Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

The MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Report on Form 10-K.

Executive Overview

We are a global provider of integrated financial information, analytical applications and industry-leading service for the global investment community. We deliver insight and information to investment professionals through our analytics, service, content, and technology. These professionals include portfolio managers, investment research professionals, investment bankers, risk and performance analysts, and wealth advisors. From streaming real-time data to historical information, including quotes, estimates, news and commentary, we offer proprietary and third-party content through desktop, web, mobile and off-platform solutions. Our broad application suite offers tools and resources including company and industry analyses, full screening tools, portfolio analysis, risk profiles, alpha-testing, portfolio optimization and research management solutions. With recent acquisitions, we have continued to expand our solutions across the investment lifecycle from idea generation to performance and client reporting. Our revenues are derived from subscriptions to products and services such as workstations, analytics, enterprise data, research management, and trade execution.

2018 Year in Review

Fiscal 2018 revenue growth can be attributed to achievements in the delivery, integration and consumption of our financial data and analytical applications by the global investment community. As of August 31, 2018, annual subscription value (“ASV”) totaled $1.39 billion, an increase of 5.8% over the prior year and 5.7% organically. Revenues increased 10.6% year over year, of which, 5.6% of the increase can be attributed to organic revenue growth. In addition, clients and users reached new highs of 5,142 and 91,897, respectively, in fiscal 2018. We returned $393.4 million to stockholders in the form of share repurchases and dividends during the fiscal year.

We continued to diversity our suite of solutions through the integration of our acquisitions and new product investments. We enhanced our Multi-Asset Class (“MAC”) risk models, leading to several global client wins and strengthening our position in the analytics market. We expanded our Content and Technology Solutions (“CTS”) workflow and launched Open:FactSet Marketplace, a new platform to address the demand for integrating both financial and alternative data. We recently added Data Exploration, a platform for financial professionals to evaluate quickly alternative and financial datasets and build investment applications in a fully hosted environment.

FactSet released its first annual Corporate Social Responsibility Report (“CSR”), highlighting the Company’s commitments to our clients, employees, stockholders, and communities. The report covered the fiscal year ending August 31, 2017, highlighting our recent achievements and setting a trajectory for our future CSR goals.

Client Service / Consultants

A client-centric approach has always been a key foundation of our success at FactSet. We support our powerful information and analytical applications with a team of financial data and modeling experts. Client satisfaction is a key metric by which we measure the success of our service. According to our global client satisfaction survey, greater than 95% of respondents were satisfied or very satisfied with FactSet’s support. The depth of our knowledge, the data behind the models and the complex mathematics substantiating the answers each create an opportunity for us to forge close working relationships with our user community.

Our industry-leading customer care is largely due to the talent of our employee population. As of August 31, 2018, employee headcount was 9,571, up 5.5% from a year ago. This increase in headcount was primarily in client-focused positions with dedication to client loyalty, supporting our recent global client retention rate of greater than 95% of ASV as of August 31, 2018. Our consulting teams have been trained to listen to our clients’ needs and transfer this knowledge directly to the product development teams, helping us transform suggestions into new or enhanced product offerings.

Educating our clients is also an important component of our service. Not only do we teach our users the nuances of our software and content offerings, but also FactSet personnel are often thought-leaders in a particular area of financial modeling in our rapidly evolving industry. As a result, clients look to FactSet as a trusted partner to stay on the forefront of financial modeling and analysis.

Key Metrics

The following is a review of our key metrics:

As of and for the Year ended August 31,
(in millions, except per share data_,_ client and user counts)20182017Change
Revenues$1,350.1$1,221.210.6%
Operating Income$366.2$352.14.0%
Net Income$267.1$258.33.4%
Diluted EPS$6.78$6.514.1%
ASV(1)$1,393.1$1,316.65.8%(2)
Clients(3)5,1424,7448.4%
Users(4)91,89788,8463.4%
(1)During the third quarter of fiscal 2017, FactSet excluded professional services fees billed within the last 12 months, which are not subscription based. As such, ASV exclud__e__d professional service fees of $21.6 million and $17.2 million as of August 31, 2018 and 2017_, respectively._
(2)ASV grew 5.8% year over year, of which, 5.7% represents organic ASV growth. Organic ASV excludes ASV from acquisitions and dispositions completed with__in the last 12 months and the effects of foreign currency.
(3)In the second quarter of fiscal 2017, we changed our client count definition to capture clients with ASV greater than $10,000 versus the previous metric of clients with ASV greater than $24,000. The prior year client count was restated to reflect this change for comparison purposes.
(4)In the second quarter of fiscal 2017, we changed our user count definition to include users from workstations previously not captured due to certain product bundling and users of the StreetAccount web product. The prior year user count was restated to reflect this change for comparison purposes.

Annual Subscription Value Growth

ASV at any given point in time represents the forward-looking revenues for the next twelve months from all subscription services currently being supplied to clients, and excludes professional services fees billed in the last twelve months, which are not subscription-based. With proper notice to us, our clients can add to, delete portions of, or terminate service at any time, subject to certain contractual limitations. As of August 31, 2018, our ASV totaled $1.39 billion, up 5.7% organically over the prior year. Organic ASV excludes ASV from acquisitions and dispositions completed within the last 12 months and the effects of foreign currency. The increase in ASV was driven by growth in our geographic segments and achievements across each of our workflow solutions which include Research, Analytics, CTS, and Wealth. Additionally, we have leveraged relationships with existing clients to increase year over year sales through cross-selling and upselling of our diversified product suite.

Buy-side and sell-side ASV growth rates for the last 12 months were 5.4% and 7.3% respectively. Buy-side clients account for 83.9% of ASV, while the remainder is derived from sell-side firms that perform mergers and acquisitions advisory work, capital markets services and equity research.

As of August 31, 2018, ASV from our U.S. operations was $868.7 million, an increase of 5.3% organically from a year ago. ASV from international operations was $524.4 million, an increase of 6.3% organically from a year ago. The growth in ASV in both the U.S. operations and international operations was driven primarily by higher sales across all workflow solutions and new business additions across the operations, primarily in the U.S segment.

Client and User Additions

Our total client count was 5,142 as of August 31, 2018, representing a net increase of 398 clients in the last twelve months. In the second quarter of fiscal 2017, we changed our client count definition to capture clients with ASV greater than $10,000 versus the previous metric of clients with ASV greater than $24,000. The prior year client count was restated to reflect this change for comparison purposes. Client count has increased by 398 or 8.4% in the last twelve months primarily from wealth managers, corporate firms and institutional asset managers. These firm types contributed to over 60% of the net user additions during the fiscal 2018 year. We continue to focus on expanding and cultivating relationships with our current client base as it is essential to our long-term growth strategy and assists in our upsell of workstations, applications and content at our existing clients.

As of August 31, 2018, there were 91,897 professionals using FactSet. In the second quarter of fiscal 2017, FactSet changed its user count definition to include users from workstations previously not captured due to certain product bundling and users of the StreetAccount web product. The prior year user count was restated to reflect this change for comparison purposes. User count increased by 3,051 users in the past twelve months primarily driven by an increase in workstation sales.

Annual client retention as of August 31, 2018, was greater than 95% of ASV and 91% when expressed as a percentage of clients. Our successful client retention demonstrates that a majority of our clients maintain their subscriptions to FactSet year over year, highlighting the strength of our business strategy. As of August 31, 2018, our largest individual client accounted for approximately 2% of total subscriptions, and annual subscriptions from our ten largest clients did not surpass 15% of total client subscriptions.

Returning Value to Stockholders

On August 10, 2018, our Board of Directors approved a regular quarterly dividend of $0.64 per share. The cash dividend of $24.4 million was paid on September 18, 2018 to common stockholders of record at the close of business on August 31, 2018. We repurchased 1.5 million shares for $302.4 million during fiscal 2018 under our existing share repurchase program.

On March 26, 2018, our Board of Directors, approved a $300.0 million expansion of the existing share repurchase program. Including this expansion, $241.7 million is available for future share repurchases as of August 31, 2018.

Capital Expenditures

Capital expenditures were $33.5 million during fiscal 2018, compared to $36.9 million a year ago. Capital expenditures of $24.2 million or 72% of our capital expenditures during fiscal 2018 related to upgrades of existing computer systems in Norwalk, additional server equipment for our data centers located in New Jersey and Virginia, as well as laptop computers and peripherals for new and existing employees. The remainder of our capital expenditures was primarily for the build out of office space including $2.8 million at our Hong Kong location, $2.2 million at our India locations, and $1.5 million at our Netherlands location.

Results of Operations

For an understanding of the significant factors that influenced our performance during the past three fiscal years, the following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements presented in this Report on Form 10-K.

Years ended August 31,
(in thousands, except per share data)20182017Change20172016Change
Revenues$1,350,145$1,221,17910.6%$1,221,179$1,127,0928.3%
Cost of services$659,296$566,58016.4%$566,580$487,40916.2%
Selling, general and administrative$324,645$302,4647.3%$302,464$290,0074.3%
Operating income$366,204$352,1354.0%$352,135$349,6760.7%
Net income$267,085$258,2593.4%$258,259$338,815(23.8)%
Diluted earnings per common share$6.78$6.514.1%$6.51$8.19(20.5)%
Diluted weighted average common shares39,37739,64239,64241,365

Revenues

Fiscal 201****8 compared to Fiscal 201****7

Revenues in fiscal 2018 were $1.35 billion, increasing 10.6% compared to fiscal 2017. Our organic revenue growth rate for fiscal 2018 was 5.6% compared to the prior year period, with cancellations remaining relatively flat during fiscal 2018. Organic revenues exclude the effects of acquisitions and dispositions completed in the last 12 months and foreign currency in all periods. The increase in revenues was throughout our geographical segments and workflow solutions. The U.S. segment revenue was up 7.4% compared to the prior year period, primarily driven by additional clients, expansion from within our existing client base and an annual price increase, while holding client cancellations steady. Our international operations also grew as demonstrated by our 17.3% growth in Europe and a 13.1% increase in Asia Pacific. In addition to revenue growth amongst the geographic segments, achievements were also made across each workflow solution which include Research, Analytics, CTS, and Wealth. The Research workflow growth was driven by additional users due to banking new hires. The growth in the Analytics workflow was primarily attributed to increased sales in the portfolio analytics, reporting, and risk platforms, coupled with the enhancement of our multi-asset class risk model offerings, which strengthened our position in the analytics market. The CTS workflow growth was driven by increased demand for our proprietary content data feeds while new business sales drove the Wealth workflow growth.

Fiscal 201****7 compared to Fiscal 201****6

Revenues in fiscal 2017 were $1.22 billion, up 8.3% compared to fiscal 2016. Our organic revenue growth rate for fiscal 2017 increased 6.9% compared to fiscal 2016. The increase in revenues was primarily driven by organic ASV growth, continued momentum for our multi-asset class analytic solutions, workstations, data feeds products and the additions to our product offerings from our fiscal 2017 acquisitions. Offsetting these positive factors, we experienced cancellations due to firm consolidations and failures.

Revenues by Geographic Segment

Years ended August 31,
(in thousands)201820172016
U.S.$841,908$784,146$755,492
% of revenues62.4%64.2%67.0%
Europe$387,589$330,332$277,682
Asia Pacific$120,648$106,701$93,918
International$508,237$437,033$371,600
% of revenues37.6%35.8%33.0%
Consolidated$1,350,145$1,221,179$1,127,092

Fiscal 201****8 compared to Fiscal 201****7

Revenue from our U.S. segment increased 7.4% to $841.9 million in fiscal 2018 compared to $784.1 million in fiscal 2017, due to organic ASV growth across our workflow solutions and strong performance executing new business sales. Cancellations remained relatively flat for fiscal 2018 showing signs of stability. Excluding the effects of acquisitions and dispositions, organic revenue in the U.S. was up 5.1% compared to fiscal 2017. Revenue from our U.S. operations accounted for 62.4% of our consolidated revenues during fiscal 2018, a decrease from 64.2% in fiscal 2017.

Revenue from our international operations increased 16.3% in fiscal 2018 compared to fiscal 2017, due to growth across our workflow solutions, partially offset by higher cancellations compared to the prior year.

European revenue increased 17.3% to $387.6 million in fiscal 2018 compared to $330.3 in fiscal 2017. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, European organic revenue grew 9.4% in fiscal 2018 compared to fiscal 2017. Foreign currency exchange rate fluctuations increased our European growth rate by 150 basis points.

Asia Pacific revenue increased 13.1% during fiscal 2018, compared with fiscal 2017. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, Asia Pacific organic revenue grew 12.9% during fiscal 2018 compared to fiscal 2017, with foreign currency exchange rate fluctuations remaining flat compared to prior year.

Fiscal 201****7 compared to Fiscal 201****6

Revenue from our U.S. segment increased 3.8% to $784.1 million in fiscal 2017 compared to $755.5 million in fiscal 2016. Our U.S. revenue growth reflected the performance from both our Analytics and CTS workflows, as well as revenue from acquisitions completed in fiscal 2017. Excluding the effects of acquisitions and dispositions completed in the last 12 months, organic revenue in the U.S. increased 6.2% compared to fiscal 2016. Revenue from our U.S. operations accounted for 64.2% of our consolidated revenues during fiscal 2017, a decrease from 67.0% in fiscal 2016 due to the acquisitions completed in fiscal 2017 which primarily increased international revenue.

European revenue increased 19.0% in fiscal 2017 compared to fiscal 2016 due to solid growth in both our CTS and Analytics workflows as well as, client price increases, and acquisitions completed in 2017, partially offset by the impact of foreign currency translation. Foreign currency exchange rate fluctuations reduced our European growth rate by 40 basis points. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, European revenue grew 8.3% compared to fiscal 2016.

The Asia Pacific revenue growth rate of 13.6% was primarily due to increased subscriptions to our content, analytic solutions and core workstation product offerings. Additionally, foreign currency exchange rate fluctuations increased our Asia Pacific growth rate by 46 basis points. Excluding the effects of acquisitions and dispositions completed in the last 12 months and foreign currency, Asia Pacific revenue grew 12.7% compared to fiscal 2016.

Operating Expenses

Years ended August 31,
(in thousands)201820172016
Cost of services$659,296$566,580$487,409
Selling, general and administrative (“SG&A”)324,645302,464290,007
Total operating expenses$983,941$869,044$777,416
Operating income$366,204$352,135$349,676
Operating Margin27.1%28.8%31.0%

Cost of Services

Fiscal 201****8 compared to Fiscal 201****7

Cost of services increased 16.4% to $659.3 million compared to the prior fiscal year. Cost of services, expressed as a percentage of revenues, was 48.8% during fiscal 2018, an increase of 240 basis points over the prior year period. This increase was primarily due to higher employee compensation costs driven by increased employee headcount and restructuring actions, incremental data costs from recent acquisitions and additional users as well as amortization of intangible assets associated with our recent acquisitions. This increase was partially offset by a reduction in stock-based compensation expenses from accelerated vesting in the prior year.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues increased 100 basis points in fiscal 2018, compared to fiscal 2017. The increase is primarily due to the hiring of 497 net new employees over the last 12 months, with the majority of their compensation recorded in cost of services due to their involvement with content collection, engineering and product development. Employee compensation expense further increased due to headcount expansion from prior year acquisitions that were included for a full year in fiscal 2018, while fiscal 2017 only included a partial year amount. In addition, during fiscal 2018 we incurred $17.4 million of restructuring charges primarily related to severance of which $8.5 million was recorded within cost of services. Data costs, when expressed as a percentage of revenues, increased 60 basis points due primarily from our recent acquisitions and higher variable data costs associated with additional users. Amortization of acquired intangible assets, when expressed as a percentage of revenues, increased 20 basis points in fiscal 2018 compared to the same period a year ago, primarily due to recent acquisitions, which added $93.2 million of intangible assets to be amortized over a weighted-average life of 11.5 years. These intangible assets were amortized for the full fiscal 2018, while, fiscal 2017 did not include a similar amount of acquisition amortization due to the dates of each acquisition.

Fiscal 2017 compared to Fiscal 2016

Cost of services increased 16.2% to $566.6 million in fiscal 2017, compared to fiscal 2016. Cost of services, expressed as a percentage of revenues, was 46.4% in fiscal 2017, an increase of 320 basis points compared to fiscal 2016. The increase was primarily driven by higher employee compensation, including stock-based compensation, computer related expenses, amortization of intangibles and acquisition-related costs.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues, increased 200 basis points in fiscal 2017 compared to fiscal 2016. In fiscal 2017, 699 new employees were added, which included head count expansion from acquisitions of 498 new employees (primarily in the European segment), as well as base salary changes and incremental hires in our centers of excellence located in India and the Philippines. The increase was also due to new employees hired, of which a significant number were involved with content collection, engineering and product development. As of August 31, 2017, approximately 70% of our employees performed operational roles. Employee compensation also increased due to a charge of $5.9 million related to restructuring actions and a change in the vesting of performance-based stock options.

Computer-related expenses, which include depreciation, maintenance, software and other fees increased 30 basis points, when expressed as a percentage of revenues in fiscal 2017 compared to fiscal 2016. The increase was due to added computer-related expenses, depreciation associated with the additional laptop computers and peripherals for new and existing employees, upgrades to existing computer systems, and improvements to our telecommunication equipment. Amortization of intangible assets increased 30 basis points, when expressed as a percentage of revenues, in fiscal 2017 compared to fiscal 2016 primarily due to our fiscal 2017 acquisitions, which added approximately $93.2 million of intangible assets to be amortized over a weighted-average life of 11.5 years. Additionally, acquisition-related costs increased cost of sales by approximately 40 basis points when expressed as a percentage of revenues year over year.

Selling, General and Administrative

Fiscal 201****8 compared to Fiscal 201****7

SG&A expenses increased 7.3% to $324.6 million during fiscal 2018 compared to $302.5 million in fiscal 2017. SG&A expenses, expressed as a percentage of revenues, were 24.0% in fiscal 2018, a decrease of 70 basis points over the prior year period. This decrease was primarily due to revenue growth outpacing the growth of SG&A related expenses on a year over year basis, foreign currency exchange gains on hedging activities of our Indian Rupee and lower overall employee compensation including stock-based compensation expense. This decrease was partially offset primarily by higher legal costs, restructuring actions and new employee additions.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues decreased 50 basis points compared to fiscal 2017. The decrease is primarily related to a higher percentage of our employees working in a cost of services capacity compared to an SG&A role. Compensation for our employees within the content collection, consulting, product development, software and systems engineering groups is recorded within cost of services while employees within our sales and various other support and administrative departments are reflected in SG&A. In fiscal 2018, the majority of our hiring has been in departments within cost of services, thus driving a higher percentage of our employee compensation in this area. Partially offsetting these decreases were higher legal expenses primarily from the settlement of a legal matter in the fourth quarter of fiscal 2018, a full year of employee compensation from recent acquisitions and $8.9 million of severance charges.

Fiscal 2017 compared to Fiscal 201****6

SG&A expenses increased 4.3% to $302.5 million during fiscal 2017 compared to $290.0 million in fiscal 2016. SG&A expenses, expressed as a percentage of revenues, was 24.8% in fiscal 2017, a decrease of 90 basis points compared to fiscal 2016 due to lower employee compensation expense partially offset by higher professional fees and occupancy costs, including rent expense and depreciation of furniture and fixtures. Additionally, fiscal 2016 included a charge of $3.3 million related primarily to legal matters.

Employee compensation, including stock-based compensation, when expressed as a percentage of revenues, decreased 160 basis points in fiscal 2017 compared to fiscal 2016 due to a continued shift in our employee base from SG&A to cost of service related roles. This decrease in employee compensation was offset by a charge of $4.4 million related to restructuring actions and a change in the vesting of performance-based stock options. Professional fees, expressed as a percentage of revenues, increased 30 basis points from costs associated with acquisitions in fiscal 2017. Occupancy costs, when expressed as a percentage of revenues, increased 30 basis points due to the increase in the worldwide-leased office space of 71,000 square feet, which included expanded offices in Germany, Switzerland, Bulgaria, India and the Netherlands.

Operating Income and Operating Margin

Fiscal 201****8 compared to Fiscal 201****7

Operating income increased 4.0% to $366.2 million in fiscal 2018 compared to $352.1 million in fiscal 2017. Our operating margin decreased in fiscal 2018 to 27.1%, compared to 28.8% for fiscal 2017. Operating income increased due to incremental revenue that outpaced the growth of SG&A expenses year over year partially offset by higher cost of services. The reduction in operating margin year over year was due to an increase in employee compensation costs, including restructuring actions, data costs from acquisitions and additional users, amortization of intangible assets associated with our recent acquisitions, and incremental legal fees partially offset by foreign currency exchange gains on hedging activities and lower stock-based compensation.

Fiscal 201****7 compared to Fiscal 201****6

Operating income increased 0.7% to $352.1 million in fiscal 2017 compared to fiscal 2016. Our operating margin for fiscal 2017 was 28.8%, down from 31.0% in fiscal 2016. Expenses related to employee compensation, professional fees, computer related costs, amortization of intangibles and acquisition-related costs all increased in fiscal 2017, which resulted in our total operating expenses increasing to 11.8% year over year. We also recognized charges of approximately $18.0 million related to restructuring actions, a change in the vesting of performance-based stock options and other acquisition-related costs, compared to $7.0 million in fiscal 2016. The higher expenses were offset partially by a year over year increase in revenues of 8.3%, driven partially by our recent acquisitions.

Operating Income by Segment

Years ended August 31,
(in thousands)201820172016
U.S.$148,095$137,105$165,251
Europe148,977153,676131,410
Asia Pacific69,13261,35453,015
Consolidated$366,204$352,135$349,676

Our operating segments are aligned with how we manage the business, the demographic markets we serve, and how the CODMG assesses performance. Our internal financial reporting structure is based on three reportable segments, the U.S., Europe and Asia Pacific, which we believe helps us better manage the business and view the markets we serve. Sales, consulting, data collection, product development and software engineering are the primary functional groups within each segment. Each segment records compensation expense, including stock-based compensation, amortization of intangible assets, depreciation of furniture and fixtures, amortization of leasehold improvements, communication costs, professional fees, rent expense, travel, office and other direct expenses. Expenditures associated with our data centers, third-party data costs and corporate headquarter charges are recorded by the U.S. segment and are not allocated to the other segments. The centers of excellence, located in India and the Philippines, primarily focus on content collection that benefit all our segments. The expenses incurred at these locations are allocated to each segment based on a percentage of revenues.

Fiscal 201****8 compared to Fiscal 201****7

U.S. operating income increased 8.0% to $148.1 million during fiscal 2018 compared to $137.1 million a year ago. The increase in U.S. operating income was primarily due to revenue growth of 7.4%, partially offset by increased expenses related to employee compensation, computer equipment and data costs. Employee compensation increased primarily due to annual base salary increases, restructuring actions, and higher employee benefit costs including medical expenditures. Computer related expenses, which include depreciation, maintenance, software and other fees, increased year over year due to expenses associated with upgrades to existing computer systems in Norwalk, additional server equipment in our data centers located in New Jersey and Virginia, as well as laptop computers and peripherals for new and existing employees. Data costs increased due to higher third-party data costs from our recent acquisitions and additional users.

European operating income decreased 3.1% to $149.0 million during fiscal 2018 compared to $153.7 million a year ago. The impact of foreign currency decreased European operating income by $4.9 million year over year. Additionally, the decrease in European operating income was due to a full year impact of fiscal 2017 acquisitions, contributing to higher employee compensation, amortization of intangible assets, and data costs, partially offset by revenue growth of 17.3%.

Asia Pacific operating income increased 12.7% to $69.1 million during fiscal 2018 compared to $61.4 million a year ago. The increase in Asia Pacific operating income was due to revenue growth of 13.1% and benefits from a stronger U.S. dollar, partially offset by increases in employee compensation and occupancy costs. Employee compensation was higher year over year as result of a 9.2% increase in our Asia Pacific workforce. Occupancy costs increased due primarily to an increase in rent expense for additional office space in our Philippines location. The impact of foreign currency increased Asia Pacific operating income by $3.6 million year over year.

Fiscal 2017 compared to Fiscal 2016

U.S. operating income decreased 17.0% to $137.1 million during fiscal 2017 compared to $165.3 million in fiscal 2016. The decrease in U.S. operating income was primarily due to increases in expenses related to employee compensation, and occupancy costs, partially offset by revenue growth of 3.8%. Employee compensation increased primarily due to a 3.6% increase in U.S. employee headcount year over year and a change in the vesting of performance-based stock options. Occupancy costs including rent expense and depreciation of furniture and fixtures increased due primarily to an increase in rent expense at our New York location.

European operating income increased 16.9% to $153.7 million during fiscal 2017 compared to $131.4 million in fiscal 2016. The increase in European operating income was due to revenue growth of 19.0% and benefits from a stronger U.S. dollar, offset by higher employee compensation, occupancy costs, and amortization of intangibles. European revenue grew due to acquisitions completed in 2017, which had a significant sales presence in European markets. The impact of foreign currency increased European operating income by $6.2 million year over year. Employee compensation was higher in fiscal 2017 compared to fiscal 2016 due to an increase of 473 net new employees in our European offices. These employees were primarily from acquisitions completed in 2017. Occupancy costs including rent expense and depreciation of furniture and fixtures increased due primarily to an increase in rent expense in Germany associated with the 2017 acquisitions. Amortization of intangibles increased due to the addition of $93.2 million of intangibles, the majority of which resided in our European segment.

Asia Pacific operating income increased 15.7% to $61.4 million during fiscal 2017 compared to $53.0 million in fiscal 2016. The increase in Asia Pacific operating income was due to revenue growth of 13.6% and benefits from a stronger U.S. dollar, partially offset by increases in employee compensation and occupancy costs. Employee compensation was higher year over year as a result of a 2.7% increase in our Asia Pacific workforce in fiscal 2017. Occupancy costs increased due to an increase in rent expense at our India locations. The impact of foreign currency increased Asia Pacific operating income by $1.4 million year over year.

Income Taxes, Net Income and Diluted Earnings per Share

Years ended August 31,
(in thousands)201820172016
Provision for income taxes$84,753$86,053$122,178
Net income$267,085$258,259$338,815
Diluted earnings per common share$6.78$6.51$8.19

Income Taxes

Fiscal 201****8 compared to Fiscal 201****7

The fiscal 2018 provision for income taxes was $84.8 million, a decrease of 1.5% from the same period a year ago. The decrease was primarily attributable to the impacts associated with the U.S. tax reform under the Tax Cuts and Jobs Act (“TCJA”). On December 22, 2017, the U.S. government enacted comprehensive tax legislation through the TCJA. The TCJA, among other things, lowered the statutory U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. Due to our August 31 fiscal year-end, the lower tax rate was phased in, resulting in a blended U.S. statutory federal rate of 25.7% for fiscal 2018. The TCJA also implemented a modified territorial tax system and imposed a mandatory one-time transition tax on accumulated earnings and profits (“E&P”) of foreign subsidiaries that were previously deferred from U.S. income taxes.

Our effective tax rate was 24.1% for the full fiscal 2018 year compared to 25.0% a year ago due to higher foreign income taxed at rates lower than U.S. rates, incremental income tax benefits from R&D tax credits and increased excess tax benefits from stock option exercises. These benefits were partially offset by the one-time transition tax of $23.2 million and a $2.3 million tax expense associated with the remeasurement of our net U.S. deferred tax position, both of which related to the TCJA. We had approximately $250 million in undistributed foreign E&P generated prior to December 31, 2017, which resulted in the provisional amount for the one-time transition tax expense of $23.2 million, payable over an eight-year period. This amount may change as we finalize the calculation of foreign E&P previously deferred from U.S. federal taxation, as well as the analysis of available foreign tax credits. Due to the changes in taxation of undistributed foreign earnings under the TCJA, we will continue to analyze foreign subsidiary earnings, as well as global working capital requirements, and may repatriate earnings when the amounts are remitted substantially free of additional tax. In addition, the estimates may also be affected by changes in interpretations at the federal and state levels, and any additional regulatory guidance that may be issued.

Fisca****l 2017 compared to Fiscal 2016

The fiscal 2017 provision for income taxes was $86.1 million, down 29.6% compared to fiscal 2016. The decrease was primarily due to tax expense of $30.8 million related to the gain on sale of our Market Metrics business that occurred in fiscal 2016. Excluding the tax impact of the gain, the provision for income taxes decreased by 5.9% year over year related primarily to our organizational realignment. As of September 1, 2016, we realigned certain aspects of our global operations from FactSet Research Systems Inc., our U.S. parent company, to FactSet UK Limited, a U.K. operating company, to better serve our growing client base outside the U.S. Due to the realignment we recognized a 200 basis point benefit in our annual tax rate. Additionally, excluding the gain on sale in fiscal 2016, our provision for income taxes decreased due to a decrease in taxable income year over year. This decrease was due primarily to higher interest expense incurred as a result of an increase in our outstanding debt borrowings by approximately $300 million.

Net Income and Diluted Earnings per Share

Fiscal 201****8 compared to Fiscal 201****7

Net income increased 3.4% to $267.1 million while diluted earnings per share increased 4.1% to $6.78 during fiscal 2018 compared to fiscal 2017. Net income and diluted EPS grew primarily due to higher revenues from strong performances across our segments and workflow solutions, gains earned from our foreign currency hedges, and a decrease in our effective tax rate due to the TCJA. These benefits were partially offset by an increase in employee compensation expenses, data costs, amortization of intangible assets from acquisitions, occupancy costs, and interest expense associated with our outstanding debt. Diluted EPS also benefited from a 0.3 million reduction in our weighted average shares outstanding due to share repurchases partially offset by stock option exercises during fiscal 2018.

Fiscal 2017 compared to Fiscal 2016

Net income decreased 23.8% to $258.3 million and diluted earnings per share decreased 20.5% to $6.51 during fiscal 2017 compared to fiscal 2016. A large component of the decrease year over year was related to the after-tax gain of $81.7 million from the sale of the Market Metrics business in fiscal 2016. This gain increased diluted earnings per share by $2.01. Excluding the fiscal 2016 after-tax gain on sale, net income increased 0.4% year over year, while diluted EPS increased by 5.3%. During fiscal 2017, net income and diluted earnings per share increased due to revenue growth of 8.3% year over year, coupled with a reduction to the income tax provision of 29.6% primarily related to the gain from the sale of our Market Metrics business along with an organizational realignment. Additionally, during fiscal 2017, foreign currency movements increased operating income by $7.1 million compared to a benefit of $11.6 million in the same period of fiscal 2016. These increases were partially offset by incremental employee compensation expense due to the hiring of 699 net new employees (including 498 employees from acquisitions completed in the last 12 months), an increase in professional fees, occupancy costs, computer related expenses, amortization of intangibles and acquisition-related costs. The increase in diluted earnings per share was also driven by a decrease in diluted shares outstanding as a result of continued share repurchases in fiscal 2017.

Non-GAAP Financial Measures

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

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

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

Twelve Months Ended August 31,
(In thousands)20182017Change
Revenues$1,350,145$1,221,17910.6%
Deferred revenue fair value adjustment(1)7,6915,486
Acquisitions and divestitures completed(2)(58,624)(1,222)
Currency impact (foreign currency movements)(3)(4,952)—
Organic revenues$1,294,260$1,225,4435.6%
(1)D__eferred revenue fair value adjustments from purchase accounting.
(2)Acquired revenues from acquisitions and divestitures completed within the last 12 months.
(3)The impact from foreign currency movements over the past 12 months.

The table below provides an unaudited reconciliation of operating income, operating margin, net income and diluted EPS to adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted EPS.

Twelve Months Ended August 31,
(In thousands, except per share data)2018(1)2017(2)Change
Operating income$366,204$352,1354.0%
Intangible asset amortization24,66519,924
Deferred revenue fair value adjustment7,6915,486
Other items26,95017,969
Adjusted operating income$425,510$395,5147.6%
Adjusted operating margin31.3%32.2%
Net income$267,085$258,2593.4%
Intangible asset amortization(3)19,72314,845
Deferred revenue fair value adjustment(4)6,0844,093
Other items(5)21,61414,308
Income tax items21,310(1,918)
Adjusted net income$335,816$289,58716.0%
Diluted earnings per common share$6.78$6.514.1%
Intangible asset amortization0.500.37
Deferred revenue fair value adjustment0.150.10
Other items0.560.35
Income tax items0.53(0.05)
Adjusted diluted earnings per common share(6)$8.53$7.3116.7%
Weighted average common shares (Diluted)39,37739,642
(1)Operating income, n__et income and diluted EPS in fiscal 2018 were adjusted to exclude (i) intangible asset amortization (ii) deferred revenue fair value adjustments from purchase accounting_,_ and (iii) other items including restructuring_, legal matters_ and other corporate actions_._ Net income and diluted EPS in fiscal 2018 were also adjusted to exclude a one-time deemed repatriation tax on foreign earnings.
(2)Operating income, net income and diluted EPS in fiscal 2017 were adjusted to exclude (i) intangible asset amortization (ii) deferred revenue fair value adjustments from purchase accounting_, and_ (iii) other items including modifications of certain share-based compensation grants, restru__cturing actions and acquisition-related costs. Net income and diluted EPS in fiscal 2017 were also adjusted to exclude benefits related to finalizing fiscal 2016 tax returns and other discrete items_._
(3)The intangible asset amortization was recorded net of a _tax impact of $4._9 million in fiscal 2018 compared with $5.1 million for fiscal 2017.
(4)The deferred revenue fair value adjustment was recorded net of a tax impact of $1.6 million in fiscal 2018 compared with $1.4 million for fiscal 2017.
(5)_The other items were recorded net of a tax impact of $5._3 million in fiscal 2018 compared with $3.7 million for fiscal 2017.
(6)Details may not sum to total due to rounding

Liquidity

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

Years ended August 31,
(in thousands)201820172016
Net cash provided by operating activities$385,668$320,527$331,140
Capital expenditures (1)(33,520)(36,862)(47,740)
Free cash flow (2)$352,148$283,665$283,400
Net cash used in investing activities$(48,531)$(347,306)$(158,408)
Net cash used in financing activities$(320,037)$(8,161)$(91,002)
Cash and cash equivalents at end of year$208,623$194,731$228,407
(1)Included in net cash used in investing activities during each fiscal year reported.
(2)F__ree cash flow is defined as cash provided by operating activities, which includes the cash cost for taxes and changes in working capital, less capital expenditures.

Fiscal 201****8 compared to Fiscal 201****7

Cash and cash equivalents aggregated to $208.6 million, or 14.7% of our total assets at August 31, 2018, compared with $194.7 million, or 13.8% of our total assets at August 31, 2017. Our cash and cash equivalents increased $13.9 million during fiscal 2018 due to net cash provided by operating activities of $385.7 million and $71.6 million in proceeds from the exercise of employee stock options. These cash inflows were partially offset by $89.4 million in dividend payments, $33.5 million of capital expenditures, $15.0 million related to a business investment, $3.2 million from the effects of foreign currency translations and $303.9 million in share repurchases, which included $302.4 million under the existing share repurchase program and $1.5 million in shares repurchased from employees to cover their cost of taxes upon vesting of restricted stock.

Net cash used in investing activities was $48.5 million in fiscal 2018, representing a $298.8 million decrease from fiscal 2017. This reduction was primarily due to decreased acquisition activity with $15.0 million invested in fiscal 2018 compared to $303.1 million largely related to the BI-SAM Technologies (“BISAM”) and Vermilion Holdings Limited (“Vermilion”) acquisitions in fiscal 2017. Additionally, cash used in investing activities decreased year over year due to lower capital expenditures of $3.3 million and a decrease in the purchase of investments (net of proceeds) of $7.4 million year over year

During fiscal 2018, net cash used in financing activities was $320.0 million, representing a $311.9 million increase from fiscal 2017. This increase was due to $275.0 million in proceeds (net of repayment) from the issuance of long-term debt in fiscal 2017 that did not occur in fiscal 2018. In addition, the decrease was due to higher dividend payments of $8.5 million, an increase in share repurchases of $43.0 million, and a change in the presentation of tax benefits from share-based payment arrangements due to the adoption of the accounting standard update, which required us to disclose benefits from stock option exercises as an operating cash inflow instead of a financing activity. This presentation change was adopted prospectively beginning with fiscal 2018. These cash outflows were partially offset by an increase in proceeds from employee stock plans of $21.6 million.

We expect that for at least the next 12 months, our operating expenses will continue to constitute a significant use of our cash. As of August 31, 2018, our total cash and cash equivalents worldwide was $208.6 million, with $574.8 million in outstanding borrowings (net of $0.2 million of unamortized debt issuance costs). Approximately $30.9 million of our total available cash and cash equivalents is held in bank accounts located within the U.S., $134.3 million in Europe (predominantly within the UK, France, and Germany) and the remaining $43.4 million is held in the Asia Pacific segment. We believe our liquidity (including cash on hand, cash from operating activities and other cash flows that we expect to generate) within each geographic segment will be sufficient to meet our short-term and long-term operating requirements, as they occur, including working capital needs, capital expenditures, dividend payments, stock repurchases, growth objectives and other financing activities. In addition, we expect existing foreign cash, cash equivalents and cash flows from operations to continue to be sufficient to fund our foreign operating activities and cash commitments for investing activities, such as capital expenditures, for at least the next 12 months and thereafter for the foreseeable future.

Free cash flow generated in fiscal 2018 was $352.1 million, an increase of 24.1% compared to $283.7 million in fiscal 2017. Free cash flow was attributable to $267.1 million of net income, $87.0 million of non-cash items, $31.6 million of working capital changes, less $33.5 million in capital expenditures. The year over year free cash flow growth was driven by positive working capital changes totaling $47.6 million and lower capital expenditures of $3.3 million. Working capital improved year over year due to timing of supplier payments and payroll, stabilization of our days sales outstanding (“DSO”) at 41 days and the adoption of an accounting standard update for share-based payments, which required the presentation of benefits from stock options exercised to be reported as an operating activity, when in prior periods it was reported as a financing activity.

Fiscal 201****7 compared to Fiscal 201****6

Cash and cash equivalents aggregated to $194.7 million, or 13.8% of our total assets at August 31, 2017, compared with $228.4 million, or 22.4% of our total assets at August 31, 2016. Our cash and cash equivalents decreased $33.7 million during fiscal 2017 due primarily to $303.1 million in cash paid for acquisitions (net of cash acquired), $252.8 million in share repurchases under the existing share repurchase program, dividend payments of $80.9 million, capital expenditures of $36.9 million and $7.4 million from the purchase of investments (net of proceeds). These cash outflows were partially offset by cash provided by operations of $320.5 million, $275.0 million in net proceeds from long-term debt, $50.0 million in proceeds from the exercise of employee stock options, $10.3 million in tax benefits from share-based payment arrangements and $1.3 million from the effects of foreign currency translations.

Net cash used in investing activities was $347.3 million in fiscal 2017, which represented a $188.9 million increase from fiscal 2016 due primarily to an increase in the cash used in acquisitions and the purchases of investments (net of proceeds), partially offset by a decrease in capital expenditures. Additionally, in fiscal 2016 we recognized proceeds from the sale of our Market Metrics business of $153.1 million. Acquisitions during fiscal 2017, largely related to BISAM and Vermilion, resulted in a cash outflow of $303.1 million compared to a net cash outflow of $262.9 million for the Portware acquisition during fiscal 2016. Purchase of investments (net of proceeds) resulted in an increased cash outflow of $6.5 million in fiscal 2017 compared to fiscal 2016. The decrease in capital expenditures of $10.9 million was due from the fit-out of new space in New York, Chicago and at our corporate headquarters in Norwalk in fiscal 2016.Fiscal 2017 capital expenditures related primarily to computer equipment for our U.S. locations and additional expenses at our Chicago, New York, and India locations.

During fiscal 2017, net cash used in financing activities was $8.2 million compared to $91.0 million in fiscal 2016. This decrease was due primarily to FactSet entering into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase $120.0 million of our common stock in July 2016. We 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 our receiving an additional 102,916 shares of our common stock. Excluding cash used in the ASR Agreement, cash provided by financing activities in fiscal 2016 was $29.0 million, resulting in a fluctuation of $37.2 million in the current year. This fluctuation was due to an increase in cash used to repurchase common stock under our existing share repurchase program of $24.2 million, an increase in payments of regular quarterly dividends of $6.7 million, lower proceeds from employee stock plans of $6.8 million and lower tax benefits from share-based payment arrangements of $7.9 million. Cash used in share repurchases increased year over year as we repurchased 1.6 million shares for $252.8 million under the existing share repurchase program compared to 1.5 million shares for $232.3 million in fiscal 2016. Dividend payments increased as our Board of Directors approved a 12.0% increase in the regular quarterly dividend to $0.56 per share, or $2.24 per share per annum, beginning with the dividend payment in June 2017. The year over year fluctuation was also due to additional borrowings under our 2017 Credit Agreement (defined in Capital Needs) of $575.0 million, used to fund our acquisition of BISAM on March 17, 2017 and retire our existing debt of $365.0 million. In fiscal 2016 we borrowed $265.0 million under our previous credit agreement to fund our acquisition of Portware on October 16, 2015. Refer to the Capital Resources section of the MD&A for a discussion of our long-term debt borrowings.

Free cash flow for fiscal 2017 was $283.7 million compared to $283.4 million in fiscal 2016. Free cash flow generated during fiscal 2017 was attributable to $258.3 million of net income adjusted for $78.3 million of non-cash items partially offset by $36.9 million in capital expenditures and $16.0 million of negative working capital changes. Free cash flow increased slightly from the comparable year ago period, due primarily to a reduction in capital expenditures partially offset by a decrease in net cash provided by operating activities. The decrease in net cash provided by operating activities was the result of higher client receivables and the timing of taxes payments. Our DSO was 41 days as of August 31, 2017, representing an increase from 31 days at August 31, 2016. The increase in DSO was primarily related to the acquisitions made in the year.

Capital Resources

Capital Expenditures

Capital expenditures were $33.5 million during fiscal 2018, down from $36.9 million a year ago. Capital expenditures of $24.2 million, or 72% of our capital expenditures during fiscal 2018 related to upgrades to existing computer systems in Norwalk, additional server equipment in our data centers located in New Jersey and Virginia, as well as laptop computers and peripherals for new and existing employees. The remainder of our capital expenditures was primarily for the build out of office space including $2.2 million at our India location, $2.8 million at our Hong Kong location and $1.5 million at our Netherlands location.

Capital expenditures were $36.9 million during fiscal 2017, down from $47.7 million in fiscal 2016. Approximately $21.4 million, or 58%, of our capital expenditures was primarily for purchases of more servers for our existing data centers, additional laptop computers and peripherals for new employees, upgrades to existing computer systems and improvements to our telecommunication equipment. The remainder of our capital expenditures was primarily for the build out of office space including $4.4 million at our Chicago location, $4.4 million at our New York locations and $2.7 million at our India locations.

Capital Needs

Long-Term Debt

On March 17, 2017, we 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 an unsecured $575.0 million revolving credit facility (the “2017 Revolving Credit Facility”). We may request borrowings under the 2017 Revolving Credit Facility until its maturity date of March 17, 2020. The 2017 Credit Agreement also allows us, 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. At our option, a borrowing may be in the form of a base rate loan or a LIBOR rate loan. Borrowings under the loan bear interest on the outstanding principal amount at a rate equal to the daily LIBOR rate plus a spread using a debt leverage pricing grid currently at 1.00%. Interest on the loan outstanding is payable quarterly in arrears and on the maturity date. There are no prepayment penalties if we elect to prepay the outstanding loan amounts prior to the scheduled maturity date. The principal balance is payable in full on the maturity date.

In conjunction with our entrance into the 2017 Credit Agreement, we borrowed $575.0 million in the form of a LIBOR rate loan under the 2017 Revolving Credit Facility. Proceeds from the 2017 Revolving Credit Facility were also used to fund our acquisition of BISAM.

All outstanding loan amounts are reported as Long-term debt within the Consolidated Balance Sheet, presented net of related loan origination fees at August 31, 2018. The loan origination fees are amortized into interest expense over the term of the loan using the effective interest method. During fiscal years 2018, 2017 and 2016, we recorded interest expense of $15.9 million, $8.4 million and $3.0 million, respectively, on our outstanding debt amounts. As of August 31, 2018, no commitment fee was owed by us since we 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. We were in compliance with all of the covenants of the 2017 Credit Agreement as of August 31, 2018 and 2017.

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

Letters of Credit

From time to time, we are required to obtain letters of credit in the ordinary course of business. Approximately $2.0 million of standby letters of credit have been issued in connection with our leased office spaces as of August 31, 2018. These standby letters of credit contain covenants that, among other things, require us to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of August 31, 2018 and 2017, we were in compliance with all covenants contained in the standby letters of credit.

Foreign Currency

Foreign Currency Exposure

Certain wholly owned subsidiaries within the European and Asia Pacific segments operate under a functional currency different from the U.S. dollar. The financial statements of these foreign subsidiaries are translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average 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 accumulated other comprehensive (loss) income as a component of stockholders’ equity.

Over the next 12 months, our non-U.S. dollar denominated revenues expected to be recognized are estimated to be $92.8 million while our non-U.S. dollar denominated expenses are estimated to be $324.5 million, which translates into a net foreign currency exposure of $231.7 million. Our foreign currency exchange exposure is related to our operating expense base in countries outside the U.S., where 74% of our employees were located as of August 31, 2018. During fiscal 2018, foreign currency movements decreased operating income by $1.3 million, compared to a $7.1 million increase to operating income for fiscal 2017.

Foreign Currency Hedges

As of August 31, 2018, we maintained the following foreign currency forward contracts to hedge our exposures:

●Philippine Peso – foreign currency forward contracts to hedge approximately 75% of our Philippine Peso exposure through the fourth quarter of fiscal 2020.
●Indian Rupee – foreign currency forward contracts to hedge approximately 75% of our Indian Rupee exposure through the third quarter of fiscal 2019 and 50% of its exposure from the fourth quarter of fiscal 2019 through the end of the second quarter of fiscal 2020.
●Euro – foreign currency forward contracts to hedge approximately 50% of our Euro exposure through the third quarter of fiscal 2019.
●British Pound Sterling – foreign currency forward contracts to hedge approximately 50% of our British Pound Sterling exposure through the third quarter of fiscal 2019.

As of August 31, 2018, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos with U.S. dollars was PHP 2.8 billion, to purchase Indian Rupees with U.S. dollars was Rs. 3.6 billion, to purchase Euros with U.S. dollars was € 22.0 million and to purchase British Pound Sterling with U.S. dollars was £14.0 million.

There were no other outstanding foreign currency forward contracts as of August 31, 2018. A gain on derivatives of $3.1 million was recorded into operating income during fiscal 2018, compared to a loss of $2.9 million in fiscal 2017.

Off-Balance Sheet Arrangements

At August 31, 2018 and 2017, we had no off-balance sheet financing or other arrangements with unconsolidated entities or financial partnerships (such as entities often referred to as structured finance or special purpose entities) established for purposes of facilitating off-balance sheet financing or other debt arrangements or for other contractually limited purposes.

Share Repurchase Program

Repurchases will be made from time to time in the open market and privately negotiated transactions, subject to market conditions. In fiscal 2018, we repurchased 1.5 million shares for $302.4 million compared to 1.6 million shares for $252.8 million in fiscal 2017 under the existing share repurchase program. Over the last 12 months, we have returned $393.4 million to stockholders in the form of share repurchases and dividends. On March 26, 2018, our Board of Directors approved a $300.0 million expansion of the existing share repurchase program. Subsequent to this expansion, $431.2 million is available for future share repurchases. As of August 31, 2018, $241.7 million is available for future share repurchases under the existing share repurchase program.

Contractual Obligations

Fluctuations in our operating results, the degree of success of our accounts receivable collection efforts, the timing of tax and other payments as well as necessary capital expenditures to support growth of our operations will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. As of August 31, 2018, we had total purchase commitments of $79.0 million, which was comparable to the prior year commitments of $81.0 million, reflecting no material changes with suppliers during fiscal 2018.

The following table summarizes our significant contractual obligations as of August 31, 2018 and the corresponding effect that these obligations will have on our liquidity and cash flows in future periods:

Payments due by period
(in millions)20192020-20212022-20232024 and thereafterTotal
Operating lease obligations(1)$41.1$73.4$63.3$230.0$407.8
Purchase commitments(2)75.83.2——79.0
Long-term debt obligations(3)—575.0——575.0
Total contractual obligations by period(4)$116.9$651.6$63.3$230.0$1,061.8
(1)Operating lease amounts include future minimum lease payments under all our non-cancelable operating leases with an initial term in excess of one year. For more information on o__ur operating leases, see Note 19_, Commitments and Contingencies, in the Notes to the Company’s Consolidated Financial Statements included in Item 8_ of this Report on Form 10-K_._
(2)Purchase commitments represent payment__s due in future periods in respect of obligations to our various data vendors as well as commitments to purchase goods and services such as telecommunication_, computer maintenance and consulting_ services.
(3)Represents the amount due under the Company’s 2017 Credit Agreement_._
(4)_Non-current income taxes payable of $_11.5 _million and non-current deferred tax liabilities of $_24.9 million have been excluded in the table above due to uncertainty regarding the timing of future payments.

Purchase orders do not necessarily reflect a binding commitment but are merely indicative of authorizations and intention to conclude purchases in the future. For the purpose of this tabular disclosure, purchase obligations for goods and services are defined as agreements that are enforceable and legally binding on us 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. It is expected that all the contractual obligations noted in the table will be funded from existing cash and cash flows from operations. Expected timing pertaining to the contractual obligations included in the table above has been estimated based on information currently available. The amounts paid, and the timing of those payments may differ based on when the goods and services provided by our vendors to whom we are contractually obligated are received as well as due to changes to agreed-upon amounts for any of our obligations.

On February 14, 2018, we entered into a new lease to relocate our corporate headquarters to 45 Glover Avenue in Norwalk, Connecticut. The new location will comprise approximately 173,000 square feet of office space. We expect to take possession of the newly leased property on or around January 1, 2019 for fit-out purposes. We will continue to occupy our existing headquarters space until the new headquarters property is ready for occupancy, currently estimated to be in the second quarter of fiscal 2020.

Including new lease agreements executed during fiscal 2018, our worldwide leased office space increased to approximately 1,750,000 square feet at August 31, 2018, up 607,000 square feet, or 54.0% from August 31, 2017. This increase was primarily related to additional office space in the Philippines and the new headquarters lease signed in February 2018. Future minimum requirements for our operating leases in place as of August 31, 2018 totaled $407.8 million, an increase from $281.7 million as of August 31, 2017, primarily due to the additional office space in the Philippines and new leased space for headquarters in Norwalk, Connecticut mentioned above.

As disclosed earlier in the Capital Resources section of this MD&A, we entered into the 2017 Credit Agreement on March 17, 2017 and borrowed $575.0 million. In conjunction with the 2017 Credit Agreement, FactSet retired its outstanding loan amount of $365.0 million under the previous credit agreement.

With the exception of the new leases entered in the ordinary course of business, there were no other significant changes to our contractual obligations during fiscal 2018.

Dividends

On May 7, 2018, our Board of Directors approved a 14.3% increase in the regular quarterly dividend beginning with the dividend payment on June 19, 2018, which was $0.64 per share. With our dividends and our share repurchases, in the aggregate, we have returned $393.4 million to stockholders over the past 12 months. Future cash dividends will depend on our earnings, capital requirements, financial condition and other factors we consider relevant. Dividends must be authorized by our Board of Directors.

During fiscal years 2018 and 2017, our Board of Directors declared the following dividends on our common stock:

Year EndedDividends per Share of Common StockRecord DateTotal $ Amount (in thousands)Payment Date
Fiscal 2018
First Quarter$0.56November 30, 2017$21,902December 19, 2017
Second Quarter$0.56February 28, 2018$21,799March 20, 2018
Third Quarter$0.64May 31, 2018$24,566June 19, 2018
Fourth Quarter$0.64August 31, 2018$24,443September 18, 2018
Fiscal 2017
First Quarter$0.50November 30, 2016$19,852December 20, 2016
Second Quarter$0.50February 28, 2017$19,709March 21, 2017
Third Quarter$0.56May 31, 2017$21,951June 20, 2017
Fourth Quarter$0.56August 31, 2017$21,853September 19, 2017

All the above cash dividends were paid from existing cash resources on a quarterly basis.

Significant Accounting Policies

We describe our significant accounting policies in Note 3, Summary of Significant Accounting Policies, of the Notes to our Consolidated Financial Statements included in Item 8 below.

Critical Accounting Estimates

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our consolidated financial statements that require estimation but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.

Business Combinations

We record acquisitions using the purchase method of accounting. All 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. Our estimates are based on historical experience, information obtained from the management of the acquired companies, and when appropriate, include assistance from independent third-party appraisal firms. Our significant assumptions and estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the accuracy or validity of such estimates.

Performance-based Equity Awards

Performance-based stock options require management to make assumptions regarding the likelihood of achieving our performance targets. The number of performance-based options that vest will be predicated on us achieving performance levels during the measurement period subsequent to the date of grant. Depending on the financial performance levels we achieve, 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, we granted 68,761 performance-based stock options during the second quarter of fiscal 2015 that are eligible to cliff vest based on a four-year measurement period ending February 28, 2019. In the second quarter of fiscal 2018, we modified the vesting criteria of the grant, which resulted in 40% of the options being deemed eligible to vest, with the remaining options forfeited. No cumulative catch-up adjustment was required because we had expected the 40% level to be achieved. The option holders must remain employed by FactSet through February 28, 2019 for the options to vest. As of August 31, 2018, total unamortized stock-based compensation of $0.4 million will be recognized as expense over the remaining vesting period of 0.4 years.

January 2017 Performance-based Option Grant Review

In connection with the acquisition of Vermilion, we 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, 2018, we do 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 periods could result in the following changes to the current estimate of the vesting percentage and related expense:

(in thousands, except vesting percentage data) Vesting PercentageCumulative Catch-up Adjustment(1)Remaining Expense to be Recognized
0% (current expectation)$—$—
100%$613$1,272
(1)Amount represent__s the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 201__8_._

J****une 2017 Performance-based Option Grant Review

In connection with the acquisition of BISAM, we 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, 2018, we do 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:

(in thousands, except vesting percentage data) Vesting PercentageCumulative Catch-up Adjustment(1)Remaining Expense to be Recognized
0%(current expectation)$—$—
80%$1,658$5,449
90%$1,866$6,130
100%$2,073$6,811
(1)Amount represent__s the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 201__8_._

Accrued Compensation

We make significant estimates in determining our accrued compensation. Annual cash-based awards that are variable and discretionary in nature represent approximately 10% of our Company’s employee incentive compensation program. We conduct a final review of Company, departmental and individual performance each year end to determine the amount of discretionary employee compensation. We also review 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 on a quarterly basis and adjusts accrual rates as appropriate. As of August 31, 2018, and 2017, the amount of the variable employee compensation recorded within accrued compensation was $43.6 million and $39.2 million, respectively.

Goodwill and Intangible Assets

Goodwill is not amortized as it is estimated to have an indefinite life. At least annually, we are 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. Our reporting units evaluated for potential impairment were the U.S., Europe and Asia Pacific, which is aligned with how the chief operating decision making group (“CODMG”), composed of the CEO and executive management, manages the business and the demographic markets we serve. The three reporting units are consistent with the operating segments reported as there is no discrete financial information available for the subsidiaries or business units within each operating segment. The impairment test requires management to make judgments in connection with these reporting units, including assigning assets, liabilities, goodwill and other indefinite-lived intangible assets to reporting units and determining the fair value of each reporting unit.

Our impairment analysis contains uncertainties as it requires management to make assumptions and apply judgment to estimate industry and economic factors including market conditions, legal and technological factors and the profitability of our business strategies. It is our policy to conduct impairment testing based on our current business strategies taking into consideration present industry and economic conditions, as well as future expectations. We have not made any material changes in our impairment analysis methodology during the past three fiscal years. While we do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to test for goodwill impairment losses, we may be exposed to an impairment charge that could be material if actual results are not consistent with our estimates and assumptions. Future events could cause us to conclude that indicators of impairment do exist, and that goodwill associated with our previous acquisitions is impaired, which could result in an impairment loss in our Consolidated Statements of Income and a write-down of the related asset.

We performed our annual goodwill impairment test during the fourth quarter of fiscal 2018, consistent with the timing of previous years. It was determined that there was no impairment, with the fair value of each of the Company’s reporting units significantly exceeding carrying value. The carrying value of goodwill as of August 31, 2018 and 2017, was $701.8 million and $707.6 million, respectively.

Our 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 our operations. We amortize intangible assets over their estimated useful lives, which are evaluated quarterly to determine whether events and circumstances warrant a revision to the remaining period of amortization. The weighted average useful life of our acquired identifiable intangible assets at August 31, 2018 was 11.5 years. 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. There were no adjustments to the useful lives of intangible assets subject to amortization during any of the periods presented. These intangible assets had no assigned residual values as of August 31, 2018 and 2017.

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 periods presented. Our ongoing consideration of the recoverability could result in impairment charges in the future, which could adversely affect our results of operations. The carrying value of intangible assets as of August 31, 2018 and 2017, was $148.9 million and $173.5 million, respectively.

Long-lived Assets

Long-lived assets, comprised of property, equipment and leasehold improvements are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that may cause an impairment review include significant changes in technology that make current computer-related assets that we use in our operations obsolete or less useful, and significant changes in the way we use these assets in our operations. When evaluating long-lived assets for potential impairment if impairment indicators are present, we first compare the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. The new cost basis will be depreciated (amortized) over the remaining useful life of that asset. Using the impairment evaluation methodology described here, there have been no long-lived asset impairment charges for each of the last three years. The carrying value of long-lived assets was $100.5 million in both years ended August 31, 2018 and 2017.

Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.

Estimated Tax Provision and Tax Contingencies

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our tax provision is an estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions. These laws can be complicated and are difficult to apply to any business, including ours. The tax laws also require us to allocate our taxable income to many jurisdictions based on subjective allocation methodologies and information collection processes. Our effective tax rates differ from the statutory rate primarily due to the impact of state taxes, foreign operations, R&D and other tax credits, tax audit settlements, incentive-stock options and domestic production activities deductions. Our annual effective tax rate was 24.1%, 25.0% and 26.5% in fiscal 2018, 2017 and 2016, respectively.

We recognize the benefit of an income tax position only if it is more likely than not that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position as of the reporting date. Otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We will classify the liability for unrecognized tax benefits as current to the extent that we anticipate payment of cash within one year. Additionally, we accrue interest on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest is classified as income tax expense in the financial statements.

As of August 31, 2018, we had gross unrecognized tax benefits totaling $9.2 million, including $1.1 million of accrued interest, recorded as Taxes Payable (non-current) within the Consolidated Balance Sheet. Unrecognized tax benefits represent tax positions taken on tax returns but not yet recognized in the consolidated financial statements. When applicable, we adjust the previously recorded tax expense to reflect examination results when the position is effectively settled. If recognized, the unrecognized tax benefits and related interest would be recorded as a benefit to tax expense on the Consolidated Statements of Income. Audits by multiple tax authorities are currently ongoing. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. For this reason, we regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. Although we believe our reserves are reasonable, no assurance can be given that the final outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.

Our provision for income taxes is subject to volatility and could be adversely impacted by numerous factors such as changes in tax laws, regulations, or accounting principles, including accounting for uncertain tax positions or interpretations of them. Significant judgment is required to determine recognition and measurement. Further, as a result of certain ongoing employment and capital investment actions and commitments, our income in certain countries is subject to reduced tax rates and in some cases is wholly exempt from tax. Our failure to meet these commitments could adversely affect our provision for income taxes. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an adverse impact on our operating results and financial condition.

New Accounting Pronouncements

See Note 3, Summary of Significant Accounting Policies, in the Notes to the Company’s Consolidated Financial Statements included in Item 8 for a full description of recent accounting pronouncements, including the expected dates of adoption, which we include here by reference.

Market Trends

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

Shift from Active to Passive Investment Management

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

Brexit

Volatility is expected to continue in the short term as the UK negotiates its exit from the European Union. The initial UK economic performance has been stronger than originally expected as the timeframe from the initial vote increases. Additionally, increased European confidence and UK consumer spending has contributed to the recovery of the economic outlook. The negotiation process is continuing, including the latest milestone of the UK and European Union developing a draft of the legal text for the transition deal. Any impact from Brexit on us will depend, in part, on the longer-term outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results. While we evaluate our own risks and uncertainty related to Brexit, we will continue to partner with our clients to help them navigate the fluctuating international markets.

MiFID II

In the European Union, the new version of the Markets in Financial Instruments Directive, also known as "MiFID II", became effective in January 2018. The main purpose of this initiative was to ensure fairer, safe and more efficient markets and facilitate greater transparency for all participants. The Research workflow is one area where both buy-side and sell-side clients have seen and will continue to see significant change requirements as a result of the MiFID II inducement rules. The goal of the new legislative framework is to strengthen investor protection and improve the functioning of financial markets, making them more efficient, resilient and transparent. New reporting requirements and tests will increase the amount of information available and reduce the use of dark pools and OTC trading. MiFID II requirements have meant pricing models and business practices have had to adapt significantly. We will continue to evaluate our own risks and uncertainty related to MiFID II and partner with our clients to help them navigate these new rules. However, recently we have noticed a substantial interest in our Research workflow, which is part of the opportunity for us, but more importantly, allows our clients to leverage our technology solutions for MiFID II compliance.

Forward-Looking Factors

Forward-Looking Statements

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

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

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

Business Outlook

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

Fiscal 201****9 Expectations

●Organic ASV plus professional services is expected to increase in the range of $75.0 million and $90.0 million over fiscal 2018.
●GAAP Revenues are expected to be in the range of $1.41 billion and $1.45 billion.
●GAAP operating margin is expected to be in the range of 29% and 30%. Adjusted operating margin is expected to be in the range of 31.5% and 32.5%.
●FactSet’s annual effective tax rate is expected to be in the range of 17.5% and 18.5%, primarily as a result of the TCJA.
●GAAP diluted EPS is expected to be in the range of $8.70 and $8.90. Adjusted diluted EPS is expected to be in the range of $9.45 and $9.65. The midpoint of this guidance represents a 12% growth over the prior year.

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

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