Commitments and Contingencies

9 Months Ended

May 31, 2011

Commitments and Contingencies

Commitments and Contingencies

16. COMMITMENTS AND CONTINGENCIES

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

Lease Commitments

At May 31, 2011, the Company leases approximately 169,000 square feet of office space at its headquarters in Norwalk, Connecticut. In addition, FactSet leases office space in the U.S. in New York, New York; Boston, Massachusetts; Chicago, Illinois; San Mateo, California; Austin, Texas; Tuscaloosa, Alabama; Newark and Piscataway, New Jersey; Manchester, New Hampshire; and Reston, Virginia. Outside the U.S., the Company's operations are conducted in leased office space in London, England; Paris and Avon, France; Amsterdam, the Netherlands; Frankfurt, Germany; Milan, Italy; Tokyo, Japan; Hong Kong; Dubai, United Arab Emirates; Hyderabad and Mumbai, India; Sydney, Australia; and Manila, the Philippines. The leases expire on various dates through March 2021. Total minimum rental payments associated with the leases are recorded as rent (a component of selling, general and administrative expenses) on a straight-line basis over the periods of the respective non-cancelable lease terms. The Company believes that its leased office space is adequate for its current needs and that additional space is available for lease to meet any future needs.

During the first nine months of fiscal 2011, FactSet entered into the following new lease agreements:

• Piscataway, New Jersey: In connection with the relocation of the Company's New Hampshire data center to a new, state of the art facility. The new lease for space in New Jersey will result in incremental future minimum rental payments of $15.8 million over the non-cancelable lease term of ten years.

• Paris, France: A new lease agreement for office space was entered into in order to relocate the Company's JCF operations within Paris. The new lease will result in incremental future minimum rental payments of $3.2 million over the non-cancelable lease term of six years. In May 2011, the offices of the Company's JCF operations were relocated within Paris, resulting in a reduction of rentable office space of approximately 10,000 square feet. A charge of $0.1 million was recorded in May 2011 to reflect the remaining lease payments due under the vacated office space.

• Hyderabad, India: New lease agreements for additional space to support the Company's expanding content collection operations in India were entered into, which will result in incremental future minimum rental payments of $2.6 million over the non-cancelable lease term of five years.

• Manila, the Philippines: A new lease agreement for space to support the Company's expanding content collection operations in the Philippines was entered into, which will result in incremental future minimum rental payments of $1.3 million over the non-cancelable lease term of five years.

• Dubai, United Arab Emirates: The Company's global presence expanded with the opening of a Dubai office in December 2010, joining FactSet's network of more than 24 offices around the world. The new lease will result in incremental future minimum rental payments of $0.2 million over the non-cancelable lease term of one year.

Including the new lease agreements entered into during fiscal 2011, the Company's worldwide leased office space increased to approximately 724,000 square feet, up 13.1% from August 31, 2010 and 13.4% from a year ago.

At May 31, 2011, the Company's lease commitments for office space provide for the following future minimum rental payments under non-cancelable operating leases with remaining terms in excess of one year (in thousands):

Years Ended August 31,	Minimum Lease Payments
2011 (remaining three months)	$	6,128
2012		25,558
2013		25,132
2014		20,507
2015		17,639
Thereafter		60,852
Total	$	155,816

During the three months ended May 31, 2011 and 2010, rent expense for all operating leases amounted to $8.7 million and $7.2 million, respectively. Rent expense for all operating leases for the first nine months of fiscal 2011 and 2010 amounted to $24.3 million and $22.3 million, respectively. Approximately $4.5 million of standby letters of credit have been issued during the ordinary course of business in connection with the Company's current leased office space as of May 31, 2011. These standby letters of credit contain covenants that, among other things, require the Company to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of May 31, 2011, FactSet was in compliance with all covenants contained in the standby letters of credit.

Purchase Commitments with Suppliers

Purchase obligations represent payment due in future periods in respect of commitments to the Company's various data vendors as well as commitments to purchase goods and services such as telecommunication and computer maintenance services. These purchase commitments are agreements that are enforceable and legally binding on FactSet and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. As of August 31, 2010, the Company had total purchase commitments of $45.6 million. There were no material changes in FactSet's purchase commitments during the first nine months of fiscal 2011.

Contingencies

Legal Matters

FactSet accrues non income-tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. The Company is subject to legal proceedings, claims, and litigation arising in the ordinary course of business, including intellectual property litigation. These matters are subject to inherent uncertainties and management's view of these matters may change in the future. While the outcome of these matters is currently not determinable, management currently believes that the ultimate cost to resolve these matters against the Company, individually or in the aggregate, will not have a material adverse impact on its consolidated financial position, results of operations or cash flows.

Income Taxes

Uncertain income tax positions are accounted for in accordance with applicable accounting guidance (see Note 15). FactSet is currently under audit by multiple tax authorities. The Company has reserved for potential adjustments to its provision for income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities, and the Company believes that the final outcome of these examinations or agreements will not have a material effect on its results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of tax benefits in the period FactSet determines the liabilities are no longer necessary. If the Company's estimates of the federal, state, and foreign income tax liabilities are less than the ultimate assessment, a further charge to expense would result.

Indemnifications

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

Financial Instruments

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable and derivative instruments. FactSet performs ongoing credit evaluations of its clients and does not require collateral from its clients. The Company calculates its receivable reserve through analyzing aged client receivables and reviewing the recent history of client receivable write-offs. At May 31, 2011, the Company's largest individual client accounted for 2% of total subscriptions and annual subscriptions from the ten largest clients did not surpass 16% of total client subscriptions, consistent with August 31, 2010. At May 31, 2011 and August 31, 2010, the receivable reserve was $1.9 million, respectively.