Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Consolidated Financial Statements:		Page
Management’s Statement of Responsibility for Financial Statements		45
Management’s Report on Internal Control over Financial Reporting		45
Reports of Independent Registered Public Accounting Firms		46-47
Consolidated Statements of Income for the years ended August 31, 2017, 2016 and 2015		48
Consolidated Statements of Comprehensive Income for the years ended August 31, 2017, 2016 and 2015		49
Consolidated Balance Sheets at August 31, 2017 and 2016		50
Consolidated Statements of Cash Flows for the years ended August 31, 2017, 2016 and 2015		51
Consolidated Statements of Changes in Stockholders’ Equity for the years ended August 31, 2017, 2016 and 2015		52
Notes to the Consolidated Financial Statements		53
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts		87

Management's Statement of Responsibility for Financial Statements

FactSet’s consolidated financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s estimates and judgments. All financial information in this Annual Report on Form 10-K has been presented on a basis consistent with the information included in the accompanying financial statements.

FactSet’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of the New York Stock Exchange, the NASDAQ Stock Market and the corporate governance requirements of the Sarbanes-Oxley Act of 2002. Management, with oversight by the Company’s Board of Directors, has established and maintains a strong ethical climate so that its affairs are conducted to the highest standards of personal and corporate conduct.

FactSet maintains accounting systems, including internal accounting controls, designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources, and the leadership and commitment of top management. In compliance with the Sarbanes-Oxley Act of 2002, FactSet assessed its internal control over financial reporting as of August 31, 2017, and issued a report (see below).

The Audit Committee of the Board of Directors, which consists solely of independent non-employee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee periodically meets with management and the independent accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities, including management’s assessment of internal control over financial reporting. The independent registered public accounting firm has full and free access to the Audit Committee and has met with the committee, with and without management present.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for FactSet. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management (with the participation of the principal executive officer and principal financial officer) conducted an evaluation of the effectiveness of FactSet’s internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission except for the internal controls of BI-SAM Technologies, FactSet Digital Solutions and Vermilion Holdings Limited which (in aggregate) constituted 4.8% of net assets (excluding goodwill and intangible assets) as of August 31, 2017 and 4.5% of revenues for the year then ended. Based on this evaluation, management concluded that FactSet’s internal control over financial reporting was effective as of August 31, 2017. Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness of FactSet’s internal control over financial reporting and has issued a report on FactSet’s internal control over financial reporting, which is included in their report on page 46.

/s/ F. PHILIP SNOW	/s/ MAURIZIO NICOLELLI
F. Philip Snow	Maurizio Nicolelli
Chief Executive Officer	Senior Vice President, Chief Financial Officer
October 30, 2017	October 30, 2017

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of FactSet Research Systems Inc.

We have audited the accompanying consolidated balance sheets of FactSet Research Systems Inc. as of August 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2017. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of FactSet Research Systems Inc. at August 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 2017, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), FactSet Research Systems Inc.'s internal control over financial reporting as of August 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated October 30, 2017 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Stamford, Connecticut

October 30, 2017

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of FactSet Research Systems Inc.

We have audited FactSet Research Systems Inc.’s internal control over financial reporting as of August 31, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). FactSet Research Systems Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of BI-SAM Technologies, FactSet Digital Solutions and Vermilion Holdings Limited, which in aggregate, constituted 4.8% of net assets (excluding goodwill and intangible assets) as of August 31, 2017 and 4.5% of revenues for the year then ended. Our audit of internal control over financial reporting of FactSet Research Systems Inc. also did not include an evaluation of the internal control over financial reporting of BI-SAM Technologies, FactSet Digital Solutions and Vermilion Holdings Limited.

In our opinion, FactSet Research Systems Inc. maintained, in all material respects, effective internal control over financial reporting as of August 31, 2017, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of FactSet Research Systems Inc. as of August 31, 2017 and 2016, and the related statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2017 of FactSet Research Systems Inc. and our report dated October 30, 2017, expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Stamford, Connecticut

October 30, 2017

FactSet Research Systems Inc.

Consolidated Statements of Income

		Years ended August 31,
(In thousands, except per share data)		2017				2016				2015
Revenues		$	1,221,179			$	1,127,092			$	1,006,768
Operating expenses
Cost of services			566,580				487,409				405,339
Selling, general and administrative			302,464				290,007				269,511
Total operating expenses			869,044				777,416				674,850
Operating income			352,135				349,676				331,918
Other (expense) income
(Loss) gain on sale of business			(1,223	)			112,453				—
Interest (expense), net of interest income			(6,600	)			(1,136	)			1,836
Total other (expense) income			(7,823	)			111,317				1,836
Income before income taxes			344,312				460,993				333,754
Provision for income taxes			86,053				122,178				92,703
Net income		$	258,259			$	338,815			$	241,051
Basic earnings per common share		$	6.55			$	8.29			$	5.80
Diluted earnings per common share		$	6.51			$	8.19			$	5.71
Basic weighted average common shares			39,444				40,880				41,572
Diluted weighted average common shares			39,642				41,365				42,235

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

FactSet Research Systems Inc.

Consolidated Statements of Comprehensive Income

		Years ended August 31,
(In thousands)		2017				2016				2015
Net income		$	258,259			$	338,815			$	241,051
Other comprehensive income (loss), net of tax
Net unrealized gain (loss) on cash flow hedges*			5,017				(857	)			(868	)
Foreign currency translation adjustments			28,816				(23,644	)			(25,263	)
Other comprehensive income (loss)			33,833				(24,501	)			(26,131	)
Comprehensive income		$	292,092			$	314,314			$	214,920

• The unrealized gain (loss) on cash flow hedges disclosed above was net of tax (expense) benefit of ($3,049), $498 and $512 for the fiscal years ended August 31, 2017, 2016 and 2015, respectively.

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

FactSet Research Systems Inc.

Consolidated Balance Sheets

		August 31,
(In thousands, except share data)		2017				2016
ASSETS
Cash and cash equivalents		$	194,731			$	228,407
Investments			32,444				24,217
Accounts receivable, net of reserves of $2,738 and $1,521 at August 31, 2017 and 2016, respectively			148,331				97,797
Prepaid taxes			7,076				—
Deferred taxes			2,668				3,158
Prepaid expenses and other current assets			24,127				15,697
Total current assets			409,376				369,276
Property, equipment and leasehold improvements, net			100,454				84,622
Goodwill			707,560				452,915
Intangible assets, net			173,543				93,161
Deferred taxes			7,412				13,406
Other assets			14,970				5,781
TOTAL ASSETS		$	1,413,315			$	1,019,161
LIABILITIES
Accounts payable and accrued expenses		$	59,214			$	45,836
Accrued compensation			61,083				51,036
Deferred fees			47,495				33,247
Deferred taxes			2,382				291
Taxes payable			9,112				7,781
Dividends payable			21,853				20,019
Total current liabilities			201,139				158,210
Long-term debt			575,000				300,000
Deferred taxes			24,892				1,708
Deferred fees			3,921				—
Taxes payable			11,484				8,782
Deferred rent and other non-current liabilities			37,188				33,080
TOTAL LIABILITIES		$	853,624			$	501,780
Commitments and contingencies (See Note 19)
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued		$	—			$	—
Common stock, $.01 par value, 150,000,000 shares authorized, 51,845,132 and 51,150,978 shares issued; 39,023,032 and 40,038,225 shares outstanding at August 31, 2017 and 2016, respectively			518				512
Additional paid-in capital			741,748				623,195
Treasury stock, at cost: 12,822,100 and 11,112,753 shares at August 31, 2017 and 2016, respectively			(1,606,678	)			(1,321,700	)
Retained earnings			1,458,823				1,283,927
Accumulated other comprehensive loss			(34,720	)			(68,553	)
TOTAL STOCKHOLDERS’ EQUITY		$	559,691			$	517,381
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,413,315			$	1,019,161

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

FactSet Research Systems Inc.

Consolidated Statements of Cash Flows

		Years ended August 31,
(in thousands)		2017				2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	258,259			$	338,815			$	241,051
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			48,294				38,052				31,349
Stock-based compensation expense			34,183				29,793				26,371
Loss (gain) on sale of business			1,223				(112,453	)			—
Deferred income taxes			4,879				4,528				(969	)
Loss (gain) on sale of assets			59				8				(34	)
Tax benefits from share-based payment arrangements			(10,331	)			(18,205	)			(28,948	)
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable, net of reserves			(29,503	)			(3,541	)			(4,300	)
Accounts payable and accrued expenses			(2,226	)			5,525				8,123
Accrued compensation			6,427				3,961				3,516
Deferred fees			(229	)			700				53
Taxes payable, net of prepaid taxes			7,877				30,270				30,437
Prepaid expenses and other assets			(850	)			7				(4,523	)
Deferred rent and other non-current liabilities			2,331				13,674				4,322
Other working capital accounts, net			132				6				(6	)
Net cash provided by operating activities			320,527				331,140				306,442
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired			(303,086	)			(262,909	)			(34,758	)
Proceeds from sale of business, net			—				153,137				—
Purchases of investments			(30,757	)			(18,137	)			(24,264	)
Proceeds from sales of investments			23,399				17,241				19,827
Purchases of property, equipment and leasehold improvements, net of proceeds from dispositions			(36,862	)			(47,740	)			(25,682	)
Net cash used in investing activities			(347,306	)			(158,408	)			(64,877	)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend payments			(80,898	)			(74,218	)			(66,551	)
Repurchase of common stock			(260,978	)			(356,828	)			(256,217	)
Proceeds from debt			640,000				265,000				35,000
Repayment of debt			(365,000	)			—				—
Sale of business			(1,223	)			—				—
Debt issuance costs			(438	)			(12	)			(32	)
Proceeds from employee stock plans			50,045				56,851				71,526
Tax benefits from share-based payment arrangements			10,331				18,205				28,948
Net cash used in financing activities			(8,161	)			(91,002	)			(187,326	)
Effect of exchange rate changes on cash and cash equivalents			1,264				(12,237	)			(11,703	)
Net (decrease) increase in cash and cash equivalents			(33,676	)			69,493				42,536
Cash and cash equivalents at beginning of period			228,407				158,914				116,378
Cash and cash equivalents at end of period		$	194,731			$	228,407			$	158,914
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for income taxes, net of refunds		$	74,788			$	87,513			$	64,750
Supplemental Disclosure of Non-Cash Transactions
Dividends declared, not paid		$	21,853			$	20,019			$	18,179
Stock issued for acquisition of business		$	—			$	—			$	2,991

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

FactSet Research Systems Inc.

Consolidated Statements of Changes in Stockholders’ Equity

		Years ended August 31,
(In thousands)		2017				2016				2015
COMMON STOCK
Balance, beginning of year		$	512			$	503			$	491
Common stock issued for employee stock plans			6				9				12
Balance, end of year		$	518			$	512			$	503
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year		$	623,195			$	542,355			$	413,754
Common stock issued for employee stock plans			50,039				57,784				72,381
Stock-based compensation expense			34,183				29,793				26,371
Tax benefits from share-based payment arrangements			10,331				18,205				28,948
Accelerated share repurchase			24,000				(24,000	)			—
Stock-based compensation adjustment associated with disposition			—				(942	)			—
Stock issued for acquisition of business			—				—				901
Balance, end of year		$	741,748			$	623,195			$	542,355
TREASURY STOCK
Balance, beginning of year		$	(1,321,700	)		$	(988,873	)		$	(734,746	)
Repurchases of common stock			(253,131	)			(328,283	)			(253,076	)
Stock issued for acquisition of business			—				—				2,090
Accelerated share repurchase			(24,000	)			—				—
Purchases of common stock upon restricted stock vesting			(7,847	)			(4,544	)			(3,141	)
Balance, end of year		$	(1,606,678	)		$	(1,321,700	)		$	(988,873	)
RETAINED EARNINGS
Balance, beginning of year		$	1,283,927			$	1,021,651			$	849,504
Net income			258,259				338,815				241,051
Dividends			(83,363	)			(76,539	)			(68,904	)
Balance, end of year		$	1,458,823			$	1,283,927			$	1,021,651
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance, beginning of year		$	(68,553	)		$	(44,052	)		$	(17,921	)
Foreign currency translation adjustments			28,816				(23,644	)			(25,263	)
Net unrealized gain (loss) on cash flow hedges, net of tax			5,017				(857	)			(868	)
Balance, end of year		$	(34,720	)		$	(68,553	)		$	(44,052	)
TOTAL STOCKHOLDERS’ EQUITY
Balance, beginning of year		$	517,381			$	531,584			$	511,082
Net income			258,259				338,815				241,051
Common stock issued for employee stock plans			50,045				57,793				72,393
Purchases of common stock upon restricted stock vesting			(7,847	)			(4,544	)			(3,141	)
Stock-based compensation expense			34,183				29,793				26,371
Tax benefits from share-based payment arrangements			10,331				18,205				28,948
Repurchases of common stock			(253,131	)			(352,283	)			(253,076	)
Foreign currency translation adjustments			28,816				(23,644	)			(25,263	)
Stock-based compensation adjustment associated with disposition			—				(942	)			—
Stock issued for acquisition of business			—				—				2,991
Net unrealized (loss) gain on cash flow hedges, net of tax			5,017				(857	)			(868	)
Dividends			(83,363	)			(76,539	)			(68,904	)
Balance, end of year		$	559,691			$	517,381			$	531,584

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

Notes to the Consolidated Financial Statements

1. ORGANIZATION AND NATURE OF BUSINESS

FactSet Research Systems Inc. (the “Company” or “FactSet”) provides integrated financial information and analytical applications for the global investment community. The Company delivers insight and information to financial investment professionals through its analytics, service, content, and technology. By integrating comprehensive datasets and analytics across asset classes with client data, FactSet supports the workflow of both buy-side and sell-side clients. These professionals include portfolio managers, wealth managers, research and performance analysts, risk managers, research professionals, investment bankers, and fixed income professionals. From streaming real-time data to historical information, including quotes, estimates, news and commentary, FactSet offers unique and third-party content through desktop, wireless and off-platform solutions. The Company’s wide 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. The Company’s revenues are 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 consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany activity and balances have been eliminated from the consolidated financial statements.

The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates have been made in areas that include allocation of purchase price to acquired assets and liabilities, stock-based compensation, income taxes, accrued compensation, valuation of goodwill, and useful lives and valuation of fixed and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Company and its subsidiaries are summarized below.

Revenue Recognition

The majority of the Company’s revenues are derived from subscriptions to services such as workstations (also referred to as users), content and applications. The majority of clients are invoiced monthly to reflect the actual services provided. The remaining clients are invoiced quarterly, annually or biannually in advance. Subscription revenue is earned each month as the service is rendered to clients on a monthly basis. FactSet recognizes revenue when the client subscribes to FactSet services, the service has been rendered and earned during the month, the amount of the subscription is fixed or determinable based on established rates quoted on an annualized basis and collectability is reasonably assured. A provision for billing adjustments and cancellation of services is estimated and accounted for as a reduction to revenue, with a corresponding reduction to accounts receivable.

Accounts Receivable and Deferred Fees

Amounts that have been earned but not yet paid are reflected on the Consolidated Balance Sheets as Accounts receivable, net of reserves. Amounts invoiced in advance of client payments that are in excess of earned subscription revenues are reflected on the Consolidated Balance Sheet as Deferred fees. As of August 31, 2017, the amount of accounts receivable that was unbilled totaled $5.3 million, which was billed in fiscal 2018.

The Company calculates its receivable reserve through analyzing aged client receivables, reviewing the recent history of client receivable write-offs and understanding general market and economic conditions. In accordance with this policy, a receivable reserve of $2.7 million and $1.5 million was recorded as of August 31, 2017 and 2016, respectively, within the Consolidated Balance Sheets as a reduction to accounts receivable.

Cost of Services

Cost of services is comprised of compensation for Company employees within the content collection, consulting, product development, software and systems engineering groups in addition to data costs, computer maintenance and depreciation expenses, amortization of identifiable intangible assets, and client-related communication costs.

Selling, General and Administrative

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

Research and Product Development Costs

FactSet does not have a separate research and product development department, but rather the Product Development and Engineering departments work closely with the Sales function to identify areas of improvement with the goal of providing increased value to clients. As such, research and product development costs relate to the salary and benefits for the Company’s product development, software engineering and technical support staff and, as such, these costs are expensed when incurred within cost of services as employee compensation. The Company expects to allocate a similar percentage of its workforce in future years in order to continue to develop new products and enhancements, respond quickly to market changes and meet the needs of its clients efficiently. FactSet incurred $215.0 million of research and product development costs during fiscal 2017, which was comparable to its spend on similar development during fiscal years 2016 and 2015 respectively.

Earnings per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the number of weighted average common shares outstanding during the period. Diluted EPS is computed by dividing net income by the number of weighted average common shares outstanding during the period increased by the dilutive effect of potential common shares outstanding during the period. The number of potential common shares outstanding has been determined in accordance with the treasury stock method to the extent they are dilutive. Common share equivalents consist of common shares issuable upon the exercise of outstanding share-based compensation awards, including employee stock options and restricted stock. Under the treasury stock method, the exercise price paid by the optionee, future stock-based compensation expense that the Company has not yet recognized and the amount of tax benefits that would be recorded in additional paid-in capital (“APIC”) when the award becomes deductible are assumed to be used to repurchase shares.

Comprehensive Income (Loss)

The Company discloses comprehensive income (loss) in accordance with applicable standards for the reporting and display of comprehensive income (loss) in a set of financial statements. Comprehensive income (loss) is defined as the change in net assets of a business enterprise during a period from transactions generated from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Fair Value Measures

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible. The Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s cash equivalents are classified as Level 1 while the Company’s derivative instruments (foreign exchange forward contracts) and certificates of deposit are classified as Level 2. There were no Level 3 assets or liabilities held by FactSet as of August 31, 2017 or 2016.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and corporate money market funds with original maturities of three months or less and are reported at fair value. The Company’s corporate money market funds are traded in an active market and the net asset value of each fund on the last day of the quarter is used to determine its fair value.

Investments

Investments consist of certificates of deposits with original maturities greater than three months, but less than one year and, as such, are classified as Investments (short-term) on the Consolidated Balance Sheets. These certificates of deposit are held for investment and are not debt securities. Investments also include mutual funds, which FactSet may withdraw from at any time, as such, they are presented as Investments (short-term) on the Consolidated Balance Sheets. The Company’s investments are associated with its purchase of certificates of deposits in India with maturities of less than twelve months from the date of purchase. Interest income earned from these investments during fiscal 2017, 2016 and 2015 were $1.6 million, $1.6 million and $2.0 million, respectively. The Company’s cash, cash equivalents and investments portfolio did not experience any realized or unrealized losses as a result of counterparty credit risk or ratings change during fiscal 2017 and 2016.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Computers and related equipment are depreciated on a straight-line basis over estimated useful lives of three years. Furniture and fixtures are depreciated on a straight-line basis over their estimated useful lives of seven years. Leasehold improvements are amortized on a straight-line basis over the terms of the related leases or estimated useful lives of the improvements, whichever period is shorter. Repairs and maintenance expenditures, which are not considered leasehold improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

The Company performs a test for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable. Should projected undiscounted future cash flows be less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value is required. Fair value is determined based on the most appropriate valuation technique, including discounted cash flows.

Goodwill

The Company is required to test goodwill for impairment annually, or more frequently if impairment indicators occur. Goodwill is tested for impairment based on the present value of discounted cash flows, and, if impaired, written down to fair value based on discounted cash flows. FactSet has three reporting units, which are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries within each operating segment. The reporting units evaluated for potential impairment were the U.S., Europe and Asia Pacific, which reflect the level of internal reporting the Company uses to manage its business and operations. The Company performed its annual goodwill impairment test during the fourth quarter of fiscal 2017, consistent with the timing of previous years, and concluded that there was no impairment, with the fair value of each of the Company’s reporting units significantly exceeding carrying value.

Intangible Assets

FactSet’s identifiable intangible assets consist of acquired content databases, client relationships, software technology, non-compete agreements and trade names resulting from acquisitions, which have been fully integrated into the Company’s operations. Depending on the nature of the intangible asset, the identifiable intangible assets are amortized on either a straight-line or an accelerated basis using estimated useful lives ranging between two and twenty years. The remaining useful lives of intangible assets subject to amortization are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. These intangible assets have no assigned residual values. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for intangible assets that management expects to hold and use is based on the amount the carrying value exceeds the fair value of the asset. No indicators of impairment of intangible assets has been identified during any of the fiscal years presented.

Accrued Liabilities

Accrued liabilities include estimates relating to employee compensation, operating expenses and tax liabilities. Approximately 15% of the Company’s employee incentive compensation programs are discretionary. At the end of each fiscal year, FactSet conducts a final review of both Company and individual performance within each department to determine the amount of discretionary employee compensation. The Company also reviews compensation throughout the year to determine how overall performance tracks against management’s expectations. Management takes these and other factors, including historical performance, into account in reviewing accrued compensation estimates quarterly and adjusting accrual rates as appropriate. The amount of the variable employee compensation recorded within accrued compensation as of August 31, 2017 and 2016, was $39.2 million and $38.2 million, respectively.

Derivative Instruments

FactSet conducts business outside the U.S. in several currencies including the Indian Rupee, Philippine Peso, British Pound Sterling, Euro and Japanese Yen. 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 exchange forward contracts for trading or speculative purposes. In designing a specific hedging approach, FactSet considers several factors, including offsetting exposures, significance of exposures, forecasting risk and potential effectiveness of the hedge. These transactions are designated and accounted for as cash flow hedges in accordance with applicable accounting guidance. The changes in fair value for these foreign currency forward contracts are initially reported as a component of accumulated other comprehensive loss (“AOCL”) and subsequently reclassified into operating expenses when the hedged exposure affects earnings. The gains and losses on foreign currency forward contracts mitigate the variability in operating expenses associated with currency movements. All derivatives are assessed for effectiveness at each reporting period.

Foreign Currency Translation

Certain wholly owned subsidiaries within the European and Asia Pacific segments operate under a functional currency different from the U.S. dollar, such as the British Pound Sterling, Euro, Japanese Yen, Indian Rupee and Philippine Peso. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates for the period for revenues and expenses. Translation gains and losses that arise from translating assets, liabilities, revenues and expenses of foreign operations are recorded in AOCL as a component of stockholders’ equity. The accumulated foreign currency translation loss totaled $38.5 million and $67.3 million at August 31, 2017 and 2016, respectively.

Income and Deferred Taxes

Income tax expense is based on taxable income determined in accordance with currently enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using currently enacted tax rates. FactSet recognizes the financial effect of an income tax position only if it is more likely than not (greater than 50%) that the tax position will prevail upon tax examination, based solely on the technical merits of the tax position as of the reporting date. Otherwise, no benefit or expense can be recognized in the consolidated financial statements. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, FactSet accrues interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest is classified as income tax expense in the financial statements. As of August 31, 2017, the Company had gross unrecognized tax benefits totaling $11.5 million, including $1.5 million of accrued interest, recorded as Taxes Payable (non-current) on the Consolidated Balance Sheet.

Stock-Based Compensation

Accounting guidance requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including stock options, restricted stock and common shares acquired under employee stock purchases based on estimated fair values of the share awards that are scheduled to vest during the period. FactSet uses the straight-line attribution method for all awards with graded vesting features and service conditions only. Under this method, the amount of compensation expense that is recognized on any date is at least equal to the vested portion of the award on that date. For all stock-based awards with performance conditions, the graded vesting attribution method is used by the Company to determine the monthly stock-based compensation expense over the applicable vesting periods.

As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based primarily on historical experience. Windfall tax benefits, defined as tax deductions that exceed recorded stock-based compensation, are classified as cash inflows from financing activities.

Performance-based stock options require management to make assumptions regarding the likelihood of achieving Company performance targets on a quarterly basis. The number of performance-based options that vest will be predicated on the Company achieving certain performance levels. A change in the financial performance levels the Company achieves could result in changes to FactSet’s current estimate of the vesting percentage and related stock-based compensation.

Treasury Stock

The Company accounts for repurchased common stock under the cost method and includes such treasury stock as a component of its stockholders’ equity. At the time treasury stock retirement is approved by FactSet’s Board of Directors, the Company’s accounting policy is to deduct its par value from common stock, reduce APIC by the amount recorded in APIC when the stock was originally issued and any remaining excess of cost as a deduction from retained earnings.

Operating Leases

The Company conducts all of its operations in leased facilities which have minimum lease obligations under non-cancelable operating leases. Certain of these leases contain rent escalations based on specified percentages. Most of the leases contain renewal options and require payments for taxes, insurance and maintenance. Rent expense is charged to operations as incurred except for escalating rents, which are charged to operations on a straight-line basis over the life of the lease. Lease incentives, relating to allowances provided by landlords, are amortized over the term of the lease as a reduction of rent expense. Costs associated with acquiring a subtenant, including broker commissions and tenant allowances, are amortized over the sublease term as a reduction of sublease income.

Business Combinations

The Company records acquisitions using the purchase method of accounting. All of the assets acquired, liabilities assumed, contractual contingencies and contingent consideration are recognized at their fair value on the acquisition date. The application of the purchase method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized from goodwill. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.

Concentrations of Risk

Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, 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.

New Accounting Standards or Updates Recently Adopted

As of the beginning of fiscal 2017, FactSet implemented all applicable new accounting standards and updates issued by the Financial Accounting Standards Board (“FASB”) that were in effect. There were no new standards or updates adopted during the last three fiscal years that had a material impact on the consolidated financial statements.

Revenue Recognition

In May 2014 and July 2015, the FASB issued accounting standard updates which provide clarified principles for recognizing revenue arising from contracts with clients and supersede 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. These accounting standard updates will be effective for FactSet beginning in the first quarter of fiscal 2019, with early adoption in fiscal 2018 permitted and allow for either full retrospective or modified retrospective adoption. The Company is currently evaluating the impact of these accounting standard updates on its consolidated financial statements including the method of adoption.

Balance Sheet Classification of Deferred Taxes

In November 2015, the FASB issued an accounting standard update to simplify the presentation of deferred taxes on the balance sheet. The accounting standard update will require an entity to present all deferred tax assets and deferred tax liabilities as non-current on the balance sheet. Under the current guidance, entities are required to separately present deferred taxes as current or non-current. Netting deferred tax assets and deferred tax liabilities by tax jurisdiction will still be required under the new guidance. This guidance is effective for FactSet beginning in the first quarter of fiscal 2018. The accounting standard update is a change in balance sheet presentation only and, as such, the Company does not believe this new accounting standard update will have a material impact on its consolidated financial statements

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued an accounting standard update to amend its current guidance on the classification and measurement of certain financial instruments. The accounting standard update significantly revises an entity’s accounting related to the presentation of certain fair value changes for financial liabilities measured at fair value. This guidance also amends certain disclosure requirements associated with the fair value of financial instruments. This guidance will be effective for FactSet beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

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 U.S. 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 on its consolidated financial statements.

Share-Based Payments

In March 2016, the FASB issued an accounting standard update which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flow. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2018. The Company believes that the adoption of this accounting standard will increase the volatility within our provision for income taxes, as all excess tax benefits or deficiencies related to share-based payments that were previously reported within equity will now be recognized in the statement of income. In addition, excess tax benefits were historically reflected as a financing activity in the statements of cash flows, and after adoption, will be included within operating activities. Share-based payment expense will continue to reflect estimated forfeitures of share-based payment awards. The Company is unable to quantify the impact on the adoption of this standard in fiscal 2018 due to the amount of variables that impact the calculation of the excess tax benefits, including the future stock price of FactSet and the volume of employee stock option exercises.

In May 2017, the FASB issued an accounting standard update, which amends the scope of modification accounting for share-based payment arrangements. The guidance focuses 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. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2019, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Cash Flow Simplification

In August 2016, the FASB issued an accounting standard update which simplifies how certain transactions are classified in the statement of cash flows. This includes 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. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Income Taxes on Intra-Entity Transfers of Assets

In October 2016, the FASB issued an accounting standard update which removes 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 is intended to reduce diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. This accounting standard update will be effective for FactSet beginning in the first quarter of fiscal 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

Goodwill Impairment Test

In January 2017, the FASB issued an accounting standard update which removes the requirement for companies to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This accounting standard update will be effective for FactSet 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 Company.

Hedge Accounting Simplification

In August 2017, the FASB issued an accounting standard update to reduce the complexity of and simplify the application of hedging 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 FactSet beginning in the first quarter of fiscal 2020, with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

No other new accounting pronouncements issued or effective as of August 31, 2017, have had or are expected to have an impact on the Company’s consolidated financial statements.

4. FAIR VALUE MEASURES

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible. 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. FactSet has categorized its cash equivalents, investments and derivatives within the fair value hierarchy as follows:

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

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 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 FactSet as of August 31, 2017 or 2016.

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

The following tables shows by level within the fair value hierarchy the Company’s assets and liabilities that are measured at fair value on a recurring basis at August 31, 2017 and 2016:

		Fair Value Measurements at August 31, 2017
(in thousands)		Level 1				Level 2				Level 3				Total
Assets
Corporate money market funds (1)		$	26,677			$	—			$	—			$	26,677
Mutual Funds (2)			—				18,364				—				18,364
Certificates of deposit (3)			—				14,080				—				14,080
Derivative instruments (4)			—				6,142				—				6,142
Total assets measured at fair value		$	26,677			$	38,586			$	—			$	65,263
Liabilities
Derivative instruments (4)		$	—			$	—			$	—			$	—
Total liabilities measured at fair value		$	—			$	—			$	—			$	—

		Fair Value Measurements at August 31, 2016
(in thousands)		Level 1				Level 2				Level 3				Total
Assets
Corporate money market funds (1)		$	92,765			$	—			$	—			$	92,765
Certificates of deposit (3)			—				24,217				—				24,217
Derivative instruments (4)			—				869				—				869
Total assets measured at fair value		$	92,765			$	25,086			$	—			$	117,851
Liabilities
Derivative instruments (4)		$	—			$	2,791			$	—			$	2,791
Total liabilities measured at fair value		$	—			$	2,791			$	—			$	2,791

	(1)	The Company’s corporate money market funds are traded in an active market and the net asset value of each fund on the last day of the quarter is used to determine its fair value. As such, the Company’s corporate money market funds are classif__ied as Level 1 and included in C__ash and cash equi__valents within the Consolidated B__alance S__heet__s_._

	(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 as investments (short-term) on the Consolidated Balance Sheets.

	(3)	The Company’s c__ertificates of deposit held for investment are not debt securities and are classified as Level 2_. These certificates of deposit have original maturities greater than three months, but less than one year a__nd, as such, are classified as I__nvestments (short-term__) within_ the Consolidated Balance Sheets_._

	(4)	The Company utilizes the income approach to measure fair value for its derivative instruments (foreign exchange forward contracts). The income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates_,_ as well as credit default swap spreads and 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) Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain assets, including goodwill and intangible assets, and liabilities, are measured at fair value on a non-recurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances such as when they are deemed to be other-than-temporarily impaired. 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 comparables, and discounted cash flow projections. An impairment charge is recorded when the cost exceeds its fair value, based upon the results of such valuations. During fiscal 2017 and 2016, 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 Purposes only

As of August 31, 2017 and 2016, the fair value of the Company’s long-term debt was $575.0 million and $300.0 million, respectively, which approximated its carrying amount given its floating interest rate basis. The fair value of the Company’s long-term debt was determined based on quoted market prices for debt with a similar maturity, and thus categorized as Level 2 in the fair value hierarchy.

5. DERIVATIVE INSTRUMENTS

Cash Flow Hedges

FactSet conducts business outside the U.S. in several currencies including the 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. 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 AOCL and subsequently reclassified into operating expenses when the hedged exposure affects earnings. There was no discontinuance of cash flow hedges during fiscal 2017 or 2016, and as such, no corresponding gains or losses related to changes in the value of the Company’s contracts were reclassified into earnings prior to settlement.

As of August 31, 2017, FactSet maintained foreign currency forward contracts to hedge approximately 75% of its Indian Rupee exposure through the third quarter of fiscal 2019.

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)		August 31, 2017				August 31, 2016				August 31, 2017				August 31, 2016
British Pound Sterling		$	—			$	33,280			$	—			$	(2,791	)
Indian Rupee			51,000				58,410				6,142				869
Total		$	51,000			$	91,690			$	6,142			$	(1,922	)

As of August 31, 2017, the gross notional value of foreign currency forward contracts to purchase Indian Rupees with U.S. dollars was Rs. 3.8 billion.

Counterparty Credit Risk

As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. FactSet has incorporated counterparty risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities. FactSet 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 FactSet has executed these derivative transactions. Because 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. The Company 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 tables provide a summary of the fair value amounts of derivative instruments and gains and losses on derivative instruments:

Designation of Derivatives (in thousands)	Balance Sheet Location		August 31, 2017				August 31, 2016
Derivatives designated as hedging instruments	Assets: Foreign Currency Forward Contracts
	Prepaid expenses and other current assets		$	3,796			$	163
	Other assets		$	2,346			$	706
	Liabilities: Foreign Currency Forward Contracts
	Accounts payable and accrued expenses		$	—			$	2,791
	Deferred rent and other non-current liabilities		$	—			$	—

All derivatives were designated as hedging instruments as of August 31, 2017 and 2016, respectively.

Derivatives in Cash Flow Hedging Relationships

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

(in thousands):		Gain (Loss) Recognized in AOCL on Derivatives (Effective Portion)											Location of Loss Reclassified from		Loss Reclassified from AOCL into Income (Effective Portion)
Derivatives in Cash Flow Hedging Relationships		2017				2016				2015			AOCL into Income (Effective Portion)		2017				2016				2015
Foreign currency forward contracts		$	5,183			$	(1,806	)		$	(1,939	)	SG&A		$	(2,883	)		$	(451	)		$	(559	)

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 August 31, 2017, FactSet estimates that $3.8 million of net derivative gains 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 August 31, 2017 and 2016, there were no net settlements recorded on Consolidated Balance Sheets.

6. OTHER COMPREHENSIVE (LOSS) INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of other comprehensive (loss) income during the fiscal years ended August 31, 2017, 2016 and 2015 are as follows:

		August 31, 2017								August 31, 2016								August 31, 2015
(in thousands)		Pre-tax				Net of tax				Pre-tax				Net of tax				Pre-tax				Net of tax
Foreign currency translation adjustments		$	28,816			$	28,816			$	(23,644	)		$	(23,644	)		$	(25,263	)		$	(25,263	)
Realized loss on cash flow hedges reclassified to earnings (1)			2,883				1,813				451				284				559				352
Unrealized gain (loss) on cash flow hedges recognized in AOCL			5,183				3,204				(1,806	)			(1,141	)			(1,939	)			(1,220	)
Other comprehensive (loss) income		$	36,882			$	33,833			$	(24,999	)		$	(24,501	)		$	(26,643	)		$	(26,131	)

	(1)	Reclassified to Selling, General and Administrative Expenses

The components of AOCL are as follows:

(in thousands)		August 31, 2017				August 31, 2016
Accumulated unrealized losses on cash flow hedges, net of tax		$	3,802			$	(1,215	)
Accumulated foreign currency translation adjustments			(38,522	)			(67,338	)
Total accumulated other comprehensive loss		$	(34,720	)		$	(68,553	)

7. SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses, whose operating results 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 for which discrete financial information is available. Financial information at the operating segment level is reviewed jointly by the Chief Executive Officer (“CEO”) and senior management. Senior management consists of executives who directly report to the CEO, comprising the Chief Financial Officer, Chief Operating Officer, Global Head of Sales and Client Solutions, General Counsel, and Chief Human Resources Officer. Senior management, along with the CEO, constitute FactSet’s chief operating decision making group (“CODMG”) and is responsible for making decisions about resources allocated among the operating segments based on actual results.

FactSet’s operating segments are aligned with how the Company, including its CODMG, manages the business and the demographic markets in which FactSet serves. The Company’s internal financial reporting structure is based on three segments; the U.S., Europe and Asia Pacific. FactSet believes this alignment helps it better manage the business and view the markets the Company 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 that provide global financial and economic information to investment managers, investment banks and other financial services professionals. The U.S. segment services investment professionals including financial institutions throughout the Americas. The European and Asia Pacific segments service investment professionals located throughout Europe and the Asia Pacific region, respectively. The accounting policies of the segments are the same as those described in the Note 3, Summary of Significant Accounting Policies.

The European segment maintains office locations in Bulgaria, Dubai, England, France, Germany, Italy, Latvia, the Netherlands, Spain, and Switzerland. The Asia Pacific segment has office locations in Australia, Hong Kong, India, Japan, and Singapore. Segment revenues reflect direct sales to clients based in their respective geographic locations. There are no intersegment or intercompany sales of FactSet services. Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, marketing, 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 and the Philippines benefit all of the Company’s operating segments and thus the expenses incurred at these locations are allocated to each segment based on a percentage of revenues. Of the total $707.6 million of goodwill reported by the Company at August 31, 2017, 54% was recorded in the U.S. segment, 45% 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 system. These results are used, in part, by management, both in evaluating the performance of, and in allocating resources to, each of the segments.

(in thousands) Year Ended August 31, 2017		U.S.				Europe				Asia Pacific				Total
Revenues from clients		$	784,146			$	330,332			$	106,701			$	1,221,179
Segment operating profit			137,104				153,676				61,355				352,135
Total assets			703,941				609,368				100,006				1,413,315
Depreciation and amortization			35,244				9,837				3,213				48,294
Stock-based compensation			30,247				3,320				616				34,183
Capital expenditures			29,561				2,385				4,916				36,862

Year Ended August 31, 2016		U.S.				Europe				Asia Pacific				Total
Revenues from clients		$	755,492			$	277,682			$	93,918			$	1,127,092
Segment operating profit			165,251				131,410				53,015				349,676
Total assets			654,796				279,864				84,501				1,019,161
Depreciation and amortization			31,529				4,220				2,303				38,052
Stock-based compensation			25,776				3,459				558				29,793
Capital expenditures			38,631				4,092				5,017				47,740

Year Ended August 31, 2015		U.S.				Europe				Asia Pacific				Total
Revenues from clients		$	678,774			$	251,522			$	76,472			$	1,006,768
Segment operating profit			172,980				116,310				42,628				331,918
Total assets			427,990				239,689				68,992				736,671
Depreciation and amortization			23,645				5,135				2,569				31,349
Stock-based compensation			23,006				2,991				374				26,371
Capital expenditures			22,459				460				2,763				25,682

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

		Years ended August 31,
(in thousands)		2017				2016				2015
Revenues(1)
United States		$	784,146			$	755,492			$	678,774
United Kingdom			163,732				154,902				144,769
All other European countries			166,600				122,780				106,753
Asia Pacific			106,701				93,918				76,472
Total revenues		$	1,221,179			$	1,127,092			$	1,006,768

	(1)	Revenues are attributed to countries based on the location of the client.

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

		At August 31,
(in thousands)		2017				2016				2015
Long-lived Assets(1)
United States		$	79,299			$	70,646			$	49,923
United Kingdom			6,012				5,772				3,655
All other European countries			6,306				1,018				1,322
Asia Pacific			8,837				7,186				4,364
Total long-lived assets		$	100,454			$	84,622			$	59,264

	(1_)_	Long-lived assets consist of property, equipment and leasehold improvements, net of accumulated depreciation and amortization and exclude goodwill, intangible assets, deferred taxes and other assets.

8. BUSINESS COMBINATIONS

BISAM

On March 17, 2017, FactSet acquired BI-SAM Technologies (“BISAM”) for a total purchase price of $217.6 million. BISAM is a global provider of portfolio performance and attribution, multi-asset risk, GIPS composites management and reporting. BISAM’s product offerings include B-One, BISAM’s cross-asset solution, which will serve as a complement to both FactSet’s portfolio analytics suite and client reporting solutions, and Cognity, which enhances FactSet’s risk analysis for derivatives and quantitative portfolio construction. These factors contributed to a purchase price in excess of fair value of BISAM’s net tangible and intangible assets, leading to the recognition of goodwill. At the time of acquisition, BISAM employed over 160 employees based primarily in its New York, Boston, Paris, London and Sofia offices. Total transaction costs related to the acquisition were $3.2 million in fiscal 2017 and were recorded within Selling, General and Administrative (“SG&A”) expenses in the Consolidated Statements of Income.

Allocation of the purchase price to the assets acquired and liabilities assumed was finalized during the fourth quarter of fiscal 2017. There were no significant adjustments between the preliminary and final allocation. The total purchase price was allocated to BISAM’s net tangible and intangible assets based upon their estimated fair value as of the date of acquisition.

(i__n thousands)
Tangible assets acquired		$	27,583
Amortizable intangible assets
Software technology			18,261
Client relationships			37,597
Trade name			741
Goodwill			173,898
Total assets acquired		$	258,080
Liabilities assumed			(40,443	)
Net assets acquired		$	217,637

Intangible assets of $56.6 million have been allocated to amortizable intangible assets consisting of client relationships, amortized over 16 years using an accelerated amortization method; software technology, amortized over five years using a straight-line amortization method; and a trade name, amortized over four years using a straight-line amortization method.

Goodwill totaling $173.9 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. Goodwill generated from the BISAM acquisition is included in the US and European segments and is not deductible for income tax purposes. The results of operations of BISAM have been included in the Company’s Consolidated Statements of Income since the completion of the acquisition on March 17, 2017. Pro forma information has not been presented because the effect of the BISAM acquisition is not material to the Company’s consolidated financial results.

Vermilion

On November 8, 2016, FactSet acquired Vermilion Holdings Limited (“Vermilion”) for a total purchase price of $67.9 million. Vermilion is a global provider of client reporting and communications software and services to the financial services industry. Client reporting is a growing area of the market as regulatory requirements rise and with the acquisition of Vermilion and its Vermilion Reporting Suite (“VRS”), FactSet now offers a workflow around all elements of the client reporting process, which it expects will expand as investors grow increasingly sophisticated. This factor contributed to a purchase price in excess of fair value of Vermilion’s net tangible and intangible assets, leading to the recognition of goodwill. At the time of acquisition, Vermilion employed 59 individuals in its London, Boston and Singapore offices. Total transaction costs related to the acquisition were $0.7 million in fiscal 2017 and recorded within SG&A expenses in the Consolidated Statements of Income.

Allocation of the purchase price to the assets acquired and liabilities assumed was finalized during the third quarter of fiscal 2017. There were no significant adjustments between the preliminary and final allocation. The total purchase price was allocated to Vermilion’s net tangible and intangible assets based upon their estimated fair value as of the date of acquisition. Based upon the purchase price and the valuation, the allocation is as follows:

(i__n thousands)
Tangible assets acquired		$	7,916
Amortizable intangible assets
Software technology			10,916
Client relationships			5,954
Non-compete agreements			806
Trade name			571
Goodwill			51,157
Total assets acquired		$	77,320
Liabilities assumed			(9,434	)
Net assets acquired		$	67,886

Intangible assets of $18.2 million have been allocated to amortizable intangible assets consisting of client relationships, amortized over 15 years using an accelerated amortization method; software technology, amortized over six years using a straight-line amortization method; non-compete agreements, amortized over three years using a straight-line amortization method; and a trade name, amortized over four years using a straight-line amortization method.

Goodwill totaling $51.2 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. Goodwill generated from the Vermilion acquisition is included in the European segment and is not deductible for income tax purposes. The results of operations of Vermilion have been included in the Company’s Consolidated Statements of Income since the completion of the acquisition on November 8, 2016. Pro forma information has not been presented because the effect of the Vermilion acquisition is not material to the Company’s consolidated financial results.

Portware LLC

On October 16, 2015, FactSet acquired Portware LLC (“Portware”) for a total purchase price of $263.6 million. At the time of acquisition, Portware employed 166 individuals in its New York, London, Hong Kong, and Hyderabad, India offices. Portware is a global provider of multi-asset trade automation solutions for mega and large asset managers. With the acquisition of Portware, FactSet now offers a platform that it expects will increase value to global asset managers by expanding its capabilities to include multi-asset trade automation. This factor contributed to a purchase price in excess of fair value of Portware’s net tangible and intangible assets, leading to the recognition of goodwill. Total transaction costs related to the acquisition were $0.7 million for the year ended August 31, 2016. These transaction expenses were recorded within SG&A expenses in the Consolidated Statements of Income.

The total purchase price was allocated to Portware’s net tangible and intangible assets based upon their estimated fair value as of the date of acquisition. Based upon the purchase price and the valuation, the allocation is as follows:

(i__n thousands)
Tangible assets acquired		$	9,656
Amortizable intangible assets
Software technology			43,000
Client relationships			27,000
Non-compete agreements			3,500
Trade name			2,000
Goodwill			187,378
Total assets acquired		$	272,534
Liabilities assumed			(8,951	)
Net assets acquired		$	263,583

Intangible assets of $75.5 million have been allocated to amortizable intangible assets consisting of client relationships, amortized over 16 years using an accelerated amortization method; software technology, amortized over eight years using a straight-line amortization method; non-compete agreements, amortized over seven years using a straight-line amortization method; and a trade name, amortized over five years using a straight-line amortization method.

Goodwill totaling $187.4 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and is included in the U.S. segment. Approximately 77% of the total goodwill generated from the Portware acquisition is deductible for income tax purposes. The results of operations of Portware have been included in the Company’s Consolidated Statements of Income since the completion of the acquisition on October 16, 2015. Pro forma information has not been presented because the effect of the Portware acquisition is not material to the Company’s consolidated financial results.

9. DISPOSITIONS

During the third quarter of fiscal 2016, the Company entered into a definitive stock purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell its market research business, consisting of Market Metrics LLC and Matrix-Data Limited (collectively “Market Metrics” or the “disposal group”) and associated assets (the “Transaction”). On July 1, 2016, FactSet completed the Transaction and received $165.0 million in cash, less estimated working capital and certain adjustments set forth in the Purchase Agreement, including a $9.7 million bonus adjustment amount. The Company recognized a pre-tax gain on the sale of $112.5 million in fourth quarter of fiscal 2016, which is recorded within o__ther (expense) income in the Consolidated Statements of Income. In the second quarter of fiscal 2017, the Company finalized the working capital adjustment and recognized a pre-tax loss of $1.2 million within other (expense) income in the Consolidated Statements of Income.

The Company assessed the Transaction and the disposal group and determined that the sale does not represent a strategic shift in its business that has a major effect on its consolidated results of operations, financial position or cash flows. Accordingly, the disposal group is not presented in the consolidated financial statements as a discontinued operation. The results of the disposal group through the date the Transaction closed are reported within the U.S. segment (for Market Metrics LLC) and the European segment (for Matrix-Data Limited).

10. GOODWILL

Changes in the carrying amount of goodwill by segment for fiscal years ended August 31, 2017 and 2016 are as follows:

(in thousands)		U.S.				Europe				Asia Pacific				Total
Balance at August 31, 2015		$	211,869			$	93,725			$	2,693			$	308,287
Acquisitions and other adjustments			187,352				—				—				187,352
Disposition			(31,741	)			(665	)			—				(32,406	)
Foreign currency translations			—				(10,780	)			462				(10,318	)
Balance at August 31, 2016		$	367,480			$	82,280			$	3,155			$	452,915
Acquisitions and other adjustments			19,355				216,047				—				235,402
Foreign currency translations			—				19,432				(189	)			19,243
Balance at August 31, 2017		$	386,835			$	317,759			$	2,966			$	707,560

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 2017, 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. During fiscal 2017 the Company acquired goodwill of $235.4 million representing the excess of the purchase price over the fair value of the net tangible and intangible assets from acquisitions completed in fiscal 2017.

11. 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 the Company’s acquired intangible assets at August 31, 2017 was 11.5 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 were no changes to the estimate of the remaining useful lives during fiscal years 2017, 2016 and 2015. Amortizable intangible assets are tested for impairment, if indicators are present, based on 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.

During fiscal 2017, $93.2 million of intangible assets were acquired with a weighted average useful life of 11.5 years. The details of the intangible assets acquired during fiscal 2017 are outlined as follows:

Acquired Intangible Assets Allocation (in thousands)		Amortization Period (years)				Acquisition Cost
Client relationships			16.1			$	50,152
Software technology			6.3				40,826
Non-compete agreements			3.1				862
Trade name			4.0				1,354
Total			11.5			$	93,194

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

At August 31, 2017 (in thousands)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Data content		$	34,116			$	18,899			$	15,217
Client relationships			99,779				22,339				77,440
Software technology			105,963				30,889				75,074
Non-compete agreements			4,833				1,518				3,315
Trade names			4,080				1,583				2,497
Total		$	248,771			$	75,228			$	173,543

At August 31, 2016 (in thousands)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Data content		$	34,167			$	16,758			$	17,409
Client relationships			45,185				16,480				28,705
Software technology			62,560				20,545				42,015
Non-compete agreements			4,344				1,118				3,226
Trade names			2,728				922				1,806
Total		$	148,984			$	55,823			$	93,161

Amortization expense recorded for intangible assets during fiscal years 2017, 2016 and 2015 was $19.9 million, $14.8 million and $8.2 million, respectively. As of August 31, 2017, estimated intangible asset amortization expense for each of the next five years and thereafter are as follows:

Fiscal Year (in thousands)		Estimated Amortization Expense
2018		$	24,475
2019			23,634
2020			22,978
2021			21,404
2022			19,081
Thereafter			61,971
Total		$	173,543

12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

		August 31,
(in thousands)		2017				2016
Leasehold improvements		$	113,760			$	103,238
Computers and related equipment			138,195				110,661
Furniture and fixtures			42,532				39,375
Subtotal		$	294,487			$	253,274
Less accumulated depreciation and amortization			(194,033	)			(168,652	)
Property, equipment and leasehold improvements, net		$	100,454			$	84,622

Depreciation expense was $28.0 million, $23.3 million and $23.1 million for fiscal years 2017, 2016 and 2015, respectively.

13. COMMON STOCK AND EARNINGS PER SHARE

On May 5, 2017, FactSet’s Board of Directors approved a 12.0% increase in the regular quarterly dividend from $0.50 to $0.56 per share, or $2.24 per share per annum.

Shares of common stock outstanding were as follows:

		Years ended August 31,
(in thousands)		2017				2016				2015
Balance, beginning of year (September 1)			40,038				41,317				41,793
Common stock issued for employee stock plans			693				823				1,213
Repurchase of common stock from employees(1)			(50	)			(28	)			(23	)
Repurchase of common stock under the share repurchase program			(1,555	)			(1,478	)			(1,666	)
Repurchase of common stock under accelerated share repurchase agreement			(103	)			(596	)			—
Balance, end of year (August 31)			39,023				40,038				41,317

	(1)	For fiscal 2017, 2016 and 2015_, the Company repurchased_ 49,771_, 27,625 and 23,192 sha__res, or $_7.8 million, $4.5 million and $3.1 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 EPS computations is as follows:

(in thousands, except per share data)		Net Income (Numerator)				Weighted Average Common Shares (Denominator)				Per Share Amount
For the year ended August 31, 2017
Basic EPS
Income available to common stockholders		$	258,259				39,444			$	6.55
Diluted EPS
Dilutive effect of stock options and restricted stock							198
Income available to common stockholders plus assumed conversions		$	258,259				39,642			$	6.51
For the year ended August 31, 2016
Basic EPS
Income available to common stockholders		$	338,815				40,880			$	8.29
Diluted EPS
Dilutive effect of stock options and restricted stock							485
Income available to common stockholders plus assumed conversions		$	338,815				41,365			$	8.19
For the year ended August 31, 2015
Basic EPS
Income available to common stockholders		$	241,051				41,572			$	5.80
Diluted EPS
Dilutive effect of stock options and restricted stock							663
Income available to common stockholders plus assumed conversions		$	241,051				42,235			$	5.71

Dilutive potential common shares consist of stock options and unvested restricted stock. There were 704,786, 507,658 and 88,090 stock options excluded from the fiscal 2017, 2016 and 2015 calculations of diluted EPS, respectively, because their inclusion would have been anti-dilutive.

As of August 31, 2017, 2016 and 2015, 415,061, 782,843 and 478,945, respectively, performance-based stock options were excluded from the calculation of diluted EPS. Performance-based stock options are omitted from the calculation of diluted EPS until the performance criteria is considered probable of being met.

14. STOCKHOLDERS’ EQUITY

Preferred Stock

At August 31, 2017 and 2016, there were 10,000,000 shares of preferred stock ($.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 August 31, 2017 and 2016, there were 150,000,000 shares of common stock ($.01 par value per share) authorized, of which 51,845,132 and 51,150,978 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

At August 31, 2017 and 2016, there were 12,822,100 and 11,112,753 shares of treasury stock (at cost) outstanding, respectively. As a result, 39,023,032 and 40,038,225 shares of FactSet common stock were outstanding at August 31, 2017 and 2016, respectively.

Share Repurchase Program

Repurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions. During fiscal 2017, the Company repurchased 1,554,822 shares for $252.8 million. During fiscal 2016, the Company repurchased 1,478,000 shares for $232.3 million.

On July 1, 2016, FactSet entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase $120.0 million of FactSet common stock. The Company received 595,607 shares of common stock on July 5, 2016, which was approximately 80% of the total number of shares of common stock expected to be repurchased under the ASR Agreement. The final settlement of the ASR Agreement occurred in the first quarter of fiscal 2017 with FactSet receiving an additional 102,916 shares of its common stock.

On March 27, 2017, the Board of Directors of FactSet approved a $300.0 million expansion of to the existing share repurchase program. At August 31, 2017, $244.1 million remained authorized for future share repurchases. No minimum number of shares to be repurchased has been fixed. There is no timeframe to complete the share repurchase program and it is expected that share repurchases will be paid for using existing and future cash generated by operations.

Restricted Stock

Restricted stock awards entitle the holder to shares of common stock as the awards vest over time. During fiscal 2017, 132,194 shares of previously granted restricted stock awards vested and were included in common stock outstanding as of August 31, 2017 (less 49,771 shares repurchased from employees at a cost of $7.8 million to cover their cost of taxes upon vesting of the restricted stock). During fiscal 2016, 69,244 shares of previously granted restricted stock awards vested and were included in common stock outstanding as of August 31, 2016 (less 27,625 shares repurchased from employees at a cost of $4.5 million to cover their cost of taxes upon vesting of the restricted stock).

Dividends

The Company’s Board of Directors declared the following dividends during the periods presented:

Declaration Date		Dividends Per Share of Common Stock			Type	Record Date		Total $ Amount (in thousands)			Payment Date
August 10, 2017		$	0.56		Regular (cash)	August 31, 2017		$	21,853		September 19, 2017
May 5, 2017		$	0.56		Regular (cash)	May 31, 2017		$	21,951		June 20, 2017
February 6, 2017		$	0.50		Regular (cash)	February 28, 2017		$	19,709		March 21, 2017
November 10, 2016		$	0.50		Regular (cash)	November 30, 2016		$	19,852		December 20, 2016
August 5, 2016		$	0.50		Regular (cash)	August 31, 2016		$	20,019		September 20, 2016
May 6, 2016		$	0.50		Regular (cash)	May 31, 2016		$	20,171		June 21, 2016
February 5, 2016		$	0.44		Regular (cash)	February 29, 2016		$	18,044		March 15, 2016
November 6, 2015		$	0.44		Regular (cash)	November 30, 2015		$	18,208		December 15, 2015
August 10, 2015		$	0.44		Regular (cash)	August 31, 2015		$	18,179		September 15, 2015
May 12, 2015		$	0.44		Regular (cash)	May 29, 2015		$	18,274		June 16, 2015
February 11, 2015		$	0.39		Regular (cash)	February 27, 2015		$	16,236		March 17, 2015
November 12, 2014		$	0.39		Regular (cash)	November 28, 2014		$	16,216		December 16, 2014

All of 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.

15. STOCK OPTION AND RETIREMENT PLANS

Stock Options

The FactSet Research Systems Inc. 2004 Stock Option and Award Plan, as Amended and Restated (the “Option Plan”) provides for the grant of share-based awards, including stock options and restricted stock awards to employees of FactSet. The expiration date of the Option Plan is December 14, 2020. Stock options granted under the Option Plan expire either seven or ten years from the date of grant and the majority vest ratably over a period of five years. Options become vested and exercisable provided the employee continues employment with the Company through the applicable vesting date and remain exercisable until expiration or cancellation. Options are not transferable or assignable other than by will or the laws of descent and distribution. During the grantee’s lifetime, the options may be exercised only by the grantee.

As of August 31, 2017, a total of 3,366,070 stock options were outstanding at a weighted average exercise price of $139.29. Unamortized stock-based compensation of $57.7 million is expected to be recognized as stock-based compensation expense over the remaining vesting period of 3.3 years.

Stock Option Activity

In fiscal years 2017, 2016 and 2015, stock options to purchase 1,026,984, 1,195,649, and 828,652 shares of common stock, respectively, were granted to existing employees and non-employee directors of the Company. These options have a weighted average grant date exercise price of $157.09, $168.14 and $141.79 for fiscal years 2017, 2016 and 2015, respectively.

A summary of stock option activity is as follows:

(in thousands, except per share data)		Number Outstanding				Weighted Average Exercise Price Per Share
Balance at August 31, 2014			3,482			$	79.67
Granted – non performance-based			677			$	140.49
Granted – performance-based			138			$	148.52
Granted – non-employee Directors grant			14			$	138.48
Exercised			(1,060	)		$	63.03
Forfeited			(134	)		$	106.01
Balance at August 31, 2015			3,117			$	100.71
Granted – non performance-based			622			$	171.18
Granted – performance-based			551			$	165.59
Granted – non-employee Directors grant			23			$	146.82
Exercised			(681	)		$	71.52
Forfeited			(268	)		$	113.70
Balance at August 31, 2016			3,364			$	129.54
Granted – non performance-based			713			$	152.89
Granted – performance-based			291			$	166.29
Granted – non-employee Directors grant			24			$	170.24
Exercised			(487	)		$	86.17
Forfeited			(539	)		$	160.31
Balance at August 31, 2017			3,366			$	139.29

Stock Options Outstanding and Exercisable

The following table summarizes ranges of outstanding and exercisable options as of August 31, 2017 (in thousands, except per share data and the weighted average remaining years of contractual life):

				Outstanding																Exercisable
Range of Exercise Prices Per Share				Number Outstanding				Weighted Average Remaining Years of Contractual Life				Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value				Number Exercisable				Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value
$87.26	-	$92.22			627				4.7			$	91.59			$	41,122				536			$	91.61			$	35,146
$94.84	-	$110.31			306				4.9			$	99.02			$	17,797				240			$	97.41			$	14,345
$131.31	-	$148.52			540				7.1			$	135.46			$	11,730				4			$	138.48			$	75
$150.81	-	$152.28			729				9.1			$	152.25			$	3,595				20			$	152.05			$	102
$159.14	-	$170.24			692				8.7			$	165.23			$	—				27			$	164.90			$	—
$171.22	-	$175.20			472				8.1			$	173.39			$	—				91			$	175.20			$	—
Total Fiscal 201__7					3,366				7.4			$	139.29			$	74,244				918			$	105.14			$	49,668

Prior Year Amounts						August 31, 2016								August 31, 2015
		Number of Shares				Weighted Average Exercise Price Per Share				Number of Shares				Weighted Average Exercise Price Per Share
Outstanding at fiscal year end			3,364			$	129.54				3,117			$	100.71
Exercisable at fiscal year end			970			$	89.42				1,352			$	78.70

The aggregate intrinsic value of in-the-money stock options exercisable at August 31, 2017 and 2016 was $49.7 million and $86.0 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price of $157.18 at August 31, 2017 and the exercise price multiplied by the number of options exercisable as of that date. The weighted average remaining contractual life of stock options exercisable at August 31, 2017 and 2016 was 5.1 years and 4.5 years, respectively. The total pre-tax intrinsic value of stock options exercised during fiscal 2017, 2016 and 2015 was $38.0 million, $60.8 million and $92.7 million, respectively.

Performance-based Stock Options

Performance-based stock options require management to make assumptions regarding the likelihood of achieving Company performance targets. The number of performance-based options 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 stock options will vest to the grantees of those stock options. However, there is no current guarantee that such options will vest in whole or in part.

February 2015 Performance-based Option Grant Review

In connection with the acquisition of Code Red, FactSet granted 137,522 performance-based stock options during the second quarter of fiscal 2015. Of the total amount granted, 68,761 performance-based options were eligible to vest if certain Code Red ASV and operating margin targets were achieved over a two-year measurement period ending February 28, 2017. At the conclusion of the measurement period, 70% of the options were deemed eligible to vest, with the remaining options being forfeited. The option holders must remain employed by FactSet through February 28, 2019 in order for the options to vest. As of August 31, 2017, total unamortized stock-based compensation of $0.8 million will be recognized as expense over the remaining vesting period of 1.4 years.

The remaining 68,761 options granted in February 2015 are eligible to cliff vest based on a four-year measurement period ending February 28, 2019. As of August 31, 2017, total unamortized stock-based compensation of $0.4 million will be recognized as expense over the remaining vesting period of 1.4 years. A change, up or down, in the actual financial performance levels achieved by Code Red in future fiscal years could result in the following changes to the current estimate of the vesting percentage and related expense:

Vesting Percentage (in thousands)			Cumulative Catch-up Adjustment*				Remaining Expense to be Recognized
0%			$	(769	)		$	—
10%			$	(577	)		$	108
40% (current expectation)			$	—			$	431
70%			$	577			$	755
100%			$	1,153			$	1,078

* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 2017.

October 2015 and August 2016 Performance-based Option Grant Review

In connection with the acquisition of Portware during the first quarter of fiscal 2016, FactSet granted 530,418 performance-based stock options. In the fourth quarter of fiscal 2017, FactSet modified the vesting of these grants to allow 70% of the options to become eligible to vest, with the remaining options being forfeited. In conjunction with this modification, FactSet recognized a cumulative catch-up adjustment of $1.8 million. The remaining options will vest 40% on the second anniversary date of the grant and 20% on each subsequent anniversary date provided the option holders remain employed by FactSet. As of August 31, 2017, total unamortized stock-based compensation of $2.9 million will be recognized as expense over the remaining vesting period of 3.1 years.

FactSet granted 20,911 additional performance-based stock options to Portware employees in the fourth quarter of fiscal 2016 with similar performance conditions. In the fourth quarter of fiscal 2017, FactSet modified the vesting of these grants to allow 70% of the options to become eligible to vest, with the remaining options being forfeited. In conjunction with this modification, FactSet recognized a cumulative catch-up adjustment of $0.1 million. The remaining options will vest 40% on the second anniversary date of the grant and 20% on each subsequent anniversary date provided the option holders remain employed by FactSet. As of August 31, 2017, total unamortized stock-based compensation of $0.4 million will be recognized as expense over the remaining vesting period of 3.9 years.

January 2017 Performance-based Option Grant Review

In connection with the acquisition of Vermilion, FactSet granted 61,744 performance-based stock options in January 2017. These performance-based options will vest 40% on the second anniversary date of the grant and 20% on each subsequent anniversary date if certain Vermilion revenue and operating income targets are achieved by November 30, 2018. The option holders must also remain employed by FactSet for the options to be eligible to vest. As of August 31, 2017, FactSet does not believe these growth targets are probable of being achieved, and as such, no stock-based compensation expense is expected to be recognized in connection with these performance-based options. A change in the actual financial performance levels achieved by Vermilion in future fiscal years could result in the following changes to the current estimate of the vesting percentage and related expense:

Vesting Percentage (in thousands)			Cumulative Catch-up Adjustment*				Remaining Expense to be Recognized
0% (current expectation)			$	—			$	—
100%			$	338			$	2,367

* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 2017.

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 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 achieved by March 31, 2019. The option holders must also remain employed by FactSet for the options to be eligible to vest. As of August 31, 2017, FactSet does not believe these growth targets are probable of being achieved, and as such, no stock-based compensation expense is expected to be recognized in connection with these performance-based options. A change in 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 and related expense:

Vesting Percentage (in thousands)			Cumulative Catch-up Adjustment*				Remaining Expense to be Recognized
0% (current expectation)			$	—			$	—
80%			$	237			$	6,870
90%			$	267			$	7,729
100%			$	296			$	8,588

* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 2017.

Restricted Stock and Stock Unit Awards

The Company’s Option Plan plans permit the issuance of restricted stock and restricted stock units. Restricted stock awards are subject to continued employment over a specified period.

Restricted Stock and Stock Unit Awards Activity

In fiscal years 2017, 2016 and 2015, FactSet granted 62,400, 97,319 and 54,862 restricted stock awards to employees of the Company, respectively. These awards have a weighted average grant date fair value of $158.26, $159.64 and $138.23 for fiscal years 2017, 2016 and 2015, respectively.

As of August 31, 2017, a total of 182,175 shares of restricted stock and restricted stock units were unvested and outstanding, which results in unamortized stock-based compensation of $19.1 million to be recognized as stock-based compensation expense over the remaining vesting period of 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
Balance at August 31, 2014			368			$	89.77
Granted (restricted stock and stock units)			55			$	138.23
Vested(1)			(95	)		$	70.94
Canceled/forfeited			(15	)		$	101.04
Balance at August 31, 2015			313			$	103.34
Granted (restricted stock and stock units)			97			$	159.64
Vested(2)			(69	)		$	85.04
Canceled/forfeited			(79	)		$	112.51
Balance at August 31, 2016			262			$	126.27
Granted (restricted stock and stock units)			62			$	158.26
Vested(3)			(132	)		$	123.28
Canceled/forfeited			(10	)		$	130.32
Balance at August 31, 2017			182			$	138.62

	(1)	The 94,870 restricted stock awards that vested during fiscal 2015 were comprised of: 53,495 of awards granted on October 23, 2009_, which cliff vested 60% after three years (on October 23, 2012) and 40% after five years (on October 23, 2014); 14,683 restricted stock awards that were granted on April 8, 2013, which cliff vest 20% annually upon the anniversary date of the grant; 17,228 awards relating to restricted stock granted on February 9, 2010;_ and 9,464 restricted stock awards that were previously granted between November 2013 and November 2014.

	(2)	The 69,244 restricted stock awards that vested during fiscal 2016 were comprised of: 37,079 of awards relating to restricted stock granted on November 8, 2010 (remaining 40%) and 14,683 restricted stock awards that were granted on April 8, 2013, which cliff vest 20% annually upon the anniversary date of the grant_. Additionally, 17,482 awards vested related to_ other grants_._

	(3)	The 132,194 restricted stock awards that vested during fiscal 2017 were comprised of: 73,522 of awards relating to restricted stock granted on November 1, 2013, which cliff vested 60% after three years, 17,328 of awards relating to restricted stock granted on October 16, 2015, which vested 20% annually upon the anniversary date of the grant and 30,162 of awards relating to restricted stock granted on October 16, 2015, which were modified to accelerate vest 100% in conjunction with employee severance. Additionally, 11,182 awards vested related to other grants.

Share-based Awards Available for Grant

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

(in thousands)		Share-based Awards Available for Grant under the Employee Stock Option Plan				Share-based Awards Available for Grant under the Non-Employee Stock Option Plan
Balance at August 31, 2014			3,222				102
Granted – non performance-based options			(677	)			—
Granted – performance-based options			(138	)			—
Granted – non-employee Directors grant			—				(14	)
Restricted stock awards granted(1)			(137	)			—
Share-based awards canceled/forfeited(2)			171				—
Balance at August 31, 2015			2,441				88
Granted – non performance-based options			(622	)			—
Granted – performance-based options			(551	)			—
Granted – non-employee Directors grant			—				(22	)
Restricted stock awards granted(1)			(243	)			—
Share-based awards canceled/forfeited(2)			466				—
Balance at August 31, 2016			1,491				66
Granted – non performance-based options			(713	)			—
Granted – performance-based options			(291	)			—
Granted – non-employee Directors grant			—				(24	)
Restricted stock awards granted(1)			(156	)			—
Share-based awards canceled/forfeited(2)			566				—
Balance at August 31, 2017			897				42

	(1)	Each restricted stock award granted is equivalent to 2.5 shares granted under the Company’s Option P__lan.

	(2)	Under the Company’s O__ption P__lan, 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. 2008 Employee Stock Purchase Plan (the “Purchase Plan”) in three-month intervals at a purchase price equal to at least 85% of the lesser of the fair market value of the Company’s common stock on either the first day or the last day of each three-month offering period. Employee purchases may not exceed 10% of their gross compensation during an offering period.

During fiscal 2017, employees purchased 75,372 shares as compared to 73,072 shares in fiscal 2016 and 63,265 shares in fiscal 2015. At August 31, 2017, 333,172 shares were reserved for future issuance under the Purchase Plan.

401(k) Plan

The Company established its 401(k) Plan in fiscal 1993. The 401(k) Plan is a defined contribution plan covering all full-time, U.S. employees of the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 (“IRC”). Each year, participants may contribute up to 60% of their eligible annual compensation, subject to annual limitations established by the IRC. The Company matches up to 4% of employees’ earnings, capped at the Internal Revenue Service annual maximum. Company matching contributions are subject to a five year graduated vesting schedule. All full-time, U.S. employees are eligible for the matching contribution by the Company. The Company contributed $10.1 million, $9.7 million, and $8.6 million in matching contributions to employee 401(k) accounts during fiscal 2017, 2016 and 2015, respectively.

16. STOCK-BASED COMPENSATION

The Company recognized total stock-based compensation expense of $34.2 million, $29.8 million and $26.4 million in fiscal 2017, 2016 and 2015, respectively. As of August 31, 2017, $76.9 million of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted average period of 3.3 years. There was no stock-based compensation capitalized as of August 31, 2017 and 2016, respectively.

Employee Stock Option Fair Value Determinations

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

Q1 201****7	671,263 non performance-based employee stock options and 22,460 performance-based employee stock options were granted at a weighted average exercise price of $152.51 and a weighted average estimated fair value of $39.60 per share.
Q2 201****7	61,744 performance-based employee stock options were granted at a weighted average exercise price of $169.16 and a weighted average estimated fair value of $43.81 per share.
Q3 201****7	11,604 non performance-based employee stock options were granted at a weighted average exercise price of $163.05 and a weighted average estimated fair value of $42.23 per share.
Q4 201****7	29,650 non performance-based employee stock options and 206,417 performance-based employee stock options were granted at a weighted average exercise price of $165.75 and a weighted average estimated fair value of $42.93 per share.
Q1 2016	513,785 non performance-based employee stock options and 530,418 performance-based employee stock options were granted at a weighted average exercise price of $170.21 and a weighted average estimated fair value of $46.62 per share.
Q2 2016	4,073 non performance-based employee stock options were granted at an exercise price of $150.81 and an estimated fair value of $40.51 per share.
Q3 2016	103,903 non performance-based employee stock options were granted at an exercise price of $152.10 and an estimated fair value of $40.57 per share.

Q4 2016	20,911 performance-based employee stock options were granted at an exercise price of $171.22 and an estimated fair value of $47.82 per share.
Q1 2015	462,913 non performance-based employee stock options were granted at a weighted average exercise price of $131.31 and a weighted average estimated fair value of $37.67 per share.
Q2 2015	25,075 non performance-based employee stock options and 137,522 performance-based employee stock options were granted at a weighted average exercise price of $147.05 and a weighted average estimated fair value of $43.05 per share.
Q3 2015	61,210 non performance-based employee stock options were granted at a weighted average exercise price of $159.14 and a weighted average estimated fair value of $44.95 per share.
Q4 2015	128,090 non performance-based employee stock options were granted at a weighted average exercise price of $165.02 and a weighted average estimated fair value of $54.10 per share.

The weighted average estimated fair value of employee stock options granted during fiscal 2017, 2016 and 2015 was determined using the binomial model with the following weighted average assumptions:

		2017				2016				2015
Term structure of risk-free interest rate		0.07%	-	2.09%		0.07%	-	2.1%		0.01%	-	2.3%
Expected life (years)		7.4	-	8.1		7.3	-	8.1		5.8	-	9.4
Term structure of volatility		21%	-	30%		21%	-	30%		20%	-	31%
Dividend yield			1.18%				1.09%				1.32%
Weighted average estimated fair value			$40.68				$46.08				$41.87
Weighted average exercise price			$156.77				$168.55				$141.84
Fair value as a percentage of exercise price			25.9%				27.3%				29.5%

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

Non-Employee Director Stock Option Fair Value Determinations

The 2008 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”) provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet. A total of 250,000 shares of FactSet common stock have been reserved for issuance under the Directors’ Plan. The expiration date of the Directors’ Plan is December 1, 2018.

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 is affected by the Company’s stock price as well as assumptions regarding a number of 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 forfeitures and employee stock option exercise behaviors.

F****iscal 2017

On January 13, 2017, FactSet granted 23,846 stock options to the Company’s non-employee Directors, including one-time new director grants of 2,104 for both Malcolm Frank and Sheila B. Jordan, who were elected to FactSet’s Board of Directors on December 20, 2016. All of the options granted on January 13, 2017, have a weighted average estimated fair value of $35.65 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate			1.95	%
Expected life (years)			5.4
Expected volatility			22.7	%
Dividend yield			1.24	%

Fiscal 2016

On January 15, 2016, FactSet granted 22,559 stock options to the Company’s non-employee Directors, including a one-time new director grant of 2,417 for Laurie Siegel, who was elected to FactSet’s Board of Directors on December 15, 2015. All of the options granted on January 15, 2016, have a weighted average estimated fair value of $31.03 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate			1.62	%
Expected life (years)			5.4
Expected volatility			23.0	%
Dividend yield			1.05	%

Fiscal 2015

On January 15, 2015, FactSet granted 13,842 stock options to the Company’s non-employee directors at a weighted average estimated fair value of $28.18 per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate			1.45	%
Expected life (years)			5.4
Expected volatility			23	%
Dividend yield			1.30	%

Restricted Stock Fair Value Determinations

Restricted stock granted to employees entitle 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 are 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 stock awards are amortized to expense over the vesting period.

Q1 201****7	5,084 shares of restricted stock were granted at a weighted average estimated fair value of $151.63 per share.
Q2 201****7	7,843 shares of restricted stock were granted at a weighted average estimated fair value of $161.31 per share.
Q3 201****7	No restricted stock granted.
Q4 201****7	49,473 shares of restricted stock were granted at a weighted average estimated fair value of $158.46 per share.
Q1 2016	93,120 shares of restricted stock were granted at a weighted average estimated fair value of $159.46 per share.
Q2 2016	No restricted stock granted.

Q3 2016	255 shares of restricted stock were granted at a weighted average estimated fair value of $146.20 per share.
Q4 2016	3,944 shares of restricted stock were granted at a weighted average estimated fair value of $164.77 per share.
Q1 2015	10,225 shares of restricted stock were granted at a weighted average estimated fair value of $127.58 per share.
Q2 2015	38,088 shares of restricted stock were granted at a weighted average estimated fair value of $137.83 per share.
Q3 2015	845 shares of restricted stock were granted at a weighted average estimated fair value of $152.77 per share.
Q4 2015	5,704 shares of restricted stock were granted at a weighted average estimated fair value of $157.84 per share.

Employee Stock Purchase Plan Fair Value Determinations

During fiscal 2017, employees purchased 75,372 shares at a weighted average price of $136.34 compared to 73,072 shares at a weighted average price of $131.14 in fiscal 2016 and 63,265 shares at a weighted average price of $122.76 in fiscal 2015. Stock-based compensation expense recorded during fiscal 2017, 2016 and 2015 relating to the employee stock purchase plan was $2.1 million, $1.9 million and $1.5 million, respectively.

The Company uses the Black-Scholes model to calculate the estimated fair value for the employee stock purchase plan. The weighted average estimated fair value of employee stock purchase plan grants during fiscal years 2017, 2016 and 2015, were $28.16, $26.87 and $24.05 per share, respectively, with the following weighted average assumptions:

		2017				2016				2015
Risk-free interest rate			0.69	%			0.22	%			0.03	%
Expected life (months)			3				3				3
Expected volatility			8.6	%			10.7	%			16.3	%
Dividend yield			1.25	%			1.18	%			1.15	%

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 a number of 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.

17. INCOME TAXES

Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using currently enacted tax rates.

Provision for Income Taxes

The provision for income taxes is as follows:

		Years ended August 31,
(in thousands)		2017				2016				2015
U.S. operations		$	218,650			$	353,434			$	263,411
Non-U.S. operations			125,662				107,559				70,343
Income before income taxes		$	344,312			$	460,993			$	333,754
U.S. operations		$	65,403			$	106,671			$	88,147
Non-U.S. operations			20,650				15,507				4,556
Total provision for income taxes		$	86,053			$	122,178			$	92,703
Effective tax rate			25.0	%			26.5	%			27.8	%

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

		Years ended August 31,
(in thousands)		2017				2016				2015
Current
U.S. federal		$	58,057			$	97,703			$	82,885
U.S. state and local			5,659				4,917				4,419
Non-U.S.			17,458				15,030				6,368
Total current taxes		$	81,174				117,650			$	93,672
Deferred
U.S. federal		$	4,320			$	3,915			$	720
U.S. state and local			(77	)			136				123
Non-U.S.			636				477				(1,812	)
Total deferred taxes		$	4,879			$	4,528			$	(969	)
Total provision for income taxes		$	86,053			$	122,178			$	92,703

The provision for income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income tax rate to income before income taxes as a result of the following factors:

		Years ended August 31,
(expressed as a percentage of income before income taxes)		2017				2016				2015
Tax at U.S. Federal statutory tax rate			35.0	%			35.0	%			35.0	%
Increase (decrease) in taxes resulting from:
State and local taxes, net of U.S. federal income tax benefit			1.8				1.5				1.6
Foreign income at other than U.S. rates			(7.0	) (1)			(5.0	) (2)			(3.0	)
Domestic production activities deduction			(2.1	)			(1.5	)			(2.2	)
Income tax benefits from R&D tax credits			(3.3	)			(3.6	)			(2.7	)
Income tax benefits from foreign tax credits			(0.3	)			(0.2	)			(0.3	)
Other, net			0.9				0.3				(0.6	)
Effective tax rate			25.0	%			26.5	% (3)			27.8	% (4)

	(1)	Includes a 2__0__0 basis point benefit as a result of FactSet’s global realignment. Effective September 1, 2016, FactSet realigned certain aspects of its global operations from FactSet Research Systems Inc., its U.S. parent company, to FactSet UK Limited, a U.K. operating company, to better position the Company to serve its growing client base outside the U.S. This realignment allows the Company to further implement strategic corporate objectives and helps achieve operational and financial efficiencies, while complementing FactSet’s increasing global growth and reach.

	(2)	Includes a portion of the gain from the sale of the Market Metrics business that was not taxable in the UK

	(3)	The fiscal 2016 effective tax rate of 26.5% includes income tax benefits of $10.5 million primarily from the permanent reenactment of the U.S. Federal R&D Tax Credit (the “R&D tax credit”) in December 2015, finalizing the fiscal 2015 tax returns and other discrete items. The reenactment of the R&D tax credit was retroactive to January 1, 2015_,_ and eliminates the yearly uncertainty surrounding the extension of the credit_._

	(4)	The fiscal 2015 effective tax rate of 27.8% includes income tax benefits of $8.8 million primarily from the reenactment of the R&D tax credit in December 2014, finalizing the fiscal 2014 tax returns and other discrete items.

Deferred Tax Assets and Liabilities

The significant components of deferred tax assets that are recorded within the Consolidated Balance Sheets were as follows:

		At August 31,
(in thousands)		2017				2016
Current
Receivable reserve		$	811			$	531
Deferred rent			1,321				1,022
Other			536				1,605
Net current deferred tax assets		$	2,668			$	3,158
Non-current
Depreciation on property, equipment and leasehold improvements		$	2,220			$	5,194
Deferred rent			10,294				9,626
Stock-based compensation			20,117				19,927
Purchased intangible assets, including acquired technology			(32,742	)			(24,645	)
Other			7,523				3,304
Net non-current deferred tax assets		$	7,412			$	13,406
Total deferred tax assets		$	10,080			$	16,564

The significant components of deferred tax liabilities that are recorded within the Consolidated Balance Sheets were as follows:

		At August 31,
(in thousands)		2017				2016
Current
Other		$	2,382			$	291
Net current deferred tax liabilities		$	2,382			$	291
Non-current
Stock-based compensation		$	(815	)		$	—
Purchased intangible assets, including acquired technology			26,231				1,666
Other			(524	)			42
Net non-current deferred tax liabilities		$	24,892			$	1,708
Total deferred tax liabilities		$	27,274			$	1,999

No U.S. income taxes have been provided on filing-basis undistributed foreign earnings and profits of $223.6 million as of August 31, 2017, as FactSet plans to permanently reinvest these amounts and use the earnings to fund non-U.S. operations and working capital needs as well as facilities overseas. These needs include, but are not limited to, capital expenditures and acquisitions intended to further FactSet’s global growth strategy. At each reporting period, FactSet assesses its position with regard to undistributed foreign earnings of its subsidiaries. To the extent that earnings can no longer be indefinitely reinvested, the Company will accrue the tax impact, if any, attributable to those earnings, including the impact of foreign tax credits, at such time. If such earnings are repatriated, additional tax expense may result, although the flexibility inherent in the U.S. Internal Revenue Code may permit the ultimate distribution to be tax-free depending on the nature of the distribution. Therefore the Company does not believe it is practicable to estimate, with reasonable accuracy, the hypothetical amount of the unrecognized deferred tax liability on its undistributed foreign earnings given the many factors and assumptions necessary to estimate the amount of the federal income tax that may be payable in the future on the undistributed earnings.

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 August 31, 2017, the Company had gross unrecognized tax benefits totaling $11.5 million, including $1.5 million of accrued interest, recorded as Taxes Payable (non-current) on the Consolidated Balance Sheet. As of August 31, 2016, the Company had gross unrecognized tax benefits totaling $8.8 million, including $1.3 million of accrued interest, recorded as Taxes Payable (non-current) on the Consolidated Balance Sheet. The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense, which is consistent with the recognition in prior reporting periods. The Company recognized interest charges of less than $0.2 million in each of the fiscal years ended August 31, 2017, 2016 and 2015, respectively.

Unrecognized tax benefits represent tax positions taken on tax returns but not yet recognized in the consolidated financial statements. 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:

(in thousands)
Unrecognized income tax benefits at August 31, 2014		$	5,501
Additions based on tax positions related to the current year			962
Additions for tax positions of prior years			1,122
Statute of limitations lapse			(809	)
Unrecognized income tax benefits at August 31, 2015		$	6,776
Additions based on tax positions related to the current year			1,779
Additions for tax positions of prior years			1,436
Statute of limitations lapse			(1,209	)
Unrecognized income tax benefits at August 31, 2016		$	8,782
Additions based on tax positions related to the current year			3,896
Additions for tax positions of prior years			628
Statute of limitations lapse			(1,822	)
Unrecognized income tax benefits at August 31, 2017		$	11,484

In the normal course of business, the Company’s tax filings are subject to audit by federal, state and foreign tax authorities. At August 31, 2017, 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	2014 through 2017
State (various)	2010 through 2017
Europe
United Kingdom	2014 through 2017
France	2016 through 2017
Germany	2017

18. DEBT

FactSet’s debt obligations consisted of the following:

		At August 31,
(in thousands)		2017				2016
2017 Revolving Credit Facility (maturity date of March 17, 2020)			575,000				—
2015 Revolving Credit Facility (maturity date of September 21, 2018)		$	—			$	300,000
Total Outstanding Debt		$	575,000			$	300,000

On March 17, 2017, the Company entered into a Credit Agreement (the “2017 Credit Agreement”) between FactSet, as the borrower, and PNC Bank, National Association (“PNC”), as the administrative agent and lender. The 2017 Credit Agreement provides for a $575.0 million revolving credit facility (the “2017 Revolving Credit Facility”). FactSet may request borrowings under the 2017 Revolving Credit Facility until its maturity date of March 17, 2020. The 2017 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 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%. 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.

In conjunction with FactSet’s entrance into the 2017 Credit Agreement, the Company borrowed $575.0 million in the form of a LIBOR rate loan under the 2017 Revolving Credit Facility and retired the outstanding debt under its previous credit agreement between FactSet, as the borrower, and Bank of America, N.A., as the lender. The total principal amount of the debt outstanding at the time of retirement was $365.0 million and there were no prepayment penalties. Proceeds from the 2017 Revolving Credit Facility were also used to fund FactSet’s acquisition of BISAM.

All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheet at August 31, 2017. During fiscal 2017 and 2016, we paid approximately $8.4 million and $3.1 million in interest on its outstanding debt amounts, respectively. The principal balance is payable in full on the maturity date.

As of August 31, 2017, no commitment fee was owed by FactSet since it borrowed the full amount under the 2017 Credit Agreement. In fiscal 2017, FactSet incurred approximately $0.4 million in legal costs to draft and review the 2017 Credit Agreement. These costs were capitalized as loan origination fees and are amortized into interest expense over the term of the loan using the effective interest method.

The 2017 Credit Agreement contained covenants restricting certain FactSet activities, which are usual and customary for this type of loan.

In addition, the 2017 Credit Agreement required that FactSet maintain a consolidated leverage ratio, as measured by total funded debt/EBITDA below a specified level as of the end of each fiscal quarter. The Company was in compliance with all of the covenants of the 2017 Credit Agreement as of August 31, 2017.

19. COMMITMENTS AND CONTINGENCIES

Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the balance sheet as liabilities. FactSet records liabilities for commitments when incurred (i.e., when the goods or services are received).

Lease Commitments

At August 31, 2017, FactSet leased approximately 1,143,000 square feet of office space under various non-cancelable operating leases which expire on various dates through 2031. Total minimum rental payments associated with the leases are recorded as rent expense (a component of Selling, General & Administrative expense) on a straight-line basis over the periods of the respective non-cancelable lease terms. Future minimum commitments for the Company’s operating leases in place as of August 31, 2017 are as follows:

Years ended August 31, (in thousands)		Minimum Lease Payments
2018			38,056
2019			35,627
2020			27,834
2021			20,836
2022			20,215
Thereafter			139,099
Total		$	281,667

During fiscal 2017, 2016 and 2015, rent expense (including operating costs) for all operating leases amounted to $48.4 million, $43.2 million and $38.6 million, respectively. At August 31, 2017 and 2016, deferred rent reported within the Consolidated Balance Sheets totaled $37.4 million and $34.4 million, of which $33.5 million and $31.2 million, respectively, was reported as a non-current liability within the line item Deferred Rent and Other Non-Current Liabilities.

Approximately $1.9 million of standby letters of credit have been issued during the ordinary course of business in connection with the Company’s current leased office space as of August 31, 2017. These standby letters of credit contain covenants that, among other things, require FactSet to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of August 31, 2017 and 2016, FactSet was in compliance with all covenants contained in the standby letters of credit.

Purchase Commitments with Suppliers

Purchase obligations represent payments due in future periods in respect of commitments to the Company’s various data vendors as well as commitments to purchase goods and services such as telecommunication and computer maintenance services. These purchase commitments are agreements that are enforceable and legally binding on FactSet and that 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, 2017 and 2016, the Company had total purchase commitments with suppliers of $81.0 million and $67.5 million, respectively.

Contingencies

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 subject to legal proceedings, claims and litigation arising in the ordinary course of business, including intellectual property litigation. Based on information available at August 31, 2017, FactSet’s management does not believe that the ultimate outcome of these unresolved matters against the Company, individually or in the aggregate, is likely to have a material adverse effect on the Company's consolidated financial position, its results of operations or its cash flows.

Income Taxes

Uncertain income tax positions are accounted for in accordance with applicable accounting guidance (see Note 17). 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.

Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, FactSet has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at FactSet’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments FactSet could be required to make under these indemnification obligations is unlimited; however, FactSet has a director and officer insurance policy that it believes mitigates FactSet's exposure and may enable FactSet to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification obligations is immaterial.

20. RISKS AND CONCENTRATIONS OF CREDIT RISK

Financial Risk Management

Foreign Currency Exchange Risk

The Company is exposed to changes in foreign currency exchange rates, which could affect its operating results, financial position and cash flows. The Company’s primary foreign currency market exposures include the British Pound Sterling, Euro, Japanese Yen, Indian Rupee and Philippine Peso. To the extent that FactSet’s international activities recorded in local currencies increase in the future, its exposure to fluctuations in currency exchange rates will correspondingly increase. FactSet manages its exposure to foreign currency exchange risk through its regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge currency exposures as well as to reduce earnings volatility resulting from shifts in market rates. FactSet only enters into foreign currency forward contracts to manage foreign currency exposures. The fair market values of all the Company’s derivative contracts change with fluctuations in currency rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. See Note 5, Derivative Instruments, for additional analysis of the Company’s foreign currency exchange rate risk.

Interest Rate Risk

Cash and Cash Equivalents - The fair market value of FactSet’s cash and investments at August 31, 2017 was $227.2 million. The Company’s cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or less and are reported at fair value. The Company’s investments consist of certificates of deposits with original maturities greater than three months, but less than one year and, as such, are classified as Investments within the Consolidated Balance Sheet. It is anticipated that the fair market value of its cash and investments will continue to be immaterially affected by fluctuations in interest rates. Preservation of principal is the primary goal of FactSet’s cash and investment policy. Pursuant to established investment guidelines, the Company tries to achieve high levels of credit quality, liquidity and diversification. Its investment guidelines do not permit FactSet to invest in puts, calls, strips, short sales, straddles, options, commodities, precious metals, futures or investments on margin. Because the Company has a restrictive investment policy, its financial exposure to fluctuations in interest rates is expected to remain low. The Company does not believe that the value or liquidity of its cash and investments have been significantly impacted by current market events.

Debt - As of August 31, 2017, the fair value of FactSet’s long-term debt was $575.0 million, which approximated its carrying amount and was determined based on quoted market prices for debt with a similar maturity. It is anticipated that the fair market value of FactSet’s debt will continue to be immaterially affected by fluctuations in interest rates and it does not believe that the value of its debt has been significantly impacted by current market events. The debt bears interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus 1.00%. During the years ended August 31, 2017 and 2016, we recorded interest expense of $8.4 million and $3.1 million in interest on our outstanding debt amounts, respectively. Assuming all terms of the Company’s outstanding long-term debt remained the same, a hypothetical 25 basis point change (up or down) in the one-month LIBOR rate would result in a $1.4 million change in its annual interest expense.

Current market events have not required the Company to modify materially or change its financial risk management strategies with respect to its exposures to foreign currency exchange risk and interest rate risk.

Concentrations of Credit Risk

Cash equivalents

Cash and cash equivalents are primarily maintained with two 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 are derived from revenues earned from clients located around the globe. FactSet performs ongoing credit evaluations of its clients and does not require collateral from its clients. The Company maintains reserves for potential write-offs and these losses have historically been within expectations. No single client represented 10% or more of FactSet's total revenues in any fiscal year presented. At August 31, 2017, the Company’s largest individual client accounted for 2% of total subscriptions and annual subscriptions from the ten largest clients did not surpass 15% of total subscriptions, consistent with August 31, 2016. At August 31, 2017 and 2016, the receivable reserve was $2.7 million and $1.5 million, respectively.

Derivative Instruments

As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. FactSet has incorporated counterparty risk into the fair value of its derivative assets and its own credit risk into the value of the Company’s derivative liabilities. FactSet calculates credit risk from observable data related to 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 has executed these derivative transactions. Because 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 as determined by FactSet. To mitigate counterparty credit risk, FactSet enters into contracts with large financial institutions and regularly review credit exposure balances as well as the creditworthiness of the counterparties.

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. However, 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 in any fiscal year presented.

21. UNAUDITED QUARTERLY FINANCIAL DATA

The following table presents selected unaudited financial information for each of the quarterly periods in the years ended August 31, 2017 and 2016. The results for any quarter are not necessarily indicative of future quarterly results and, accordingly, period-to-period comparisons should not be relied upon as an indication of future performance.

Fiscal 2017 (in thousands, except per share data)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenues		$	288,063			$	294,354			$	312,120			$	326,642
Cost of services		$	127,250			$	131,635			$	146,426			$	161,269
Selling, general and administrative		$	70,494			$	70,973			$	78,052			$	82,945
Operating income		$	90,319			$	91,746			$	87,642			$	82,428
Net income		$	66,583			$	66,710			$	65,414			$	59,552
Diluted earnings per common share(1)		$	1.66			$	1.68			$	1.66			$	1.52
Weighted average common shares (diluted)			40,100				39,700				39,457				39,281

	(1)	Diluted earnings per common share is calculated independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not equal the total for the fiscal year.

Fiscal 2016 (in thousands, except per share data)		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenues		$	270,504			$	281,796			$	287,501			$	287,291
Cost of services		$	114,736			$	123,911			$	124,602			$	124,160
Selling, general and administrative		$	68,460			$	72,541			$	73,609			$	75,397
Operating income		$	87,308			$	85,344			$	89,290			$	87,734
Net income		$	59,965			$	67,763			$	66,781			$	144,306
Diluted earnings per common share(1)		$	1.43			$	1.63			$	1.62			$	3.55
Weighted average common shares (diluted)			42,063				41,536				41,189				40,673

	(1)	Diluted earnings per common share is calculated independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not equal the total for the fiscal year.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.