7% and an overall reduction in operating expenses ~~which~~driven mainly by a decrease in employee compensation expense and travel expenses, partially offset by foreign currency exchange losses on hedging activities. Employee compensation decreased primarily due to a foreign currency benefit from a stronger U.S. dollar, partially offset by a net headcount increase of 1.1% over the past 12 months. Travel expenses decreased due to a focus on cost discipline measures. The foreign currency exchange losses on hedging activities were ~~comparable on a year over year basis.~~due to losses from the Euro and British Pound Sterling hedge during the three months ended May 31, 2019.

Asia Pacific operating income increased ~~14.7%~~19.8% to ~~$17.6~~$21.4 million during the three months ended ~~November 30, 2018~~May 31, 2019, compared to ~~$15.4~~$17.9 million in the same period a year ago. The increase in the Asia Pacific operating income was mainly due to revenue growth of ~~10.6% and benefits from a stronger U.S. dollar,~~14.1%, partially offset by an increase in ~~employee compensation.~~compensation expense, occupancy costs, and a reduction in foreign currency exchange gains on hedging activities compared to the prior year period. Employee compensation ~~was higher year over year,~~increased as a result of a ~~3.8%~~5.0% increase in our Asia Pacific workforce in the last 12 ~~months. The impact of~~months, partially offset by a foreign currency benefit from a stronger U.S. dollar. Occupancy costs increased due to the expansion of office space in India.

Nine months ended May 31, 2019compared toninemonths endedMay 31, 2018
U.S. operating income increased 19.8% to $140.5 million during the nine months ended May 31, 2019, compared to $117.3 million in the same period a year ago. The increase in U.S. operating income was primarily due to revenue growth of 7.1% and a reduction in marketing expense, partially offset by an increase in computer-related expenses, data costs, bad debt expense, professional fees, and occupancy expense. Marketing costs decreased due to strategic investment decisions surrounding our global marketing initiatives. Computer-related expenses increased year over year primarily due to increased costs from cloud-based hosting and licensed software arrangements. Data costs increased mainly due to increased spend in variable data costs to drive revenue growth. The increase in professional fees was mainly driven by increased software implementation support. Occupancy costs increased primarily related to leasing the new corporate headquarters space in Norwalk, Connecticut.
European operating income increased 18.4% to $127.1 million during the nine months ended May 31, 2019 compared to $107.3 million in the same period a year ago. The increase in European operating income was primarily due to revenue growth of 4.3% and a decrease in compensation expenses, partially offset by foreign currency exchange losses on hedging activities from the Euro and British Pound Sterling hedge. Compensation expense decreased primarily due to foreign currency benefit from a stronger U.S. dollar, partially offset by a net headcount increase of 1.1% over the past 12 months.
Asia Pacific operating income increased 10.5% to $58.8 million during the nine months ended May 31, 2019, compared to $53.2 million in the same period a year ago. The increase in the Asia Pacific operating income was primarily due to revenue growth of 11.0%, partially offset by ~~$1.6 million for~~an increase in employee compensation and occupancy costs. Employee compensation increased due to net headcount growth of 5.0% over the ~~first quarter~~past 12 months, with the increase primarily focused in the centers of ~~fiscal 2019.~~excellence, partially offset by a foreign currency benefit from a stronger U.S. dollar. Occupancy costs increased due to the expansion of office space in India and the Philippines.

Income Taxes, Net Income and Diluted Earnings per Share

Three months ended November 30,

Three Months Ended May 31,

Nine Months Ended May 31,

(in thousands)

2018

2017

Change

(in thousands, except for per share data)

2019

2018

Change

2019

2018

Change

Provision for income taxes
$ 11,647 $ 15,800 (26.3 )% $ 21,119 $ 14,765 43.0
%
$ 52,413 $ 69,641 (24.7
)%
Net income
$ 84,296 $ 70,379 19.8 % $ 92,265 $ 74,746 23.4
%
$ 261,263 $ 198,262 31.8
%
Diluted earnings per common share
$ 2.17 $ 1.77 22.6 % $ 2.37 $ 1.91 24.1
%
$ 6.73 $ 5.01 34.3
%
Income Taxes
Three months ended ~~November 30, 201~~8May 31, 2019compared to three months ended ~~November 30, 201~~7May 31, 2018
For the three months ended ~~November 30, 2018,~~May 31, 2019, the provision for income taxes was ~~$11.6~~$21.1 million, an increase of 43.0% from the same period a year ago. The provision for the three months ended May 31, 2019 included a $4.5 million income tax expense from finalizing prior years’ tax returns and other discrete items.
Nine months ended May 31, 2019compared tonine months endedMay 31, 2018
For the nine months ended May 31, 2019, the provision for income taxes was $52.4 million, a decrease of ~~26.3%~~24.7% from the same period a year ago. The decrease was mainly ~~attributable~~due to the enactment of the TCJA. The TCJA imposed a ~~lower effective~~one-time transition tax expense, which resulted in a $23.2 million impact to the income tax provision for the nine months ended May 31, 2018, without a comparable impact for nine months ended May 31, 2019. This transition tax impact was revised, resulting in a net benefit of $3.4 million for the nine months ended May 31, 2019. The TCJA also lowered the statutory U.S corporate income tax rate, ~~for~~which applied to the first ~~quarter~~nine months of fiscal 2019 compared to the ~~same period~~lower tax rate being phased in for the prior year comparable period. The first nine months of fiscal 2018 included a ~~year ago primarily~~remeasurement of our net U.S. deferred tax position resulting in a non-recurring tax charge of $2.2 million due to the reduction ofin the ~~U.S. corporate~~statutory federal rate. The decrease in the income tax ~~rate~~provision was partially offset by a $4.5 million income tax expense from ~~35% to 21%, effective January 1, 2018. The first quarter of fiscal 2019 also included a $2.3 million beneficial revision to~~finalizing prior years’ tax returns and other discrete items for the one-time transition tax on accumulated earnings and profits of foreign subsidiaries, initially recorded during the third quarter of fiscal 2018, and a higher R&D tax benefit compared to the prior year period.nine months ended May 31, 2019.
Net Income and Diluted Earnings per Share
Three monthsended ~~November 30, 201~~8May 31, 2019compared to three months ended ~~November 30, 201~~7May 31, 2018
Net income increased ~~19.8%~~23.4% to ~~$84.3~~$92.3 million and diluted earnings per share ~~(“EPS”~~("EPS") increased ~~22.6%~~24.1% to ~~$2.17~~$2.37 for the three months ended ~~November 30, 2018,~~May 31, 2019, compared to the same period a year ago. Net income and diluted EPS increased primarily due to revenue growth outpacing the growth of operating expenses on a year over year basis, partially offset by an increase in the income tax provision. The increase in EPS was also partially offset by the impact from stock option exercises.

Nine months ended May 31, 2019compared to ninemonths ended May 31, 2018
Net income increased 31.8% to $261.3 million and diluted EPS increased 34.3% to $6.73 for the nine months ended May 31, 2019, compared to the nine months ended May 31, 2018. Net income and diluted EPS increased due to higher ~~revenue from strong performances across our segments and workflow solutions,~~operating income, a reduction in the income tax provision primarily due to ~~a decrease in our effective tax rate associated with~~ the TCJA reform, partially offset by ~~higher data costs, bad debt expense, employee compensation expense, including stock-based compensation, and higher~~an increase in interest expense associated with our outstanding debt. Diluted EPS also benefited from a ~~$0.9~~0.7 million share reduction in our diluted weighted average shares outstanding, compared to the same period a year ago, mainly due to share ~~repurchases.~~repurchases, partially offset by the impact from stock option exercises.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures including organic revenue, adjusted operating margin, adjusted net income and adjusted diluted earnings per share. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are show in the tables below. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently that we do, limiting the usefulness of those measures for comparative purposes.

Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures and the information they provide are useful in viewing our performance using the same tools that management uses to gauge progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.

The table below provides an unaudited reconciliation of revenues to organic revenues.

Three Months Ended
November 30,

Three Months Ended May 31,

(In thousands)

2018

2017

Change

2019

2018

Change

Revenues
$ 351,640 $ 329,141 6.8 % $ 364,533 $ 339,911 7.2
%
Deferred revenue fair value adjustment⁽¹⁾
1,350 2,719 1,274 1,488
Currency impact (foreign currency movements)⁽²⁾
140 —
Currency impact
452 —
Organic revenues
$ 353,130 $ 331,860 6.4 % $ 366,259 $ 341,399 7.3
%

⁽¹⁾
Deferred revenue fair value adjustments from purchase accounting.

⁽²⁾
~~The impact from foreign currency movements over the past 12 months.~~

The table below provides an unaudited reconciliation of operating income, operating margin, net income and diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS. ~~Details may not sum to total due to rounding.~~

Three Months Ended
November 30,

Three Months Ended May 31,

(In thousands, except per share data)
2018⁽¹⁾ 2017⁽²⁾
Change

2019⁽¹⁾

2018⁽²⁾

Change

Operating income
$ 100,539 $ 89,098 12.8 % $ 117,240 $ 93,265 25.7
%
Intangible asset amortization
5,893 6,158 5,928 6,215
Deferred revenue fair value adjustment
1,350 2,719 1,274 1,488
Other items
3,484 7,146 (1,647
)
4,713
Adjusted operating income
$ 111,266 $ 105,121 5.8 % $ 122,795 $ 105,681 16.2
%
Adjusted operating margin
31.5 % 31.7 % 34.0
%
31.0
%

Net income
$ 84,296 $ 70,379 19.8 % $ 92,265 $ 74,746 23.4
%
Intangible asset amortization⁽³⁾
4,792 4,625 4,797 5,190
Deferred revenue fair value adjustment⁽⁴⁾
1,098 2,042 1,031 1,242
Other items⁽⁵⁾
2,832 5,367 (1,333
)
3,935
Income tax items
(1,709 ) (1,547 ) 5,296 —
Adjusted net income
$ 91,309 $ 80,866 12.9 % $ 102,056 $ 85,113 19.9
%

Diluted earnings per common share
$ 2.17 $ 1.77 22.6 % $ 2.37 $ 1.91 24.1
%
Intangible asset amortization
0.12 0.12 0.12 0.13
Deferred revenue fair value adjustment
0.03 0.05 0.02 0.03
Other items
0.07 0.14 (0.03
)
0.11
Income tax items
(0.04 ) (0.04 ) 0.14 —
Adjusted diluted earnings per common share
$ 2.35 $ 2.04 15.2 % $ 2.62 $ 2.18 20.2
%
Weighted average common shares (Diluted)
38,809 39,680 38,993 39,104

⁽¹⁾
Operating income, net income and diluted EPS in the ~~first~~ thirdquarter of fiscal 2019 were adjusted to exclude (i) intangible asset amortization (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items includingnon-core transaction related revenue,severance, stock-based compensation ~~expense~~ acceleration, transformation activities, and ~~professional fee~~s ~~related to infrastructure investments.~~ ~~Net income and diluted EPS in the first quarter of fiscal 2019 were also adjusted to exclude~~ ~~income tax benefits primarily related to the TCJA~~.occupancy costs.

⁽²⁾
Operating income, net income and diluted EPS in the ~~first~~ thirdquarter of fiscal 2018 were adjusted to exclude (i) intangible asset amortization (ii) deferred revenue fair value adjustments from purchase accounting, and (iii) other items including ~~restructuring. Net income~~severance, stock-based compensation acceleration,restructuringactions and ~~diluted EPS in the first quarter of fiscal 2018 were also adjusted to exclude~~ ~~income tax benefits primarily from settlements with taxing authorities~~.legal matters.

⁽³⁾
The intangible asset amortization was recorded net of a tax impact of $$1.1~~1.1~~million in the ~~first~~ thirdquarter of fiscal 2019 compared to $$1.0~~1.6~~million for the ~~first~~ thirdquarter of fiscal 2018.

⁽⁴⁾
The deferred revenue fair value adjustment was recorded net of a tax impact of $$0.2~~0.3~~million in both the ~~first~~ thirdquarter of fiscal 2019 ~~compared to $~~~~0.7~~ ~~million for the first quarter of fiscal~~and 2018.

⁽⁵⁾
The other items were recorded net of a tax impact of $$0.3~~0.7~~millionforthethirdquarter offiscal 2019compared to $0.8 million for the ~~first~~third quarter of ~~fiscal 201~~9 ~~compared with $~~~~1.8~~ ~~million for~~ ~~the first quarter of~~ ~~fiscal 201~~8.2018.

Liquidity

The table below, for the periods indicated, provides selected cash flow information:

Three months ended November 30,

Nine Months Ended May 31,

(in thousands)

2018

2017

2019

2018

Net cash provided by operating activities
$ 46,320 $ 61,143 $ 305,324 $ 279,342
Capital expenditures ⁽¹⁾
(9,526 ) (5,912 ) (32,906
)
(18,375
)
Free cash flow ⁽²⁾
$ 36,794 $ 55,231 $ 272,418 $ 260,967
Net cash used in investing activities(1)
$ (7,309 ) $ (5,445 ) $ (29,543
)
$ (18,111
)
Net cash used in financing activities
$ (75,005 ) $ (30,814 ) $ (156,038
)
$ (241,159
)
Cash and cash equivalents at end of period
$ 170,378 $ 221,933 $ 323,960 $ 213,061

⁽¹⁾
~~Included~~Capital expenditures are included in net cash used in investing activities during each fiscal period reported.

⁽²⁾
Free cash flow is~~define~~defineddas cash provided by operating activities, which includes the cash cost for taxes and changes in working capital, less capital expenditures.

Cash and cash equivalents aggregated to ~~$170.4~~$324.0 million, or ~~12.5%~~21.4% of our total assets as of ~~November 30, 2018,~~May 31, 2019, compared to $208.6 million, or 14.7% of our total assets as of August 31, 2018. Our ~~Cash~~cash and cash equivalents ~~decreased $38.2~~increased $115.3 million during the first ~~quarter~~nine months of fiscal 2019 primarily due to cash ~~outflows~~inflows related to ~~$64.7~~$575.0 million in proceeds from long-term debt, $305.3 million of net cash provided by operating activities, $78.9 million in proceeds from the exercise of employee stock options and $3.4 million net proceeds from equity investments. These cash inflows were partially offset by cash outflows primarily related to $575.0 million used in the repayment of debt, $158.3 million in share repurchases (which ~~included $60.4~~includes $152.1 million under the existing share repurchase program and ~~$4.3~~$6.2 million of shares ~~repurchased~~purchased from employees to cover their cost of taxes upon vesting of restricted stock), ~~$24.3~~$75.8 million in dividend payments, ~~$9.5~~$32.9 million of capital expenditures and ~~$2.3~~a $4.4 million reduction from the effects of foreign currency ~~fluctuation. These~~fluctuation on cash outflows were partially offset by cash inflows related to $46.3 million of net cash provided by operating activities, $14.0 million in proceeds from the exercise of employee stock options and $2.2 million net proceeds from equity investments.balances.

Net cash used in investing activities was ~~$7.3~~$29.5 million in the first ~~three~~nine months of fiscal 2019, representing a ~~$1.9~~$11.4 million increase from the same period a year ago. This increase was due primarily to $14.5 million of higher capital expenditures, ~~of $3.6 million,~~ offset by $3.1 million net proceeds from equity investments (net of purchases) ~~of $1.8 million.~~.

Net cash used in financing activities was ~~$75.0~~$156.0 million in the first ~~three~~nine months of fiscal 2019, representing a ~~$44.2~~$85.1 million ~~increase~~decrease in cash used in financing ~~activities.~~activities from the same period a year ago. The ~~increase~~decrease in cash used in financing activities was primarily due to ~~an increase~~$575.0 million of borrowings under our 2019 Credit Agreement, a $77.6 million decrease in share ~~repurchases of $33.0~~purchases, $21.4 million ~~a decrease~~increase in proceeds from employee stock plans, partially offset by a $575.0 million retirement of ~~$8.2~~the 2017 Credit Agreement, a $10.7 million ~~and an~~ increase in dividend ~~payments~~payments. Refer to the Capital Resources section of ~~$2.6 million.~~the MD&A for a discussion on our Long-term debt borrowings.

We expect that for at least the next 12 months, our operating expenses will continue to constitute a significant use of cash. As of ~~November 30, 2018,~~May 31, 2019, our total Cash and cash equivalents worldwide was ~~$170.4~~$324.0 million with ~~$574.8~~$574.1 million in outstanding borrowings (net of ~~$0.2~~$0.9 million of unamortized debt issuance costs). ~~Approximately $40.1 million of our~~The total available ~~Cash~~cash and cash equivalents is held in bank accounts located within the U.S.~~, $93.7~~ is $127.0 million, in Europe includes $151.0 million (predominantly within the UK, France, and Germany) and the remaining ~~$36.6~~$46.0 million is held in the Asia Pacific segment. We believe our liquidity (including cash on hand, cash from operating activities and other cash flows that we expect to generate) within each geographic segment will be sufficient to meet our short-term and long-term operating requirements, as they occur, including working capital needs, capital expenditures, dividend payments, stock repurchases, growth objectives and other financing activities. In addition, we expect existing foreign cash, cash equivalents and cash flows from operations to continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as capital expenditures, for at least the next 12 months, and thereafter, for the foreseeable future.

Free cash flow generated in the ~~three~~nine months ended ~~November 30, 2018~~May 31, 2019 was ~~$36.8~~$272.4 million, ~~a decrease~~an increase of ~~33.4%~~4.4% compared to a year ago. Free cash flow is the result of ~~$84.3~~$305.3 million of net ~~income, $22.1 million of non-cash items, decreased~~cash provided by ~~both $60.1 million of working capital changes and $9.5~~operating activities, partially offset by $32.9 million in capital expenditures. The year over year ~~decrease~~increase to free cash flow was primarily driven by higher net ~~working capital balances and an increase in capital expenditures,~~income, partially offset by ~~an increase to net income. Net working~~higher capital ~~balances~~requirements for the build-out of new office space for some of our locations and increased ~~year over year due to~~investments in technology, and the timing of ~~both supplier payments and payroll, and an increase in our days sales outstanding (“DSO”) to 42 days compared to 40 days in the same period a year ago.~~tax payments.

C~~apital~~Capital Resources
Capital Expenditures

Capital expenditures inwere $11.4 million during the ~~first~~third quarter of fiscal 2019, ~~were $9.5 million,~~ compared ~~with $5.9~~to $6.0 million a year ago. Capital expenditures of ~~$6.4~~$5.6 million, or ~~67%~~49%, were primarily related to corporate infrastructure investments, additional server equipment for our data centers located in New Jersey and Virginia, as well as computers and peripherals for new office space primarily in India. The remainder of our capital expenditures was primarily for the ~~build out~~build-out of office space, with ~~$2.9~~$4.1 million related to the new corporate headquarters in Norwalk, Connecticut and $1.6 million related to new office space in India.
Capital expenditures were $32.9 million during the first nine months of fiscal 2019, compared with $18.4 million in the same period a year ago. Approximately $19.3 million, or 59%, of capital expenditures were primarily related to corporate infrastructure investments, additional server equipment for our data centers located in New Jersey and Virginia, as well as computers and peripherals for new office space primarily in India. The remainder of our capital expenditures was primarily for the build-out of office space, with $5.7 million related to India, $5.5 million related to the new corporate headquarters in Norwalk, Connecticut, and $1.9 million related to the Philippines.

Capital Needs

Long-Term Debt
2019 Credit Agreement
On March ~~17, 2017, we~~29, 2019, the Company entered into athe 2019 Credit Agreement ~~(the “2017~~("the 2019 Credit ~~Agreement”~~Agreement") between FactSet, as the borrower, and PNC Bank, National Association ~~(“PNC”~~("PNC"), as the administrative agent and lender. The ~~2017~~2019 Credit Agreement provides for ~~an unsecured $575.0~~a $750.0 million revolving credit facility ~~(the “2017~~("the 2019 Revolving Credit ~~Facility”~~Facility"). WeFactSet may request borrowings under the ~~2017~~2019 Revolving Credit Facility until its maturity date of March ~~17, 2020.~~29, 2024. The ~~2017~~2019 Credit Agreement also allows ~~us,~~FactSet, subject to certain requirements, to arrange for additional borrowings with PNC for an aggregate amount of up to ~~$225.0~~$500.0 million, provided that any such request for additional borrowings must be in a minimum amount of $25.0 million. ~~At our option, a borrowing may be in the form of a base rate loan or a LIBOR rate loan.~~
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 ~~1.00%~~0.875%. FactSet borrowed $575.0 million of the available $750.0 million provided by the 2019 Revolving Credit Facility. Interest on the loan outstanding is payable quarterly, in arrears, and on the maturity date. ~~There are no prepayment penalties if we elect to prepay the outstanding loan amounts prior to the scheduled maturity date.~~ The principal balance is payable in full on the maturity date. 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.

~~In conjunction with our entrance into~~On March 29, 2019 the borrowings from the 2019 Credit Agreement were used to retire all outstanding debt under the previous 2017 Credit Agreement ~~we borrowed~~between FactSet, as the borrower, and PNC as the lender. The total principal amount of the debt outstanding at the time of retirement was $575.0 million ~~in the form of a LIBOR rate loan under the 2017 Revolving Credit Facility. Proceeds from the 2017 Revolving Credit Facility~~and there were ~~also used to fund our acquisition of BISAM.~~no prepayment penalties.

All outstanding loan amounts are reported as Long-term debt within the consolidated balance sheet ~~presented net~~at May 31, 2019. The fair value of ~~related loan origination fees at November 30, 2018. The loan origination fees are amortized into~~our long-term debt was $575.0 million as of May 31, 2019, which we believe approximates carrying amount as the terms and interest rates approximate market rates given its floating interest rate basis. For the three months ended May 31, 2019 and 2018, the Company recorded interest expense ~~over~~of $5.2 million and $4.3 million on its outstanding debt amounts, respectively. For the ~~term~~nine months ended May 31, 2019 and 2018, the Company recorded interest expense of ~~the loan using the effective interest method.~~$15.1 million and $11.3 million on its outstanding debt amounts, respectively. During the three months ended November 30, 2018 and 2017, we recorded interest expense of $4.7 million and $3.4 million on our outstanding debt amounts, respectively. As of November 30, 2018, no commitment fee was owed by us since we borrowed the full amount under the 2017 Credit Agreement.
~~In fiscal 2017,~~May 31, 2019, FactSet incurred approximately ~~$0.4~~$0.9 million in ~~legal~~debt issuance costs related to ~~draft and review~~ the ~~2017~~2019 Credit Agreement. These costs were capitalized as loan origination fees and are amortized into interest expense ratably over the term of the ~~loan using the effective interest method.~~2019 Credit Agreement.

The ~~2017~~2019 Credit Agreement ~~contained~~contains covenants and requirements restricting certain FactSet activities, which are usual and customary for this type of loan.
In addition, the ~~2017~~2019 Credit Agreement ~~required~~requires that weFactSet 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. ~~We were~~The Company was in compliance with all the covenants ofand requirements within the ~~2017~~2019 Credit Agreement as of ~~November 30, 2018 and August~~May 31, ~~2018.~~2019.

As of ~~November 30, 2018,~~May 31, 2019, the fair value of our long-term debt was $575.0 million, which we believe ~~approximated the~~approximates carrying amount as the terms and interest rates approximate market rates given its floating interest rate basis.

Letters of Credit
From time to time, we are required to obtain letters of credit in the ordinary course of business. Approximately ~~$1.1~~$3.3 million of standby letters of credit have been issued in connection with our leased office spaces as of ~~November 30, 2018.~~May 31, 2019. These standby letters of credit contain covenants that, among other things, require us to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of ~~November 30, 2018,~~May 31, 2019, and August 31, 2018, we were in compliance with all covenants contained in the standby letters of credit.

Foreign Currency

Foreign Currency Exposure
Certain ~~wholly owned~~wholly-owned subsidiaries within the ~~European~~Europe and Asia Pacific segments operate under a functional currency different from the U.S. dollar. 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 exchange rates for revenue and expenses. Translation gains and losses that arise from translating assets, liabilities, revenue and expenses of foreign operations are recorded in accumulated other comprehensive (loss) income as a component of stockholders’ equity.

Over the next 12 months, our non-U.S. dollar denominated revenue expected to be recognized are estimated to be ~~$91.3~~$88.7 million, while our non-U.S. dollar denominated expenses are estimated to be ~~$328.6~~$319.8 million, which translates into a net foreign currency exposure of ~~$237.3~~$231.1 million. Our foreign currency exchange exposure is related to our operating expense base in countries outside the U.S., where ~~75%~~approximately 76% of our employees were located as of ~~November 30, 2018.~~May 31, 2019. During the ~~first~~ three and nine months ~~of fiscal~~ended May 31, 2019, foreign currency movements increased operating income by ~~$1.7~~$3.0 million ~~compared to $0.1~~and $8.6 million, ~~a year ago.~~respectively.

Foreign Currency Hedges

As of ~~November 30, 2018,~~May 31, 2019, we maintained the following foreign currency forward contracts to hedge ~~our~~its exposures:

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

●•
Indian Rupee – foreign currency forward contracts to hedge approximately 75% of ~~our~~its Indian Rupee exposure through the ~~third~~fourth quarter of fiscal 2019, 50% of ~~our~~its exposure from the ~~fourth~~first quarter of fiscal ~~2019~~2020 through the ~~end of the second~~third quarter of fiscal 2020, and 25% of ~~our~~its exposure ~~from the third quarter of fiscal 2020 through the end of~~during the fourth quarter of fiscal 2020.

●•
Euro – foreign currency forward contracts to hedge approximately ~~50%~~75% of ~~our~~its Euro exposure through the first quarter of fiscal 2020, 50% of its exposure during the second quarter of fiscal 2020, and 25% of its exposure during the third quarter of fiscal ~~2019.~~2020.

●•
British Pound Sterling – foreign currency forward contracts to hedge approximately 50% of ~~our~~its British Pound Sterling exposure through the third quarter of fiscal ~~2019.~~2020.

As of ~~November 30, 2018,~~May 31, 2019, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos with U.S. dollars was ~~PHP 2.4 billion,~~₱1.7 billion. The gross notional value of foreign currency forward contracts to purchase Indian Rupees with U.S. dollars was ~~Rs. 3.0 billion,~~₨1.8 billion. The gross notional value of foreign currency forward contracts to purchase ~~Euros with~~ U.S. dollars with Euros was ~~€ 14.3 million and~~€39.3 million. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with British Pound Sterling ~~with U.S. dollars~~ was ~~£ 9.1~~£20.8 million.

There were no other outstanding foreign currency forward contracts as of ~~November 30, 2018.~~May 31, 2019. A loss on derivatives of ~~$0.4~~$0.6 million was recorded into operating income ~~during~~for the ~~first quarter of fiscal~~three months ended May 31, 2019, compared to a gain on derivatives of ~~$0.8~~$1.0 million in the same period a year ago. For the nine months ended May 31, 2019, a loss on derivatives of $1.4 million was recorded into operating income, compared to a gain on derivatives of $2.6 million in the prior year period.

Off-Balance Sheet Arrangements

At ~~November 30, 2018~~May 31, 2019 and August 31, 2018, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing, other debt arrangements, or other contractually limited purposes.

Share Repurchase Program

Repurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions. In the ~~first~~third quarter of fiscal 2019, we repurchased ~~275,000~~175,000 shares for ~~$60.4~~$47.6 million under our existing share repurchase ~~program.~~program compared to 620,000 shares for $122.0 million in the same period a year ago. During the first nine months of fiscal 2019, we repurchased 664,945 shares for $152.1 million compared to 1,204,920 shares for $234.8 million in the prior year comparable period. Over the last 12 months, we have returned ~~$429.0~~$326.5 million to stockholders in the form of share repurchases and dividends. As of ~~November 30, 2018, $181.3~~May 31, 2019, $89.6 million is available for future share repurchases under the existing share repurchase program.
On June 24, 2019, the Board of Directors of FactSet approved a $210.0 million expansion of the existing share repurchase program. Subsequent to this expansion, $299.6 million is available for future repurchases.

Contractual Obligations

Fluctuations in our operating results, the degree of success of our accounts receivable collection efforts, the timing of tax and other payments, as well as necessary capital expenditures to support growth of our operations will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. As of August 31, 2018, we had total purchase commitments of $79.0 million. There were no material changes in our purchase commitments during the first ~~three~~nine months of fiscal 2019.
On February 14, 2018, we entered a new lease to relocate our corporate headquarters to 45 Glover Avenue in Norwalk, Connecticut. The new location will comprise approximately 173,000 square feet of office space. We will take possession of the newly leased property on or around January 1, 2019 for fit-out purposes. We will continue to occupy our existing headquarters space until the new headquarters property is ready for occupancy, currently estimated to be in the second quarter of fiscal 2020.

Including new lease agreements executed during fiscal 2019, our worldwide leased office space isincreased to approximately ~~1,750,000~~1,846,000 square feet as of ~~November 30, 2018, remaining constant since~~May 31, 2019, up 96,000 square feet, or 5.5% from August 31, 2018. Future minimum commitments for our operating leases in place as of ~~November 30, 2018~~May 31, 2019 totaled ~~$397.5~~$410.8 million, ~~which is comparable to~~an increase of $3.1 million from $407.8 million as of August 31, ~~2018.~~2018, due to additional office space in India, partially offset by consolidating or not renewing office space in the UK and several locations in the U.S.

As disclosed earlier in the Capital Resources section of this MD&A, weFactSet entered into the ~~2017~~2019 Credit Agreement on March ~~17, 2017~~29, 2019 and borrowed $575.0 million. The loan balance of $575.0 million remains outstanding as of May 31, 2019. In conjunction with the 2019 Credit Agreement, we retired our outstanding loan amount of $575.0 million under the 2017 Credit Agreement. Refer to the Capital Resources section of the MD&A for a discussion on our Long-term debt borrowings.

There were no other significant changes to our contractual obligations during the first ~~three~~nine months of fiscal 2019.

D~~ividends~~Dividends

On ~~November 13, 2018,~~May 17, 2019, our Board of Directors approved a regular quarterly dividend of ~~$0.64~~$0.72 per share. The $0.08 per share or 12.5% increase marked our 14th consecutive year we have increased dividends, highlighting our continued commitment to returning value to shareholders. The cash dividend of ~~$24.4~~$27.5 million was paid on ~~December~~June 18, ~~2018,~~2019, to common stockholders of record at the close of business on ~~November 30, 2018.~~May 31, 2019. Future cash dividends will depend on our earnings, capital requirements, financial condition and other factors considered relevant by us and is subject to final determination by our Board of Directors.

SignificantAccounting Policies andCritical Accounting~~Estimate~~sEstimates

We describe our significant accounting policies in Note 3, Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2018. The accounting policies used in preparing our consolidated financial statements for the first nine months of fiscal 2019 are applied consistently with those described in our Annual Report on Form 10-K for the fiscal year ended August 31, 2018, with the exception of the accounting guidance adopted in the first quarter of fiscal 2019 related to revenue recognition. Please see Note 4, Revenue Recognition, of this report for further details on the adoption of the new revenue recognition standard.

We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended August 31, 2018. There were no significant changes in our accounting policies or critical accounting estimates during the first ~~three~~nine months of fiscal 2019.

New Accounting Pronouncements

See Note 3, Recent Accounting Pronouncements, in the notes to the consolidated financial statements for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include herein by reference.

Market Trends

In the ordinary course of business, we are exposed to financial risks involving the volatility of equity markets as well as foreign currency and interest rate fluctuations.

Shift from Active to Passive Investment Management
Approximately ~~83.9%~~84.2% of our ASV is derived from our investment management clients. The prosperity of these clients is tied to equity assets under management. An equity market decline not only depresses assets under management but also could cause a significant increase in redemption requests to move money out of equities and into other asset classes. Moreover, a shift from active investment management to passive investment management can result in lower demand for our services. Our investment banking clients that provide M&A advisory work, capital markets services and equity research, account for approximately ~~16.1%~~15.8% of our ASV. A significant portion of this revenue relates to services deployed by large, bulge-bracket banks. Credit continues to impact many of the large banking clients due to the amount of leverage deployed in past operations. Our clients could also encounter similar issues. A lack of confidence in the global banking system could cause declines in M&A funded by debt. Additional uncertainty, consolidation and business failures in the global investment banking sector could adversely affect our financial results and future growth. Regardless, the size of banks in general is shrinking as they deleverage their balance sheets and adjust their expense bases to future revenue opportunities. Our revenue may decline if banks, including those involved in merger activity, significantly reduce headcount in the areas of corporate M&A, capital markets and equity research to compensate for the challenges faced by other departments.

Brexit
~~Volatility is expected to continue~~On June 23, 2016, voters in the ~~short term as the UK negotiates its exit~~United Kingdom approved an advisory referendum to withdraw from the European ~~Union. The initial UK economic performance has been stronger than originally expected as~~Union ("Brexit"). On March 29, 2017, the ~~timeframe from the initial vote increases. Additionally, increased European confidence and UK consumer spending has contributed to the recovery~~United Kingdom invoked Article 50 of the ~~economic outlook. The negotiation process is continuing, including~~Lisbon Treaty, formally starting negotiations with the ~~latest milestone of the UK~~European Union. United Kingdom and European Union ~~developing a draft of~~leaders have now backed an extension until October 31, 2019, to provide more time to complete negotiations on formal withdrawal and transitional arrangements. The political and economic instability created by the ~~legal text for~~Brexit vote has caused, and may continue to cause, significant volatility in global financial markets. At this time, we cannot predict the ~~transition deal. Any~~ impact ~~from~~that Brexit will have on usour business as it will depend, in part, on the longer-term outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results. While we evaluate our own risks and uncertainty related to Brexit, we will continue to partner with our clients to help them navigate the fluctuating international markets.

MiFID II
~~In the European Union, the new version~~MiFID originally became effective in 2007 and was enhanced through adoption of ~~the Markets in Financial Instruments Directive, also known as “MiFID II”,~~MiFID II, which became effective in January 2018. The main purpose of this initiative was to ensure fairer, safe and more efficient markets and facilitate greater transparency for all participants. The Research workflow is one area where both buy-side and sell-side clients have seen and will continue to see significant change requirements as a result MiFID II ~~inducement rules. The goal~~built upon many of the ~~new legislative framework~~initiatives introduced through MiFID and is intended to ~~strengthen investor protection and~~help improve the functioning of ~~financial markets, making them more efficient, resilient and transparent. New reporting requirements and tests will increase~~ the ~~amount~~European Union single market by achieving a greater consistency of ~~information available and reduce~~regulatory standards. We continue to monitor the ~~use~~impact in the European Union of ~~dark pools and OTC trading.~~ MiFID II ~~requirements have meant pricing models~~on the investment process and ~~business practices have had to adapt significantly. We will continue to evaluate our own risks and uncertainty related to~~trade lifecycle, as well as any impact of MiFID II on non-European Union countries, and ~~partner~~plan to work with our clients to ~~help them~~ navigate ~~these new rules. However, recently we have noticed a substantial interest in our Research workflow, which is part of~~ the ~~opportunity for us, but more importantly, allows our clients to leverage our technology solutions for~~ MiFID II ~~compliance.~~requirements.

Forward-Looking Factors

Forward-Looking Statements

In addition to current and historical information, this Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements based on management’s current expectations, estimates, forecast and projections about industries in which we operate and the beliefs and assumptions of management. All statements that address expectations, guidance, outlook or projections about the future, including statements about our strategy for growth, product development, revenue, future financial results, anticipated growth, market position, subscriptions, expected expenditures, trends in our business and financial results, are forward-looking statements. Forward-looking statements may be identified by words like ~~“expects,” “believes”~~"expects," "believes", ~~“anticipates,” “plans,” “intends,” “estimates”~~"anticipates," "plans," "intends," "estimates", ~~“projects,” “should,” “indicates,” “continues,” “may”~~"projects," "should," "indicates," "continues," "may" and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this Quarterly Report on Form 10-Q or in any of our other filings with the Securities and Exchange Commission, could cause results to differ materially from those stated. These factors include, but are not limited to: the ability to integrate newly acquired companies, clients and businesses; strains on resources as a result of growth, the volatility and stability of global securities markets, including declines in equity or fixed income returns impacting the buying power of investment management clients; the ability to hire and retain qualified personnel; the maintenance of our leading technological position and reputation; failure to maintain or improve our competitive position in the marketplace; fraudulent, misappropriation or unauthorized data access, including cyber-security and privacy breaches; failures or disruptions of telecommunications, data centers, network systems, facilities, or the Internet; uncertainty, consolidation and business failures in the global investment banking industry; the continued shift from active to passive investing, the negotiation of contract terms with vendors, data suppliers and landlords; the retention of clients and the attraction of new ones; the absence of U.S. or foreign governmental regulation restricting international business; the unfavorable resolution of tax assessments and legal proceedings; and legislative and regulatory changes in the environments in which we and our clients operate. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

We intend that all forward-looking statements we make will be subject to safe harbor protection of the federal securities laws as found in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These statements involve certain known and unknown risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those listed in this MD&A above and those listed in Part 1 Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August 31, 2018. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this Quarterly Report to reflect actual results or future events or circumstances.

Business Outlook

The following forward-looking statements reflect our expectations as of ~~September~~June 25, ~~2018.~~2019. Given the number of risk factors, uncertainties and assumptions discussed in Part 1 Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended August 31, 2018, actual results may differ materially. We do not intend to update our forward-looking statements until our next quarterly results announcement, other than in publicly available statements.

Fiscal ~~201~~20199 ~~Expectations~~:Expectations:

-–
Organic ASV plus professional services is now expected to increase in the range of ~~$75.0~~$70 million and ~~$90.0~~$75 million over fiscal 2018.

-–
GAAP ~~Revenues are~~revenue is now expected to be in the range of ~~$1.41~~$1.42 billion and ~~$1.45~~$1.44 billion.

-–
GAAP operating margin is now expected to be in the range of ~~29.0%~~30.0% and ~~30.0%~~30.5%.
–
Adjusted operating margin is now expected to be in the range of ~~31.5%~~32.5% and ~~32.5%~~33.0%.

-–
FactSet’s annual effective tax rate is now expected to be in the range of ~~17.5%~~16% and ~~18.5%, primarily as a result of the TCJA.~~16.5%.

-–
GAAP diluted EPS is now expected to be in the range of ~~$8.70~~$8.90 and ~~$8.90.~~$9.00. Adjusted diluted EPS is now expected to be in the range of ~~$9.45~~$9.80 and ~~$9.65.~~$9.90. The ~~midpoint~~mid-point of this guidance represents a ~~12%~~15% growth over the prior year.

Both GAAP operating margin and GAAP diluted EPS guidance do not include certain effects of any non-recurring benefits or charges that may arise in fiscal 2019.

BusinessDevelopments

Planned Departure of ~~Chief Human Resources Officer (“CHRO”)~~Global Head of Sales and ~~Announcement~~Client Solutionsand Appointment of ~~Successor~~Global Head of Sales and Client Solutions

~~In July 2018,~~On April 15, 2019, we ~~announced that Edward Baker-Greene,~~entered into a separation of employment and general release agreement (the "Separation Agreement") with John W. Wiseman, the ~~Company’s Chief Human Resources Officer (“CHRO”), would depart~~Company's Executive Vice President, Global Head of Sales and Client Solutions. Pursuant to the Separation Agreement, Mr. Wiseman will participate in an orderly transition of duties to his successor, Franck A.R. Gossieaux, appointed June 1, 2019. Mr. Wiseman will remain an employee of FactSet until his effective termination date of August 31, 2019. A copy of the Separation Agreement is filed as ~~of November 30, 2018. Daniel Viens was~~Exhibit 10.1 to this Quarterly Report on Form 10-Q.
Effective June 1, 2019, we appointed Franck A.R. Gossieaux as the Company's new ~~CHRO, effective December 1, 2018.~~Executive Vice President, Global Head of Sales and Client Solutions. Mr. Gossieaux succeeds John W. Wiseman and will report directly to Philip Snow, FactSet's Chief Executive Officer.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we are exposed to foreign currency exchange risk that could impact our financial position and results of operations.

Foreign Currency Exchange Risk

We conduct business outside the U.S. in several currencies including the Euro, British Pound Sterling, ~~Euro,~~ Indian Rupee ~~Japanese Yen~~ and Philippine Peso. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates for the period for revenue and expenses. Over the next 12 months, our non-U.S. dollar denominated ~~revenue~~revenues expected to be recognized are estimated to be ~~$91.3~~$88.7 million while our non-U.S. dollar denominated expenses are estimated to be ~~$328.6~~$319.8 million, which translates into a net foreign currency exposure of ~~$237.3~~$231.1 million. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase. To manage the exposures related to the effects of foreign exchange rate fluctuations, we utilize derivative instruments (foreign currency forward contracts). 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. 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. Further, our 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. Our primary objective in holding derivatives is to reduce the volatility of earnings associated with changes in foreign currency.

Foreign Currency Hedges

As of ~~November 30, 2018,~~May 31, 2019, we maintained the following foreign currency forward contracts to hedge our exposures:

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

●•
Indian Rupee – foreign currency forward contracts to hedge approximately 75% of our Indian Rupee exposure through the ~~third~~fourth quarter of fiscal 2019, 50% of our exposure from the ~~fourth~~first quarter of fiscal ~~2019~~2020 through the ~~end of the second~~third quarter of fiscal 2020, and 25% of our exposure ~~from the third quarter of fiscal 2020 through the end of~~during the fourth quarter of fiscal 2020.

●•
Euro – foreign currency forward contracts to hedge approximately ~~50%~~75% of our Euro exposure through the first quarter of fiscal 2020, 50% of our exposure during the second quarter of fiscal 2020, and 25% of our exposure during the third quarter of fiscal ~~2019.~~2020.

●•
British Pound Sterling – foreign currency forward contracts to hedge approximately 50% of our British Pound Sterling exposure through the third quarter of fiscal ~~2019.~~2020.

As of ~~November 30, 2018,~~May 31, 2019, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos with U.S. dollars was PHP ~~2.4 billion,~~1.7 billion. The gross notional value of foreign currency forward contracts to purchase Indian Rupees with U.S. dollars was Rs. ~~3.0 billion, to purchase Euros with U.S. dollars was € 14.3 million and to purchase British Pound Sterling with U.S. dollars was £ 9.1 million. There were no other outstanding~~1.8 billion. The gross notional value of foreign currency forward contracts asto purchase U.S. dollars with Euros was € 39.3 million. The gross notional value of ~~November 30, 2018.~~foreign currency forward contracts to purchase U.S. dollars with British Pound Sterling was £ 20.8 million.

A loss on derivatives of ~~$0.4~~$0.6 million was recorded into operating income ~~during~~for the ~~first quarter of fiscal~~three months ended May 31, 2019, compared to a gain on derivatives of ~~$0.8~~$1.0 million in the same period a year ago. For the nine months ended May 31, 2019, a loss on derivatives of $1.4 million was recorded into operating income, compared to a gain on derivatives of $2.6 million in the prior year period. The gains and losses on foreign currency forward contracts mitigate the variability in operating expenses associated with currency movements. 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 and subsequently reclassified into operating expenses when the hedged exposure affects earnings. The related cash flow impacts of all our derivative activities are reflected as cash flows from operating activities.

A sensitivity analysis was performed based on the estimated fair value of all foreign currency forward contracts outstanding at ~~November 30, 2018.~~May 31, 2019. If the U.S. dollar had been 10% weaker, the fair value of outstanding foreign currency forward contracts would have increased by ~~$14.0~~$10.6 million, which would have had an immaterial impact on our consolidated balance sheet. Such a change in fair value of our financial instruments would be substantially offset by changes in our expense base. Had we not had any hedges in place as of ~~November 30, 2018,~~May 31, 2019, a hypothetical 10% weaker U.S. dollar against all foreign currencies from the quoted foreign currency exchange rates at ~~November 30, 2018,~~May 31, 2019, would have resulted in a decrease in operating income by ~~$7.3~~$21.3 million over the next 12 months. A hypothetical 10% weaker U.S. dollar against all foreign currencies at ~~November 30, 2018~~May 31, 2019 would have increased the fair value of total assets by ~~$61.7~~$66.5 million and equity by ~~$56.7~~$59.9 million.

Volatility in the British Pound Sterling exchange rate is expected to continue in the short term as the UK negotiates its exit from the European Union. In the longer term, any impact from Brexit will depend on, in part, on the outcome of tariff, regulatory and other negotiations.

Interest Rate Risk

Cash and Cash Equivalents

The fair market value of our Cash and cash equivalents and ~~investments~~Investments at ~~November 30, 2018~~May 31, 2019 was ~~$197.8~~$350.3 million. Our ~~Cash~~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. Our investments consist of both mutual funds and certificates of deposit as both are part of our investment strategy. These mutual funds and certificates of deposit are included as Investments(short-term) on our consolidated balance sheet as the mutual funds can be liquidated at our discretion and the certificates of deposit have original maturities greater than three months, but less than one year. The mutual funds and certificates of deposit are held for investment and are not considered debt securities. It is anticipated that the fair market value of our Cash and cash equivalents and ~~investments~~Investments will continue to be immaterially affected by fluctuations in interest rates. Preservation of principal is the primary goal of our cash and investment policy. Pursuant to our established investment guidelines, we try to achieve high levels of credit quality, liquidity and diversification. Our investment guidelines do not permit us to invest in puts, calls, strips, short sales, straddles, options, commodities, precious metals, futures or investments on margin. ~~Because~~As we have a restrictive investment policy, our financial exposure to fluctuations in interest rates is expected to remain low. We do not believe that the value or liquidity of our cash and cash equivalents and investments have been significantly impacted by current market events.

Debt

As of ~~November 30, 2018,~~May 31, 2019, the fair value of our long-term debt was $575.0 million, which approximated its carrying ~~amount and was determined based on quoted~~amount. The application of a floating interest rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid, approximates the current market ~~prices~~rate for ~~debt with a~~ similar ~~maturity.~~instruments. It is anticipated that the fair market value of our debt will continue to be immaterially affected by fluctuations in interest rates and we do not believe that the value of our debt has been significantly impacted by current market events. The debt bears interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid currently at ~~1.00%~~0.875%. During the three months ended ~~November 30,~~May 31, 2019 and 2018, ~~and 2017,~~ we recorded interest expense of ~~$4.7~~$5.2 million and ~~$3.4~~$4.3 million, respectively, on our outstanding debt amounts. During the nine months ended May 31, 2019 and 2018, we recorded interest expense of $15.1 million and $11.3 million, respectively, on our outstanding debt amounts. Assuming all terms of our outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one-month LIBOR rate would result in a $1.4 million change to our annual interest expense.
Technology Risk
Our clients rely on us for the delivery of time-sensitive, up-to-date data and applications. Our business is dependent on our ability to process substantial volumes of data and transactions rapidly and efficiently on our computer-based networks and systems. Our computer operations, as well as our other business centers, and those of our suppliers and clients are vulnerable to interruption by fire, natural disaster, power loss, telecommunications failures, terrorist attacks, acts of war, civil unrest, Internet failures, computer viruses and security breaches, and other events beyond our reasonable control. We maintain back-up facilities and certain other redundancies for each of our major data centers to minimize the risk that any such event will disrupt those operations. However, a loss of our services involving our significant facilities may materially disrupt our business and may induce our clients to seek alternative data suppliers. Any such, losses or damages we incur could have a material adverse effect on our business. Although we seek to minimize these risks through security measures, controls, back-up data centers and emergency planning, there can be no assurance that such efforts will be successful or effective.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the principal executive officer and principal financial officer, the Company has evaluated the effectiveness of its disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on that evaluation, the principal executive officer and principal financial officer have concluded that the Company’s 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”~~"Exchange Act") are effective to ensure that information required to be disclosed by the Company 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 the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s ~~first~~third quarter of fiscal 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under Note 17, Commitments and Contingencies,contained in the notes to the consolidated financial statements of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.

ITEM 1A. RISK FACTORS

There were no material changes during the first ~~three~~nine months of fiscal 2019 to the risk factors identified in the Company’s fiscal 2018 Annual Report on Form 10-K.

ITEM2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Items 2(a) and (b) are not applicable as there have been no unregistered sales of equity securities.

(c)
~~(c)~~ Issuer Purchases of Equity Securities (in thousands, except share and per share data)

The following table provides a month-to-month summary of the share repurchase activity during the three months ended ~~November 30, 2018:~~May 31, 2019:

Period

Total number of
shares purchased⁽¹⁾

Average price
paid per share

Total number of
shares purchased
as part of publicly
announced plans
or programs⁽²⁾

Maximum
number of shares
(or approximate
dollar value)
that may yet be
purchased under
the plans or
programs (in US$)⁽²⁾

September 2018
15,000 $ 224.48 15,000 $ 238,383
October 2018
253,735 $ 219.31 250,000 $ 183,549
November 2018
25,615 $ 222.70 10,000 $ 181,309
Total
294,350 275,000
Period

Total number of
shares purchased⁽¹⁾

Average price
paid per share

Total number of
shares purchased as
part of publicly
announced plans or
programs⁽²⁾

Maximum number of
shares (or
approximate dollar
value)
that may yet be
purchased under the
plans or programs (in
US$)⁽²⁾

March 2019
— $ — — $ 137,165
April 2019
90,000 $ 266.55 90,000 $ 113,176
May 2019
85,000 $ 277.24 85,000 $ 89,611 ⁽³⁾
Total
175,000 175,000

⁽¹⁾
Includes ~~275,000~~175,000shares purchased under the existing stock repurchase ~~program, as well as~~ ~~19,350~~ program. There were no shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock. during the third quarter of fiscal 2019.
⁽²⁾
Repurchases may be made from time to time in the open market and privately negotiated transactions, subject to market conditions. No minimum number of shares to be repurchased has been fixed. There is no timeframe to complete the repurchase program and it is expected that share repurchases will be paid using existing and future cash generated by operations.
(3)
On June 24, 2019, the Board of Directors of FactSet approved a $210.0 million expansion of the existing share repurchase program. Subsequent to this expansion, $299.6 million is available for future repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a)
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
10.1 Separation Agreement and General Release of Claims, dated April 22, 2019. 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
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
101.PRE
XBRL Taxonomy Extension Presentation Linkbase

X

~~SIGNATURE~~SSIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FACTSET RESEARCH SYSTEMS INC.
(Registrant)

Date: ~~January 9,~~July 10, 2019
/s/ HELEN L. SHAN
Helen L. Shan
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

/s/ BRIAN G. DALY
~~/s/ MATTHEW J. MCNULTY~~
Brian G. Daly
~~Matthew J. McNulty~~
Senior Vice President, Finance
~~Senior Vice President, Controller~~
(Principal Accounting Officer)

EXHIBIT INDEX

EXBHIT NUMBER
DESCRIPTION

10.1
Separation Agreement and General Release of Claims, dated April 22, 2019.
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.
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.
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.
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
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document

4654

Vesting Percentage (in thousands)	Cumulative Catch-up Adjustment*		Remaining Expense to be Recognized
0% (current expectation)	$	—	$	—
80%	$	2,014	$	6,870
90%	$	2,265	$	6,619
100%	$	2,517	$	6,367

	As of May 31,
(in millions)	2019		2018			Change
As reported ASV⁽¹⁾	$	1,423.0	$	1,356.2
Currency impact to ASV		0.8		(5.9	)
Organic ASV⁽²⁾	$	1,423.8	$	1,350.3			5.4	%

Period	Total number of shares purchased⁽¹⁾		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs⁽²⁾		Maximum number of shares (or approximate dollar value) that may yet be purchased under the plans or programs (in US$)⁽²⁾

September 2018		15,000	$	224.48		15,000	$	238,383
October 2018		253,735	$	219.31		250,000	$	183,549
November 2018		25,615	$	222.70		10,000	$	181,309
Total		294,350				275,000

			Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit No.	Filing Date	Filed Herewith
10.1	Separation Agreement and General Release of Claims, dated April 22, 2019.					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	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
101.PRE	XBRL Taxonomy Extension Presentation Linkbase					X


	FACTSET RESEARCH SYSTEMS INC.
	(Registrant)

Date: ~~January 9,~~July 10, 2019	/s/ HELEN L. SHAN
	Helen L. Shan
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

	/s/ BRIAN G. DALY
	~~/s/ MATTHEW J. MCNULTY~~ Brian G. Daly
	~~Matthew J. McNulty~~ Senior Vice President, Finance
	~~Senior Vice President, Controller~~
	(Principal Accounting Officer)

EXHIBIT INDEX

EXBHIT NUMBER		DESCRIPTION

10.1	Separation Agreement and General Release of Claims, dated April 22, 2019.
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.
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.
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.
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
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document