. STOCK-BASED COMPENSATION

The Company recognized total stock-based compensation expense of $7.4 million and $22.4 million during the three and nine months ended May 31, 2016, respectively. Similarly, the Company recognized total stock-based compensation expense of $6.1 million and $17.1 million during the three and nine months ended May 31, 2015, respectively. As of May 31, 2016, $82.5 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 3.3 years. There was no stock-based compensation capitalized as of May 31, 2016 or August 31, 2015, respectively.

Employee Stock Option Fair Value Determinations

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

Q1 2016	513,785 non performance-based employee stock options and 530,418 performance-based employee stock options were granted at a weighted average exercise price of $170.21 and a weighted average estimated fair value of $46.62 per share.
Q2 2016	4,073 non performance-based employee stock options were granted at an exercise price of $150.81 and an estimated fair value of $40.51 per share.
Q3 2016	103,903 non performance-based employee stock options were granted at an exercise price of $152.10 and an estimated fair value of $40.57 per share.
Q1 2015	462,913 non performance-based employee stock options were granted at a weighted average exercise price of $131.31 and a weighted average estimated fair value of $37.67 per share.
Q2 2015	25,075 non performance-based employee stock options and 137,522 performance-based employee stock options were granted at a weighted average exercise price of $147.05 and a weighted average estimated fair value of $43.05 per share.
Q3 2015	61,210 non performance-based employee stock options were granted at a weighted average exercise price of $159.14 and a weighted average estimated fair value of $44.95 per share.

The weighted average estimated fair value of employee stock options granted during the three and nine months ended May 31, 2016 and 2015 was determined using the binomial model with the following weighted average assumptions:

Three months ended May 31,	2016				2015
Term structure of risk-free interest rate		0.40%	-	1.90%		0.01%	-	2.12%
Expected life (years)			7.5				8.2
Term structure of volatility		24%	-	30%		21%	-	31%
Dividend yield			1.33%				1.16%
Weighted average estimated fair value			$40.57				$44.95
Weighted average exercise price			$152.10				$159.14
Fair value as a percentage of exercise price			26.7%				28.2%

Nine months ended May 31,	2016				2015
Term structure of risk-free interest rate		0.07%	-	2.12%		0.01%	-	2.34%
Expected life (years)			7.7				8.2
Term structure of volatility		21%	-	30%		21%	-	31%
Dividend yield			1.09%				1.33%
Weighted average estimated fair value			$46.05				$39.59
Weighted average exercise price			$168.51				$137.52
Fair value as a percentage of exercise price			27.3%				28.8%

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

Non-Employee Director Stock Option Fair Value Determinations

The 2008 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”) provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet. An initial 250,000 shares of FactSet common stock were reserved for issuance under the Directors’ Plan, of which 66,031 remain available for future grant as of May 31, 2016. The expiration date of the Directors’ Plan is December 1, 2018.

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

Fiscal 2016

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

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

scal 2015

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

Risk-free interest rate	1.45	%
Expected life (years)	5.4
Expected volatility	23.5	%
Dividend yield	1.30	%

Restricted Stock

Fair Value Determinations

Restricted stock granted to employees entitles the holder to shares of common stock as the award vests over time, but not to dividends declared on the underlying shares while the restricted stock is unvested. The grant date fair value of restricted stock awards is measured by reducing the grant date price of FactSet’s share by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. Restricted stock awards are amortized to expense over the vesting period. During the first nine months of fiscal 2016, there were 93,375 restricted stock awards granted with a weighted average grant date fair value of $159.42. During the first nine months of fiscal 2015, FactSet granted 49,158 restricted stock awards at a weighted average grant date fair value of $135.96.

Employee Stock Purchase Plan Fair Value Determinations

During the three months ended May 31, 2016, employees purchased 17,538 shares at a weighted average price of $131.57 as compared to 13,877 shares at a weighted average price of $132.48 for the three months ended May 31, 2015. During the nine months ended May 31, 2016, employees purchased 53,711 shares at a weighted average price of $129.83 as compared to 47,085 shares at a weighted average price of $118.82 for the nine months ended May 31, 2015. Stock-based compensation expense recorded for each of the three months ended May 31, 2016 and 2015, relating to the employee stock purchase plan (the “ESPP”) was $0.4 million. Stock-based compensation expense recorded for the nine months ended May 31, 2016 and 2015, relating to the ESPP was $1.4 million and $1.1 million, respectively.

The Company uses the Black-Scholes model to calculate the estimated fair value for the ESPP. The weighted average estimated fair value of ESPP grants during the three months ended May 31, 2016 and 2015 were $26.07 and $25.11 per share, respectively, with the following assumptions:

Three months ended May 31,	2016			2015
Risk-free interest rate		0.27	%		0.02	%
Expected life (months)		3			3
Expected volatility		11.53	%		7.2	%
Dividend yield		1.29	%		1.13	%

The weighted average estimated fair value of ESPP grants during the nine months ended May 31, 2016 and 2015 were $27.19 and $22.68 per share, respectively, with the following assumptions:

Nine months ended May 31,	2016			2015
Risk-free interest rate		0.20	%		0.02	%
Expected life (months)		3			3
Expected volatility		11.42	%		8.0	%
Dividend yield		1.15	%		1.16	%

Accuracy of Fair Value Estimates

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