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Note 16 - Stock-based Compensation
 12 Months Ended
Aug. 31, 2017
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
16.
STOCK-BASED COMPENSATION
 
The Company recognized total st
ock-based compensation expense of
$34.2
million,
$29.8
million and
$26.4
million in fiscal
2017,
2016
and
2015,
respectively. As of
August 31, 2017,
$76.9
million of total unrecognized compensation expense related to non-vested awards is expected to be recognized over a weighted average period of
3.3
years. There was
no
stock-based compensation capitalized as of
August 31, 2017
and
2016,
respectively.
 
Employee Stock Option Fair Value Determinations
 
The Company utilizes the lattice-binomial option-pricing model (“
binomial model”) to estimate the fair value of new employee stock option grants. The Company’s determination of fair value of stock option awards on the date of grant using the binomial model is affected by the Company’s stock price as well as assumptions regarding a number of variables. These variables include, but are
not
limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors.
 
Q1
201
7
 
671,263
non
 performance-based employee stock options and
22,460
performance-based employee stock options were granted at a weighted average exercise price of
$152.51
and a weighted average estimated fair value of
$39.60
per share.
Q2
201
7
61,744
performance-based employee stock options were granted at a weighted average exercise price of
$169.16
and a weighted average estimated fair value of
$43.81
per share.
Q3
201
7
11,604
non
 performance-based employee stock options were granted at a weighted average exercise price of
$163.05
and a weighted average estimated fair value of
$42.23
per share
.
Q4
201
7
 
29,650
non performance-based employee stock options and
206,417
performance-based employee stock options were granted at a weighted average exercise price of
$165.75
and a weighted average estimated fair value of
$42.93
per share.
Q1
2016
513,785
non performance-based employee stock options and
530,418
performance-based employee stock opti
ons were granted at a weighted average exercise price of
$170.21
and a weighted average estimated fair value of
$46.62
per share.
Q2
2016
4,073
non performance-based employee stock options were granted at an exercise price of
$150.81
and an estimated fair
value of
$40.51
per share.
Q3
2016
103,903
non performance-based employee stock options were granted at an exercise price of
$152.10
and an estimated fair value of
$40.57
per share.
 
Q4
2016
20,911
performance-based employee stock options were granted a
t an exercise price of
$171.22
and an estimated fair value of
$47.82
per share.
Q1
2015
462,913
non performance-based employee stock options were granted at a weighted average exercise price of
$131.31
and a weighted average estimated fair value of
$3
7.67
per share.
Q2
2015
25,075
non performance-based employee stock options and
137,522
performance-based employee stock options were granted at a weighted average exercise price of
$147.05
and a weighted average estimated fair value of
$43.05
per share.
Q3
2015
61,210
non performance-based employee stock options were granted at a weighted average exercise price of
$159.14
and a weighted average estimated fair value of
$44.95
per share.
Q4
2015
128,090
non performance-based employee stock options were
granted at a weighted average exercise price of
$165.02
and a weighted average estimated fair value of
$54.10
per share.
 
The weighted average estimated fair value of employee stock options granted during fiscal
2017,
2016
and
2015
was determined using the binomial model with the following weighted average assumptions:
 
   
201
7
  
201
6
  
201
5
Term structure of risk-free interest rate
  
0.07%
-
2.09%
  
 0.07%
-
2.1%
  
 0.01%
-
2.3%
Expected life (years)
  
 7.4
-
8.1
  
 7.3
-
8.1
  
 5.8
-
9.4
Term structure of volatility
  
 21%
-
30%
  
 21%
-
30%
  
 20%
-
31%
Dividend yield
  
 
1.18%
 
  
 
1.09%
 
  
 
1.32%
 
Weighted average estimated fair value
  
 
$40.68
 
  
 
$46.08
 
  
 
$41.87
 
Weighted average exercise price
  
 
$156.77
 
  
 
$168.55
 
  
 
$141.84
 
Fair value as a percentage of exercise price
  
 
25.9%
 
  
 
27.3%
 
  
 
29.5%
 
 
The risk-fr
ee 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
N
on-Employee Directors’ Stock Option Plan (the “Directors’ Plan”) provides for the grant of share-based awards, including stock options, to non-employee directors of FactSet. A total of
250,000
shares of FactSet common stock have been reserved for issuance under the Directors’ Plan. The expiration date of the Directors’ Plan is
December 1, 2018.
 
The Company utilizes the Black-Scholes model to estimate the fair value of new non-employee Director stock option grants. The Company
’s determination of fair value of share-based payment awards on the date of grant is affected by the Company’s stock price as well as assumptions regarding a number of variables. These variables include, but are
not
limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeitures and employee stock option exercise behaviors.
 
F
iscal
2017
 
On
January 1
3,
2017,
FactSet granted
23,846
stock options to the Company’s non-employee Directors, including
one
-time new director grants of
2,104
for both Malcolm Frank and Sheila B. Jordan, who were elected to FactSet’s Board of Directors on
December 20, 2016.
All of the options granted on
January 13, 2017,
have a weighted average estimated fair value of
$35
.65
per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
Risk-free interest rate
    
1.95
 %
Expected life (years)
    
5.4
  
Expected volatility
    
22.7
 %
Dividend yield
    
1.24
 %
 
Fiscal
2016
 
On
January 15, 2016,
FactSet granted
22,559
stock options to the
Company’s non-employee Directors, including a
one
-time new director grant of
2,417
for Laurie Siegel, who was elected to FactSet’s Board of Directors on
December 15, 2015.
All of the options granted on
January 15, 2016
, have a weighted average estimated fair value of
$31.03
per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
Risk-free interest rate
    
1.62
 %
Expected life (years)
    
5.4
  
Expected volatility
    
23.0
 %
Dividend yield
    
1.05
 %
 
Fiscal
2015
 
On Janua
ry
15,
2015,
FactSet granted
13,842
stock options to the Company’s non-employee directors at a weighted average estimated fair value of
$28.18
per share, using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
Risk-free interest rate
    
1.45
%
Expected life (years)
    
5.4
  
Expected volatility
    
23
%
Dividend yield
    
1.30
%
 
Restricted Stock Fair Value Determinations
 
Restricted stock granted to employees entitle the holder to shares of common stoc
k as the award vests over time, but
not
to dividends declared on the underlying shares while the restricted stock is unvested. The grant date fair value of restricted stock awards are measured by reducing the grant date price of FactSet’s share by the present value of the dividends expected to be paid on the underlying stock during the requisite service period, discounted at the appropriate risk-free interest rate. Restricted stock awards are amortized to expense over the vesting period.
 
Q1
201
7
 
5,084
shares of restricted stock were granted at a weighted average estimated fair value of
$151.63
per share.
Q2
201
7
7,843
shares of restricted stock were granted at a weighted average estimated fair value of
$161.31
per share.
Q3
201
7
No
restricted stock granted
.
Q4
201
7
 
49,473
shares of restricted stock were granted at a weighted average estimated fair value of
$158.46
per share.
Q1
2016
93,120
shares of restricted stock were granted at a weighted average estimated fair value of
$159.46
per share.
Q
2
2016
No
restricted stock granted
.
 
Q3
2016
255
shares of restricted stock were granted at a weighted average estimated fair value of
$146.20
per share.
Q4
2016
3,944
shares of restricted stock were granted at a weighted average estimated fair value of
$164.77
per share.
Q1
2015
10,225
shares of restricted stock were granted at a weighted average estimated fair value of
$127.58
per share.
Q2
2015
38,088
shares of restricted stock were granted at a weighted average estimated fair value of
$137.83
per share.
Q3
2015
845
shares of restricted stock were granted at a weighted average estimated fair value of
$152.77
per share.
Q4
2015
5,704
shares of restricted stock were granted at a weighted average estimated fair value of
$157.84
per share.
 
Employee Stock Purchase Plan Fair Value Determinations
 
During fiscal
201
7,
employees purchased
75,372
shares at a weighted average price of
$136.34
compared to
73,072
shares at a weighted average price of
$131.14
in fiscal
2016
and
63,265
shares at a weighted average price of
$122.76
in fiscal
2015.
Stock-based compensation expense recorded during fiscal
2017,
2016
and
2015
relating to the employee stock purchase plan was
$2.1
million,
$1.9
million and
$1.5
million, respectively.
 
The Company uses the Black-Scho
les model to calculate the estimated fair value for the employee stock purchase plan. The weighted average estimated fair value of employee stock purchase plan grants during fiscal years
2017,
2016
and
2015
, were
$28.16,
$26.87
and
$24.05
per share, respectively, with the following weighted average assumptions:
 
 
   
201
7
    
201
6
    
2015
  
Risk-free interest rate
    
0.69
%
    
0.22
%
    
0.03
%
Expected life (months)    
3
      
3
      
3
  
Expected volatility
    
8.6
%
    
10.7
%
    
16.3
%
Dividend yield
    
1.25
%
    
1.18
%
    
1.15
%
 
 
Accuracy of Fair Value Estimates
 
The Company is responsible for determining the assumptions used in estimating the fair value of its share-based payment awards. The Company
’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are
not
limited to the Company’s expected stock price volatility over the term of the awards, interest rates, option forfeiture rates and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have
no
vesting or hedging restrictions and are fully transferable.